Every Insurer Needs a Solid Foundation for Digital · Every Insurer Needs a Solid Foundation for Digital | 6 Without these back-office processes, carriers would simply not be able

The Ser v ice s R ese arc h C o mp any ™ © 2017, HfS Research Ltd | www.hfsresearch.com | www.horsesforsources.com

Every Insurer Needs a Solid Foundation for Digital | 1

Every Insurer Needs a Solid Foundation for Digital

January 2018 | Authors: Ollie O’Donoghue, Research Director, IT Services; Reetika Fleming, Research

Director, Insurance & Analytics

Each modern enterprise has a distinct set of challenges that inhibit their ability to embrace digital

transformation. For the insurance industry, the myriad challenges stretch from changing customer

expectations to legacy operating models that rely on traditional communication channels. However, in

such a competitive and rapidly changing industry, insurance carriers are investigating opportunities that

new operating models and digital technologies can offer.

All too often the focus of digital transformation rests on the front

office and innovative new applications, communication channels,

and technologies such as intuitive chatbots to improve touch-point

interactions for current customers and entice new ones. While this

is an important part of an enterprise’s move to embrace digital, it

can often be powerless without digitalization in the middle and

back office. For example, a beautifully designed new app may

improve the customer experience by providing a more intuitive

interface, but if the supporting services behind the application lack

the speed and responsiveness to go with it, customers are likely to

see through it.

It’s fundamental, therefore, for carriers to re-evaluate their entire business and operational structure

when embracing digital models and technologies. For insurance companies, the need to prepare for digital

involves a deep-dive into their back-office and middle office processes. Firms operating in this space tend

to rely heavily on manual processes designed to manage the heavy industry dependence on paper

documentation. Conventionally, inbound documents such as signed insurance contracts, and outbound

documents such as insurance certificates have been handled manually as paper copies. This placed an

enormous burden on insurance companies to manage and process vast volumes of paper documentation

and, in many circumstances, halted a carrier’s ability to embrace digital technologies that other industries

were able to explore.

This report investigates how insurance company Generali is preparing for digital transformation by

streamlining and digitalizing back-office processes to support transformative activities across the

business.

To truly embrace digital transformation, insurance carriers need to be as innovative in the back office as they are in the front by ensuring that core business processes are streamlined to meet increased customer demands.

http://www.hfsresearch.com/

http://www.horsesforsources.com/



Journey to the Digital OneOffice: Insurance companies need strong digital foundations to drive customer-centricity

How often do we hear about companies that provide an attractive digital façade but the inability of the

middle and back office to keep up with customers’ digital expectations hampers the overall experience?

It is all too tempting to see transforming the customer-facing front office of an enterprise as the obvious

choice when embarking on a digital transformation journey. This can create inflated expectations for

customers, though – they get a new app or communication channel, but if their processes don’t change,

neither will their outcomes. It also misses the key focus of customer centricity, which is what digital

business is all about.

Placing the customer at the centre of the enterprise is, of course, easier said than done. It is, however, the

guiding principle of HfS’ Digital OneOffice concept (see Exhibit 1), which tackles digital holistically, placing

equal importance on the back office and the front with the understanding that unless all areas of the

enterprise are aligned, customer outcomes are likely to fall short of expectations.

Exhibit 1: The HfS Digital OneOffice

Source: HfS Research, 2018





Crucially, there are industries and enterprises out there that understand the importance of getting the

back-office straightened out when aiming to meet the increasingly challenging expectations of their

customers. For these enterprises, transforming legacy processes and technologies is not only essential to

boost initial performance, but necessary if any further transformation is to take place elsewhere.

The focus on building a strong digital foundation is a concept well understood by some industries, most

notably insurance, which has a history of governance and regulation placing traditional customer

communication channels at the centre of operations. For example, in some geographies, insurance

documentation must be received and sent out as paper copies – a requirement that makes shifting toward

more digital channels challenging. However, HfS sees that innovative service providers and insurance

carriers are developing a clear roadmap for how they will overcome this particular challenge and,

consequently, build the solid foundations for digital needed to drive the company forward.

