Digitisation in industrial insurance also means building up digital portfolios. Philipp Thier, underwriter and business analyst, shares his view on the importance of digital products for automated processes, which decision criteria help to get started and which challenges need to be overcome à la “we’ve always done it this way”.
What does “product digitisation” in industrial and commercial insurance mean to you?
For me, the digitisation of a product means no less than transforming insurance companies from the old days, i.e. from paper files and Excel lists, into a new digital world. In the digital world there are standards, processes are connected and offers and policies are created automatically. Inquiries to the insurance market also happen automatically up to the automation and dark processing of entire tenders.
So where will change happen?
One approach would be to say: Wherever I recognize uniform processes and products or activities that an underwriter does ten times a day, I start to standardize and to automate such processes. This gives underwriters the opportunity to focus more on their clients. On the other hand, they can concentrate on the really complex processes. Processes that are so complex that individual underwriting is important, for example through contact with clients or contact with insurers or brokers. A third possibility would be that the product is rather unusual and that individual underwriting is therefore advisable. Everything else lends itself to being digitalised.
Where do brokers or industrial insurers currently start when it comes to digital products and automation?
That varies. We see some who come to us with a very clear goal and a very clear vision. They have thought about what and how they want to digitalize in advance. But we also have a lot of people who come to us and who have simply been given homework to do: We have to become digital, modern and agile.
Anyone who does not yet have a clear idea of what “going digital” means to their organisation in concrete terms cannot start.
Anyone who does not yet have a clear idea of what “going digital” means to their organisation in concrete terms cannot start. In order to determine a sensible starting point, we analyse the inventory and talk to the specialist departments. What’s the problem? What do the systems used so far look like? What do the processes look like? What is going well and what is going badly? Then we develop together: What do you actually want to implement? Where do you want to set priorities?
For example, when it comes to products, you can consider starting with a basic product, which is rather easy because certain standards already exist. But it is also conceivable to start with a more complex product and focus first on reducing complexity by partially or fully automating various process steps.
What about very specific products: Is D&O more suitable than a property insurance product?
In theory, any product can be digitized. There are products that are easier to implement because they are not as complex from a business and technical point of view. Take a private liability policy, for example. It is not very complex because it is already very standardised. The situation is different with an industrial property policy with a master policy and foreign coverage for 25 locations in 15 different countries, where different premiums have to be expected with different taxes. This is of course much more demanding and complex.
Basically there is nothing that cannot be implemented. The most important question remains: Where does the shoe pinch most?
How could a broker start a product digitization?
A good starting point is to look at the current inventory first. Then one to three products are picked out that are suitable for digitisation in view of their complexity. For these, the following is then clarified: Is there really a need for digitisation? Are the appropriate distribution channels available?
Now many things happen in parallel:
- First of all, there is coordination with the cooperation partners, i.e. with the distribution channels.
- In the next step, the products are analyzed in more detail. Let’s assume that we are dealing with a financial institutions product whose questionnaire consists of three pages. We discuss whether the questionnaire really has to be that long or whether it can be shortened so that it only contains perhaps ten questions, but works just as efficient as the three-page paper before. There is a lot of potential for consolidation.
- You can also consider adding automated pricing at the same time. In other words, we would develop a pricing machine together. And why not make it available to the broker’s customer? Or just the cooperation broker?
- At this point another consideration comes into play. Which platform should be used?
- And of course the various output documents can be generated: Should a sub-process be designed in such a way that the cooperation broker or the end customer – if he wants to – can create a proper offer right away? Then all these documents are generated.
A lot happens in the background and in close coordination with the specialist departments in order to set up the product correctly.
What typical hurdles in the digitalization of products do you experience, e.g. at broker organisations?
I see two major challenges: firstly, there are the legacy systems, some of which are so interwoven in the organization that it can be very difficult to replace them. Which should not happen: running the legacy system and the new system in parallel. This generates double costs and increases complexity.
The second challenge is that if you want to work digitally, if you want to trade digitally with your business partners, you also have to change the way you work and think. We often hear: Yes, we have always done that. And that’s why we have to continue to do so. In such cases, the challenge is to discuss with insurers and brokers what we really need to continue as before and where we can possibly break new ground.
Do you come across underwriters who are willing to let go of the tried and tested and embrace change?
Underwriters are very careful about their work. Underwriting has a lot of history, often based on years and decades of knowledge. And, of course, there are many who are prepared to break new ground. But there are just as many underwriters who are afraid to give up the reins to a certain extent. The objection: Then you no longer do the underwriting yourself and you no longer talk to the client yourself. Instead, underwriting or broking is to a certain extent felt to be running in a dark box that you cannot influence in your daily work.
This represents a change that is not always welcomed.
How long does it currently take to develop a simple product and make it ready for the market, and how will it run digitally and across lines of business in the future?
I can primarily speak for the insurers. The individual departments, for example a property department or a liability department, tend to focus on making sure that their business is right, that the figures are right. In my experience, there are only a few departments that have a truly customer-focused and customer-centric view.
When I digitize products, it gives me a new opportunity to bring that customer focus into the picture.
When I digitize products, it gives me a new opportunity to bring that customer focus into the picture. One example: I have a corporate customer for whom I use a risk questionnaire to look at all the risks. Based on the results of this questionnaire, my customer is provided with digital products. Now the customer can calculate offers for himself and put these products together according to his actual, individual needs.
Of course, I could offer my customer such a possibility in the analogue world too – but that would be a huge effort. I would then have to somehow reconcile ten departments and talk to ten experts. Digitally, on the other hand, partly automated, my customer would have a platform at his disposal that he never experienced before in the analogue world. With this platform relevant offers are calculated in a fraction of the time.
In my own time as an underwriter, it worked like this: Sometimes we had a pre-submission period (when the submission came from the broker), three months before the policy commenced or before the renewal date. Then weeks of underwriting were done and referrals were written so it has to go up the hierarchy to get approvals. And it is also said that there might be one or two underwriters out there who show a tendency to complicate matters.
However, if I have created standards, if there is standardized pricing and if the referral rules are clarified, then it takes maybe ten minutes from a questionnaire to an offer to a policy for a moderately complex product. Before that, it would have taken me five weeks.
Speed and quality are increasing.
Speed and quality are increasing. Typing errors, copy-paste errors, transposed numbers, dots that are actually commas no longer exist. The data is then only entered once and used for pricing, quotation, policy creation and later for supplements, and for everything that belongs to this contract.
So digitised products and their associated processes form the basis of digitization in industrial insurance?
Yes, especially when a digital product has been set up, there are now opportunities to provide separate solutions for different industry groups, i.e. specific product variants.
For example, I have a standard public liability product and can adapt it for a specific industry group with relatively little effort. I then have a liability product that is now available specifically for one type of trade or industry. The terms and conditions are still a little adjusted, perhaps the prices are a little more refined and then I am already ready to go. I can now make the product variant available to the market via various sales channels.
Many thanks for the interview!