Insurance providers need to have the confidence to use AI THE RIGHT WAY – so give your employees that confidence, too!

A brief history lesson

Markets are generally already in the midst of the fifth revolution – digitalisation. And as in previous eras, such as the age of steam trains and railways, the age of steel production and the age of oil, there will be a turning point that will decide who will manage to adapt – and ultimately profit – and who will not.

The number and impact of disruptive changes have dramatically increased in the process. Markets, products, distribution channels and the way products are created are subject to constant change. This has a decisive impact on consumers. If they used to have a certain loyalty to products, then this behaviour is increasingly falling by the wayside.

How can we solve this problem?

AI-based systems are seen as a key value driver in this phase. But simply using it doesn’t solve the challenges insurance providers face. I’d like to point out a few aspects and a potential approach to solving this problem in this blog post.

Let’s take a look, albeit an admittedly somewhat stereotypical one, at THE insurance provider

The organisation is structured based on a system of separating its functional tasks and its divisions. The accounting department manages the finances, the sales department ensures that the sales targets are achieved and the product managers develop new products with the marketing department, which in turn are used to meet the customers’ needs. And last but not least, the IT department provides the necessary IT systems and infrastructure.

AI-based projects are now being implemented within these structures. ‘Agile’ process models are used in general. These models go through project phases iteratively and refine them, allowing project goals to be continuously reviewed and measured. Similar to application development, features are prioritised in a backlog and implemented in sprints. The approach I have described relates to the context of perhaps one or more projects. As a rule, the fundamental corporate processes and principles remain unaffected. The system is also operationalised, which is then handed over to IT after the project phase, meaning the technical responsibility is passed on. Knowledge is lost and any adjustments that are needed or any tweaks to the models go unmade as a result.

I’d just like to make it clear at this point that it does, of course, often makes sense to implement projects with AI-based technologies within these existing structures. However, the gain from using AI is still far behind its potential in terms of value creation.

Rather, the holistic view of the problem is crucial. Furthermore, the divide between project and operation should be bridged.

The insurance company can build this bridge by aligning its processes along the value streams to the customer. Digital projects, which include the introduction of AI-based systems, need to focus on the customer to gain momentum. There will be discernible changes in the prioritisation of backlogs since the business value, of which customer benefit is an elementary component, comes more into focus. This change of perspective causes employees and their organisation to change their point of view and puts them in the middle of the change process.

The following scenario

Here’s the scenario: Let’s take introducing AI into churn prediction as an example and what then happens if the customer-centric view – and thus the customer benefit – is neglected. The AI recognises that someone is at risk of switching insurance provider. The insurance provider actively approaches this customer. This approach might now backfire and the customer will definitely switch provider because they were contacted an inopportune moment. If this business transaction is not properly monitored, the insurance provider may be buying into a negative business value. If there is no error culture in the organisation that understands this as part of innovation, no one will make the decision to fundamentally readjust the system or even to end the project as a learning experience.

This example also demonstrates that exploration plays a role, too. Insurance providers need to create an environment that allows people to try things out and to learn, while also keeping in mind that certain projects won’t be successful. Loss of face plays a strong role here. The foundation of insurance providers is being reshaped by the following factors:

• Cooperation of cross-functional teams
• An agile mindset
• Taking personal responsibility
• Enabling decision-making competence
• Putting customer orientation at the centre of product development

This holistic approach helps put the different challenges in focus. The benefits it brings can be recognised at an early stage and corrective measures can be implemented across the board, such as in professional, organisational and technical elements. This increases acceptance both internally and externally to the customer and sets the stage for further measures, as these are seen as an opportunity rather than a threat.

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