Market forces and rising customer expectations force insurance firms to

transform

For many insurance carriers, the catalyst for transformative activity is simple; customer expectations are

increasing dramatically in the modern marketplace. Fuelled by experiences in the wider economy with

dynamic digital companies, the modern consumer expectations have developed considerably in the last

few years alone, making topline growth challenging. On the flipside, carriers also struggle with bottom-

line growth, including profitability and maintaining margins in one of the toughest years yet – investment

returns have been low, price competition is severe in markets such as property and casualty (P&C),

demand is tapering in markets such as life and annuities (L&A), risk profiles are changing, and, finally, an

catastrophic events have increased, all adding to the pressure. As a result, speed, responsiveness,

efficiency, and cost are all becoming key critical success factors to compete in insurance today.

These demands limit the feasibility of running a modern insurance enterprise using traditional operating

models. In recent HfS research, it’s become increasingly apparent that insurance carriers are awakening

to this shifting demand (see Exhibit 2), as the most critical directive identified by executives is the push

for scalable and flexible services – no doubt to support the delivery of services that better meet changing

customer demands. Yet perhaps the most interesting insight from this research is the emerging emphasis

being placed on aligning the middle and back office to improve overall customer experiences, with 44% of

executives – the highest proportion in this category – advising it is an emerging directive. It is becoming

increasingly clear that insurance carriers are becoming more conscious of the disruptive market forces at

play, which are leading them to reimagine their business and operational models to better meet customer

demands.





12%

14%

16%

20%

24%

28%

28%

32%

52%

56%

48%

38%

48%

58%

42%

40%

44%

28%

30%

38%

44%

28%

18%

30%

26%

18%

20%

2%

0%

2%

4%

0%

0%

6%

6%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Provide real-time data and insights that support predictive, not reactivedecisions

Drive down operating costs

Align middle and back office operations to improve customer experiences

Invest in cognitive technologies and machine learning

Invest in process automation and robotics to improve straight-throughprocessing

Accelerate speed to market with new products

Improve the quality of operations talent

Policies that restrict the hiring of people

Scalable and flexible services

Mission critical Increasingly important Emerging Not a directive

Exhibit 2: How critical are the following C-Suite directives to your operations and technology strategy?


Simply put, carriers that continue to work using labour-intensive and manual processes, serving their

customers, agents, brokers, and other intermediaries through traditional channels, will not be able to keep

up with startups and industry majors alike that are embracing digital processes and technologies to meet

or reinforce customer expectations and set new standards across the customer lifecycle.

The good news is that several insurance carriers are aware of this and are working with innovative service

companies to develop solutions that will help move their business into the digital age – across the front,

middle, and back. Patrick Rolla, – Patrick Rolla, Director of Operation Efficiency Acceleration, Generali at

Generali, is well aware of the impact that customer expectations have on his business.





He stresses that speed and efficiency are the goals of his current project, which seeks to digitalize the

mountains of paper documentation that comes into Generali, with a keen eye on an improvement

roadmap that their service provider, Swiss Post Solutions, has helped them build.

With new consumer expectations, there’s a real risk that the

speed of processing transactions could limit an insurance

carrier’s ability to retain current customers and attract new

ones. The speed of response and processing may have been a

differentiator for some new entrants to the market,

particularly those that are better able to offer a distinct

consumer group quick access to insurance products and

services. However, as is often the case, this has set the pace for

the wider market, which now demands quicker access and

more responsive communication overall. Patrick touches upon

this as well, stating that if insurance companies are unable to

keep up with this new demand, they may find their customers

moving to their rivals. He speculates, “We have to answer and

process customers faster. If we don’t there is a real risk we

could lose the customer to one of our competitors.”.

Digitization not only reduces cost and drives efficiency, but it also opens up the potential to embrace other opportunities

Unlike other industries, insurance is a particularly document-focused environment, with the majority of

the paperwork coming into organizations in a physical form. The physical documents usually still exist

either because of governance and regulations or legacy communication channels and processes that have

largely stayed stagnant as manual workarounds and departments expanded around them. This makes the

digitization of document management a tremendous area to explore to understand how transforming the

back office enables a carrier to build on its digital readiness.

