Antonio Peneda and Andrew Dixon from Credera attended London Market Claims in October, and have shared their thoughts surrounding data analytics, AI, Blueprint Two and more.
1/3 - Data analytics, AI and the likely impact of these technologies on the complex commercial risk sector.
One of the key themes running through London Market Claims 2023 was the impact advanced data analytics (Machine Learning, Large Language Models, and Artificial Intelligence) would have on claims processing in the future.
Claims teams are starting to apply advanced analytics, but it’s very early days
It was extremely encouraging to see attendees identifying practical use cases for the new technology, and a level of progress in pursuing these opportunities.
Typical use cases were focussed on making existing processes within the insurance claims function more efficient and more effective - for example, contract management, communication generation, automation of low-level tasks, fraud detection, and early identification of large losses.
However, there were few discussions on how the technology could leverage claims data to drive benefits across the insurance value chain (e.g., exposure management and portfolio management), or added value services to intermediaries and clients (e.g., risk management services). There is a wealth of historic data within claims, which could in theory add significant value in other parts of the business as part of the claims proposition.
Proving the benefits case can be challenging.
There was extensive debate on the benefit case for investing in advanced analytics. This was particularly true for certain lines of business (e.g. high value and low volume) where the size of the team was relatively small and customers expected much more face to face interaction but the team didn’t necessarily have the volume of quality data to effectively train the models. For these organisations, it was proving very difficult to justify what was felt to be high upfront investment costs. For other organisations, the potential to drive efficiency and effectiveness was significant, and there were clear examples where organsiation had benefited from the technology.
Accessing quality data is fundamental
The critical importance of data quality and data accessibility to the success of leveraging advanced analytics was a recurring topic. Data is too often siloed, with a proliferation of excel spreadsheets and point data solutions. The frameworks for data quality and data accessibility were also seen to be immature. While Blueprint Two starts to introduce data standards and a common language, focussed investment on data governance should still be a priority for most claims teams.
Uncertainty over the medium-term impact
There were contrasting views on the overall medium term impact of AI/ML on insurance claims teams during the final panel debate. Some members of the panel were of the view that the claims industry is woefully underestimating the impact and potential of advanced analytics on the claims function. Others were more sceptical, reflecting on an industry which is based around relationships and places huge value on face-to-face interactions.
In reality, no one knows just how much impact advanced analytics will have on the claims function, and the picture will emerge over time. However, as the “claims proposition” starts to play an increasingly important role, the potential of advanced analytics cannot be ignored. In a competitive landscape that is driving the need for transformation, it is vital that claims teams start to get familiar with this technology and experiment with its application to drive short term benefits, future proof the business, and attract the talent of the future.
2/3 - Credera’s reflections on market readiness for Blueprint Two
At the recent London Market Claims event, the Blueprint Two initiative featured in multiple sessions as a key driver for modernising the market. It was really encouraging to see the detail behind the phase one and two releases targeted for 2024, together with the support structures and processes in place to help market participants through their journey towards adoption of the digital services. The key message for participants from Lloyd’s and Velonetic, (the main sponsor) was “Are you ready for adopting the new digital service?” and “How can we help?”
In summary, the important dates are:
Phase One: 1st July 2024 (Compulsory adoption) is the cutover to a new set of digital portals for processing premiums and claims in open market and delegated authority business. This will focus on updating the landing pages and UI experience for users, whilst shutting down direct access to a number of heritage portals. These will be replaced by new portals for both London Market and delegated authority business. Although the releases have been communicated as a “minimal impact” change to brokers and carriers, both technical and business readiness changes are required. Technical changes will focus on networking and access control updates to the new landing pages, whilst users will require training on new portals, with updates to business processes and relevant policies. With data, the EDI (Electronic Data Interchange) messaging format specifications are getting some small updates, and the MRC (Market Reform Contract) version three is also being implemented.
Phase Two: 1 September 2024 (Phased rollout) will see the release of Digital Gateway risk services, enabling the market to work in a fully digital environment across the full range of digital services. Immediate adoption is not compulsory - the market can choose when they move from phase one to phase two at a time that’s right for their business, though the cut-off date is yet to be confirmed. Adoption for phase two is likely to be more complex, as legacy messaging standards (e.g. CWT, LIMCLM) are decommissioned and moved to the single messaging standards of ACORD, EBOT, and ECOT, enabling full Core Data Record (CDR) data standards. This phase will also bring further automation and integration with PPL / Whitespace for fully digital placement.
Market readiness for Blueprint Two
Previously, market sentiment towards Blueprint Two seemed to be very much about ‘sitting on the side lines’, with lots of discussion and scepticism around the real-world applicability of such an ambitious plan. Previous attempts at modernising market processing (such as the TOM) have had less success and met significant change resistance: how do you transform such a complex and established market? For Blueprint Two, there is a growing sense that participants are waking up to the fact that it’s real, with conference delegates very engaged and keen to know more. The good news is Velonetic and Lloyd’s have addressed this, with some very good material detail presented by Alvaro Montenegro (Velonetic) and Kajal Bhardwa (Lloyd’s). This drove further interest on what it means for each participant to operate in this new world and what needs to be done now to be ready for these releases.
Credera’s perspective on Blueprint Two
It is clear that the plans are both ambitious and far-reaching, meaning the change impacts to both brokers and carriers has the potential to cause significant disruption in day-to-day operations. Likewise, previous market-wide efforts have received vocal criticism due to the lack of market participant testing to address adoption issues ahead of time.
Blueprint Two is recommending a period of “market self-testing”, starting from April 2024. It is essential that all participants have robust internal programmes mobilised to plan and support this, engaging their entire ecosystem of partners and vendors to ensure they can test end-to-end. This has to cover the full chain, across friendly brokers (for ingestion), carriers (processing), outsourcers (enriching and validating), and PAS vendors (for storing and underwriting). Each participant is responsible for setting up their own testing chain and must be ready to do so by April.
