How Bots Can Benefit the Life, Home, and Auto Insurance Industries

How Bots Can Benefit the Life, Home, and Auto Insurance Industries

Unfortunately, many insurers have a legacy of relying on archaic legacy systems. And in many ways, insurance companies are stuck between a rock and a hard place here. The reality is that many insurance products operate on incredibly thin margins, so it's often difficult to justify the cost of implementing a new system. Yet the costs of continuing with outdated technology grow higher every year. In almost every case, deploying new automated systems, specifically bots and smart bots, leads to substantial cost savings in the long run. 

It's critical to note that embracing automation doesn't mean a massive IT system overhaul project. Robotic process automation (RPA), where system-agnostic bots mimic the repetitive, rules-based processes typically carried out by humans, is a high-impact but low-cost alternative to system overhaul. RPA bridges the gap between legacy insurance systems, boosting customer experience and operational efficiency while saving costs.

At the same time, RPA can help insurance companies automate high-volume manual processes, improve data accuracy, and speed up operations. Moreover, by automating routine tasks, insurers can free up employees to focus on more value-added activities, like customer service and fraud prevention. With this in mind, let's dive further into the current challenges facing the insurance industry and how smart bots can help overcome these challenges. 

Insurers, Profit Margins, and Legacy Systems

KPMG estimates that in the next 15 years, 45% to 75% of offshore jobs in the financial services sector will be performed by bots. The leading multinational professional services network thinks this should translate to enormous cost savings of up to 75%. 

Of course, saving costs is a top priority in all organizations, regardless of size or sector. Still, it's particularly vital in the insurance sector, where profit margins are often razor-thin. For example, many insurers operate on margins as low as 2%. The net profit margin (NPM) for the dominant life insurer Aegon (AEG) is 0%, while the average NPM for life insurance companies as a whole as of 2021 was 4.1%. 

Like businesses in any sector, insurance companies must find a profitable balance between operating costs and the prices the market will tolerate. And with an economic downturn and possible recession looming on the horizon, consumers are unlikely to bear higher insurance premiums any time soon. This leaves the insurance industry little choice but to look for alternative ways to increase profitability. Namely, cutting operational expenses. 

This leads us to the problem of legacy software. Many insurance companies rely on decades-old technology that drives up maintenance and new feature development costs. However, while insurers understand the value of comprehensive digital transformation, they often struggle to take action. Usually, the most significant obstacle in legacy transformation is the cultural shift required to embrace new ways of working. The C-Suite has to be confident that any transformative initiatives will improve the business without introducing too much risk of failure. 

This is where robotic process automation comes in. RPA strikes that balance between exciting digital transformation and risk management. And critically, insurance companies are running out of time - they can't spend many more years or even months coming up with a solution. Success in today's insurance industry demands unprecedented levels of speed, accuracy, and cost-efficiency beyond what a manual workforce can provide. 

The Benefits of Smart Bots in the Insurance Industry

  • Improved accuracy and efficiency: Bots don't make typos or miscalculations, unlike human workers who can make errors for a variety of reasons, like being tired, distracted, or demotivated. 
  • Quicker processing of insurance claims: Human workers need to gather data from numerous disparate systems and spend time sifting through the information before actioning a claim. Bots can collect this information in minutes. 
  • Boosted customer satisfaction: RPA speeds up numerous data-intensive processes like claims processing, customer onboarding, and policy cancellation. Customers have their needs met quickly and are more likely to remain loyal to the company. 
  • Cost reductions: Smart bots can reduce labor costs, improve operational efficiency, and free up workers' time to spend on more creative or high-order thinking tasks. This all impacts the bottom line.

Top Use Cases for Bots in Life, Home, and Auto Insurance

Claims Management

The insurance claim life cycle has four major phases; logging, validation, adjudication, and payment. Yet, what sounds like a straightforward procedure involves many arduous tasks on the back end. 