Coming from a carrier that’s well into this journey, Patrick Rolla argues that while currently the emphasis

is on delivering the same level of service at a reduced cost, the future is made up of a step-by-step

roadmap of incremental improvements across the business. Take for example the potential uses for

modern automation technologies that businesses in other industries can implement. In a paper dominated

environment, leveraging these is simply not possible. However, by digitizing document management, the

doors to these opportunities are opened up. It’s this process that Patrick argues is where the real value

for his business comes in. Without digitization in the back office, any other transformative work lays

somewhat out of reach.

“Moving from manual to digital document processing has helped us meet our goals of reducing cost and boosting efficiency. But it’s also enabled us to develop a roadmap of implementing other technologies and solutions to increase gains further.” - Patrick Rolla, Director Operation Efficiency Acceleration, Generali





Without these back-office processes, carriers would simply not be able to function – claims or new

business applications would not get processed, accounts would not get updated, insurance certificates

would not be issued, and billing would not get executed. Modernizing these functions is the essential first

step on the journey to pursuing other digital technologies at the front end, such as analytics and

automation that will enable the firm to drive greater performance across the rest of the business.

It is here that Swiss Post Solutions endeavours to support insurance companies by providing them with

the bandwidth necessary to concentrate on reaching their digital ambitions. According to Swiss Post

Solutions, businesses operating in this space have an array of challenges from legacy infrastructure and

processes to small IT teams and limited access to talent. The service provider tackles these challenges

through its document management services, which integrate traditional labour arbitrage with the

increased application of digital technologies, such as intelligent automation, to support clients in

becoming digital ready. The result is a set of strong back- and middle-office processes that enable the

client’s business to begin building innovative new layers across their operation as part of a structured

roadmap and, critically, building the foundations to develop more customer-centric products and services.

Building a digital underbelly supports customer-centric services

While we’ve discussed increased customer expectations

and the work some firms are doing to meet them, we

haven’t focused on how this all adds up. While different

businesses and industries vary in how they deliver value to

customers, in the insurance industry, the real tangible value

comes from the back office and its transformation into what

we at HfS call the “digital underbelly” (see Exhibit 1).

Customers request insurance coverage for their home,

business, or car, for example, and the insurance company

processes that request, assigns a value to the insurance, and

commences coverage. This process is dependent on the

back office for the delivery of the product and service and

also for the overall experience of the transaction.

“We need to innovate in the front office to meet customer expectations, but without efficient back-office processes we would not be able to truly improve customer experience.” - Patrick Rolla, Director Operation Efficiency Acceleration, Generali





f processing customer requests and other

interactions takes an extended period of time

because the mailroom and document management

processes are inefficient or cumbersome, then this

impacts the overall customer experience. Even with

a slick and efficient front-office veneer, customers

are unlikely to be satisfied for very long if inefficient

processes in the background slow delivery or

necessitate frequent inputs, such as providing the

same information repeatedly at various

touchpoints, to achieve the desired outcome. It’s

with this understanding that insurance carriers are

pulling their focus onto areas of their operating

models that are essential to transforming their

business to become digital ready. Once this “digital

underbelly” is in place, insurance companies can

leverage the newfound speed to open the doors to

other opportunities that will enhance the customer

experience, such as expanding communication channels.

To exemplify how central the digital underbelly is to success in the insurance market, Generali’s Patrick

Rolla advised that for his firm it is supporting the achievement of three critical goals:

1. Building a platform that not only boosts efficiency and drives down cost, but also has a clear roadmap for how other innovations and technologies can be implemented to continue driving improvements;

2. Transforming services so they can be more responsive to customers and deliver products and services with greater speed;

3. Preparing the business to open up new communication channels that will meet modern customer demands to engage with a business at a time and through a channel that is right for them.