Within data, changes to the CDR, MRC, and wider adoption of ACORD means that any internal data stores, warehouses, analytics, and PAS systems will all need to be updated to maintain compatibility with new market standards and integration specifications.
Finally, all this change will have a human impact, and good change management will be key. Participants need to engage with their user communities early, with a clear communications plan, pro-active user testing and training, and updates to business processes to align with the new market systems and standards. Likewise, internal change projects with dependencies on Blueprint Two will need careful planning, to defer / re-scope / stop on-going projects that are impacted
How Credera can help
Blueprint Two’s programme focus is on readiness, but this is a transformative opportunity for participants, and they need to have a clear plan on how to derive the most value from this new technology stack. We can help identify modernisation opportunities to align internal processes and technologies to make best use of the Blueprint Two tools, with a clear benefits realisation plan to maintain competitive advantage against other market participants. The priority is being operationally ready for the changes, and to quickly exploit new opportunities to drive business value.
3/3 Credera reflections on Claims
The emergence of claims as a proposition differentiator was a key theme at the “TIN London Market Claims 2023” conference. Traditionally viewed as an operational function, there is a growing consensus that claims is assuming a more pivotal role in customer buying decisions, and technology and data have the ability to differentiate the claims experience.
The conference held a variety of interesting discussions centred around the following areas of interest:
- Potential for claims to demonstrate value in the customer relationship and across the customer journey.
- How new technologies could be leveraged in claims to enhance the service while establishing and maintaining customer intimacy.
- Adoption of market modernisation initiatives that will modernise the claims service, such as faster claims payments and analytics capabilities.
- How organisations develop skills in their teams to operate in a transformed claims function.
Importance of claims as part of the customer buyer decision making process
Traditionally, the quality of the claims experience has played a marginal role in customer buying decisions. The key exception is when a bad experience impacts renewals and lapses for existing customers. As one session stated, “We rarely win business on claims but almost certainly lose business in claims processing.
It is clear that this situation is changing, with claims now emerging as a key factor in customer choices. Ben Bolton (Gracechurch research) presented research showing claims ranked third behind ‘underwriting experience’ and ‘good service’ as a factor influencing customer buying decisions. The same research showed a stark difference in claims experience across the industry, with an 82 point difference in Net Promotor Score (NPS) between the best and worst performing claims functions.
Technology is enabling claims to be more of a strategic proposition
Emerging technologies such as AI and automation are also transforming the claims function, lifting their profile in the value proposition. Use cases discussed at the conference focused on making existing processes within the function more efficient and effective - for example, contract management, communication generation, automation of low-level tasks, fraud detection, and early identification of large losses. Additionally, the Blueprint Two London market initiative aims to enable market participants to operate in a fully digital environment, standardising data standards and access to new digital portals to create faster claims payments and analytical capabilities.
Beyond the efficiency and effectiveness of claims processing, there was limited discussion around the potential of new technology and data to enhance the value proposition to clients and intermediaries - for example, providing risk management insights to prevent claims materialising or enhanced data provisioning on claims.
Whilst considering the potential from technology and data, there was recognition of the need to balance digital and human touch points. There is also a need to preserve human interaction, particularly in high-value claims scenarios.
Considering this changing landscape for claims, organisations must be clear on the elements of the claims service that customers value and how to adapt their value proposition to meet these customers’ needs.
Do we really know what customers want?
Traditionally, claims operations have been insular from the market, with the customer relationship owned by the broker and internal distribution sales teams. Customer interactions with the claims function have only been focused on processing of claims, which limits the function’s ability to enhance and provide a differentiated claims service. This will have to change, as collaboration through the insurance value chain is essential to break the product proposition down to elements that makes sense for the customer.
Determining what customers truly desire is a complex undertaking. Customer expectations on claims services varies according to the value and volumes of claims being processed. The nature of the claims, whether simple (low value/high volumes) or complex (high value/low volume), dictates customer preferences. Clear communication and transparency are pivotal in complex claims, whilst swift claim settlements with minimal interaction are preferred for simple claims. Identifying the key elements requires engaging with customers to understand their expectations and identify areas for improvement. Some key considerations when determining what customers value would include main features/interactions of the claims service, level of interaction expected, and channel of choice i.e., digital or in person.
Adapting the claims operations to changing customer needs
Focusing on the core elements of the claims service challenges organisations to rethink their often long-established product, services, and business models. Having a clear understanding of the business value drivers and customer expectations is key to driving a differentiated value proposition and transformation of the claims service.
Collaboration is an essential aspect of this transformation. Brokers, intermediaries, and insurers must work together to define their requirements and facilitate a more holistic approach to claims. In the next 12 months, the industry is poised for significant shifts with the introduction Blueprint Two and integration of emerging technologies. In this evolving landscape, collaboration across the value chain with a persistent focus on transforming the claims operations to meet customer expectations will be crucial to navigate these industry changes.
How Credera can help
Credera is a boutique consultancy, delivering transformation projects and with deep skills in data, analytics, cloud computing, and software engineering. We work with blue chip clients across multiple industries and have partnerships with each of the major cloud and data platform providers.
Credera’s business transformation practice works with clients to focus on the right change interventions to deliver their most complex operational and technical transformation projects, optimising their processes, architectures, and technology choices. We help clients to understand and address organisational design implications of change across all dimensions, including people, process, technology, and data. We assess the change impacts of the most ambitious change programmes, to prepare the workforce, embed change management into ways of working, and ensure our clients achieve their strategic change goals.
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