For example, agents may conduct extensive investigations into a claim to determine fault and liability. To do this, they need to gather evidence from multiple sources and log it across different systems. In addition, if the claim involves multiple parties, the insurer may need to review and interpret several policies to determine proper compensation. These policies can include a lot of detailed information, so reviewing each policy may take some time. And then there are contested claims, damage evaluation, and payment arrangements, which again add delays. As a result, it can often take weeks or even months for customers to receive payment. 

Many elements of claims processing within life insurance, auto insurance, and other sub-sectors historically involve a lot of manual data entry. Unfortunately, this heavy reliance on manual inputs makes the claims process increasingly inconsistent and prone to effort. At the same time, disparate media input media, including electronic documents, emails, images, and paper, add further complexities. But bots can help. 

For example, smart bots can read and classify a range of data elements and prepare them for review by an insurance agent. Bots can also be used in conjunction with customer-facing portals to ensure the correct information is gathered before a request moves through the pipeline. For example, a bot can send a notification to an auto insurance customer asking for clarification on the Vehicle Identification Number (VIN), ask for any relevant images, and so on. In addition, bots can enter new data surrounding a customer’s claim into the appropriate systems and prepare reports for insurance adjusters to review. 

Contact Center Support

Smart bots in insurance contact centers can assist with a variety of activities like general customer support, billing support, application forms, survey and data collection, and telesales. For example, RPA bots can help with customer data entry. Customer support agents have to upload customer data to multiple systems, open new tickets, and more. RPA can auto-fill customer data to make ticket creation far faster. The same is true for claims request summaries. Smart bots can effortlessly search, gather, confirm, sort, filter, and prepare customer data without human intervention and then send an overview of the claims request to the customer for review. 

Self-service chatbots are also transforming the contact center world across industries. These bots can provide automated solutions to customer queries in real time. 

Data Collection for Insurance Underwriting

Much like claims processing, underwriting requires extensive information gathering across different sources. In the auto insurance industry, the underwriting process can take 30 to 120 days, depending on factors like the customer’s driving history and location. Underwriters need to review customers’ applications to determine the actual risk of insuring the customer, determine the policy coverage (including what and what’s not included), and alter or restrict coverage based on auto insurance endorsements. 

According to Accenture, underwriting teams still employ workers who spend more than 50% of their time doing repetitive tasks like data entry and collection. This is no longer necessary with smart bots. Smart bots can:

  • Collect data from external and internal sources. 
  • Fill in the required fields in documents according to company guidelines. 
  • Analyze the customer’s claim history to suggest premiums based on past results. 

New Customer Onboarding

Customer onboarding has traditionally been a manual and lengthy process for many home, auto, and life insurers. Customers need to answer seemingly endless questions, and the data collection process is manual and complex (data needs to be put into various silos). However, that has all started to change with the digital revolution and one of its most transformative aspects, automation. 

Smart bots can help with many parts of the customer onboarding process, including:

  • Verification: After receiving the application, the insurer must verify personal information. Bots can check customer details against public data sources, ensure the customer has provided the details asked for, and ask for further evidence where required. 
  • Customer account creation: Bots can set up new customers in all the required IT systems. 
  • Welcome email: Bots can automatically send customers welcome emails and relevant information about their policy. 
  • Renewal: Bots can automatically send renewal offers when the time comes. 

Regulatory Compliance

With an increased focus on consumer protection, the insurance industry seemingly faces new regulatory standards every year. Robotic process automation bots can help insurers manage their compliance efforts. For example, bots can eliminate unauthorized access to privileged data, verify process logs against policies, automate regulatory reporting tasks, and help keep a robust audit trail. 

Wrapping Up

Today, around 80% of finance leaders have already implemented or are planning to implement robotic process automation. With its legacy systems, colossal data generation, and stringent regulation standards, the insurance industry is a prime candidate for RPA disruption. Whatsmore, RPA can help insurance companies achieve much-need cost savings in today’s increasingly harsh economic landscape.

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Published On:

April 25, 2024

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