According to Patrick, these improvements will help them remain competitive by better meeting customer

expectations but, crucially, would not be possible without the work they are conducting to build a digital

underbelly with Swiss Post Solutions.

“Our customers now expect to be able to communicate with us through a channel of their choosing. Normally, this would lead to an increased workload as we balance resources across new channels. However, digitalizing in the back office opens up opportunities to automate – maintaining resource expenditure while allowing us to open more channels.” - Patrick Rolla, Director Operation Efficiency Acceleration, Generali





For example, both firms have a clear roadmap of iterative steps they need to complete to reach the level

of digital readiness required to move on to the more ambitious areas of transformative work. Swiss Post

Solutions’ document management services support Generali by buffering demand with support services

enabled by technology – such as intelligent automation – to take up increasing amounts of workload.

Once completed, this initial part of the roadmap will open up the potential to reinvent the front office –

by leveraging the decreased processing times that Swiss Post Solutions can deliver, Generali is able to

build a more responsive customer experience as an example, or free up staff and resources to enable the

carrier to open new communication channels without additional expense. It is this final point that Patrick

argues is a real strategic imperative for his business.

In Exhibit 3 we have constructed an example of typical insurance business processes, beside one which

deploys many of the technologies described by forward-thinking insurance carriers like Generali. The

example demonstrates that the application of technologies and innovative solutions enables enterprises

to streamline processes and deliver faster and more agile products and services to customers.

Exhibit 3: Examples of traditional and digital processes






End-to-end communication channels drive efficiency and support oversight

In the modern world, we often take for granted the wealth of communication channels afforded to us.

Modern digital companies now enable their customers to engage with them over social media, email, and

live chat, alongside traditional channels such as phone and email. This allows customers to select a channel

that makes sense or meets their personal preferences. However, this is not possible for every company as

factors such as lack of resources, increased cost, and disjointed legacy processes form barriers to opening

up new channels to offer great customer engagement and experience.

It may seem strange to jump from digitizing document management in the back office to shifting to

omnichannel communication structures, but it follows a similar logic to many of the other areas discussed.

In a multi-channel environment, a carrier can struggle to balance and integrate processes across all

channels. For example, the response and processes between engagements handled through email or a

web portal are likely to be handled differently than one sent through the mail. Moreover, they may even

be handled by different teams, which can not only increase a carrier’s resource burden but can also

impede the overall efficiency of a transaction – particularly if it crosses over multiple channels.

However, if insurance carriers are able to digitalize documents – physical copies uploaded through

intelligent OCR solutions alongside web forms and emails – they can develop an integrated system that

brings all documents and data into one place. It will help to drive a seamless and customer-centric

approach that ensures both customers and insurance professionals have quick access to all the

information they need. Ultimately, customer experience should remain consistent across communication

channels, with each integrated into a single platform that supports customer preference. If a customer

initially engages via post but follows up with a phone call or email, the experience should be seamless in

terms of interactions, data, and context.

Patrick identifies this as a key strategic imperative for his

organization as well, as it ties so tightly to the increased speed and

agility required in the modern insurance market, and also the

growing expectations modern consumers of insurance products

have – meeting customer demand and driving down the time and

costs of processing. Generali’s engagement with Swiss Post

Solutions has allowed them the space to reimagine how they get

work done. Swiss Post Solutions has been able to improve service

delivery while keeping costs the same, which has freed up the time

and resources for Generali to investigate the routes to digitization

and, with the insight and involvement of Swiss Post Solutions,

develop a clear roadmap for how Generali is to evolve across the

business to meet the demands of the modern market.

“Swiss Post Solutions is

joining forces with

insurance clients to develop

and deploy next generation

business process services by

digitizing data across all

communication channels

and automate subsequent

work processes.”





Digitization investments are the critical piece of the puzzle to achieve a new threshold of straight-through

insurance processing. With this approach, digital transformation is not just about building shiny new

customer interfaces; it’s also about developing processes and technologies across the business to drive a

customer-centric approach. For many insurance carriers, this can be a daunting process; however, with

the right services and technology providers to support them, by providing a much-needed blend of insight

and access to expert resources, they can begin their journey to embrace digital business models.

HfS would like to extend a special thank you to Swiss Post Solutions for its support of this study.





About the Authors

Ollie O’Donoghue

Ollie O’Donoghue is Research Director, IT Services. With over five years experience in the IT services industry – as both a practitioner and a research analyst – Ollie understands the impact IT services have in the modern business environment.

Before joining HfS, Ollie was the Head of Research and an Industry Analyst

for an ITSM Practice committed to providing IT Service and Support

Organisations with the resources to deliver greater business value. There

he developed a comprehensive research portfolio for the industry. He has

researched and presented on a multitude of topics including automation,

innovative support models, and real-time analytics. In 2017, Ollie was named second on a list of IT and

ITSM experts to watch.

Before becoming an analyst, Ollie worked as an IT service professional in a large public sector organization.

It was here that Ollie’s passion for the industry developed.

He graduated from the University of Kent with a Bachelor’s in History. He is also a certified Service Desk

Manager with higher mastery. Among his eclectic collection of professional certifications, he has four

advanced diplomas in ornamental aquatic fish care. He claims these landed him his first IT job as a member

of the interview panel was an avid fishkeeper.

In his spare time, Ollie reads up on History, Geography, and Economics and spends an unfortunate amount

of time playing strategy games on his computer. Ollie is partial to wheat beer and, in the right

circumstances, Irish whiskey.





Reetika Fleming

Reetika Fleming is Research Director at HfS Research. She currently tracks

technology-enabled operations in insurance. Her research coverage also

includes enterprise analytics services and its evolution towards Accessible

& Actionable Data within client organizations. She regularly contributes to

HfS’ research content in the form of HfS Blueprint reports, PoVs and

Soundbites. She also supports custom research and strategy projects;

analyzing data, supporting client inquiry, conducting regular discussions

and briefings with both buyers and service providers, providing

consultative, analytical and expert support to HfS clients.

Prior to HfS, Reetika worked in the sourcing research wing of business research and consulting firm

ValueNotes. Her responsibilities as Project Manager included research product design and development,

managing custom research engagements, developing thought leadership through targeted content and

community interaction, and business development support. She was also responsible for driving the unit’s

web and social media strategy and presence.

Reetika has completed her Masters in Marketing Management with distinction from Aston University, UK,

receiving Beta Gamma Sigma honors. Prior to this, she received her Bachelor’s in Business Administration

with distinction from Symbiosis International University, India.

On a more personal note, she enjoys reading fantasy series, travelling to world heritage sites and

strategy/simulation gaming.

Reetika can be reached at [email protected] and followed on Twitter at

@ReetikaFleming



mailto:[email protected]

https://twitter.com/JoshiReetika



About HfS

HfS’ mission is to provide visionary insight into the major innovations impacting business operations:

automation, artificial intelligence, blockchain, digital business models and smart analytics.

We focus on the future of operations across key industries. We influence the strategies of enterprise

customers to develop operational backbones to stay competitive and partner with capable services

providers, technology suppliers, and third party advisors.

HfS is the changing face of the analyst industry combining knowledge with impact:

» ThinkTank model to collaborate with enterprise customers and other industry stakeholders

» 3000 enterprise customer interviews annually across the Global 2000

» A highly experienced analyst team

» Unrivalled industry summits

» Comprehensive data products on the future of operations and IT services across industries

» A growing readership of over one million annually

The "As-a-Service Economy" and "OneOffice™" are revolutionizing the industry.

Read more about HfS and our initiatives on our website.



http://www.horsesforsources.com/four-foundations-as-a-service-1_052315

http://www.horsesforsources.com/four-foundations-as-a-service-1_052315

http://www.hfsresearch.com/pointsofview/Defining-the-Digital-OneOffice-Organization

http://www.hfsresearch.com/about

Documents

Every Insurer Needs a Solid Foundation for Digital · Every Insurer Needs a Solid Foundation for Digital | 6 Without these back-office processes, carriers would simply not be able