PODCAST: COVID 19 | Redefining Digital Enterprises
Episode 4: COVID-19 | Implications and Impact on Insurance Industry
Listening time: 12 minutes
COVID-19 | Implications and Impact on Insurance Industry
In this episode, Anirban Chaudhury talks about how insurers the world over are grappling with new and unprecedented challenges to balance high financial losses, increasing new premiums, and rising claims. Anirban believes that insurers can make the best of the situation by adopting digital practices with AI-tools to stay resilient in the face of uncertainty.
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Anushruti: Hi, everyone. You’re listening to AI to Impact by BRIDGEi2i, a podcast on AI for the digital enterprise. My name is Anushruti, and I’m a part of the CEO’s program office at BRIDGEi2i and the custodian of data around our sales pipeline. We are in the middle of an unparalleled wave of destruction created by the COVID-19 pandemic and in our AI to impact podcast, we will be having conversations with BRIDGEi2i business heads, reputed AI and analytics leaders, sales experts and digital transformation advisors to discuss the impact of COVID-19 on enterprises and how they can recalibrate their focus.
Today I’m going to be chatting with Anirban Chaudhury, VP & Practice Head of Insurance vertical at BRIDGEi2i. He focuses on supporting insurers in their transformation journey, using innovations that combine advanced AI applications with technology solutions. As a passionate analytics practitioner, Anirban has successfully incubated and commercialized analytics practices and created sustainable commercial impact for businesses across many nations. Hi Anirban, thank you so much for making the time to connect with us.
Anirban: Thanks Anushruti for having me here.
Anushruti: Always a pleasure. So, we all know that the COVID-19 outbreak has caused widespread concern and increasing economic hardships for consumers, businesses, and communities. In such a situation, people look up to insurance companies for support. What are the top challenges that insurance companies are juggling with right now?
Anirban: So, like everyone else, this is a black swan moment for insurers as they face a monumental challenge in balancing high financial losses, generating new premiums, and also serving consumers as per their needs. If we look closely, first of all, we are seeing an unprecedented rise in claims across a number of products and regions, be it in health, life, travel insurance or for commercial lines, business interruption, workers compensation, etc. The P&C industry estimates that business interruption losses just for the SME business in the US would be between $220-$380 Billion per month, which is a quarter to half of the total industry surplus available to pay all P&C claims. And that is huge. Now, most of these claims are also getting rejected as pandemics are typically not covered, and that is severely impacting consumers, generating negative sentiments, and also increasing chances of new types of fraud.
Secondly, most of the products that insurers typically use, advice, or assist at sales mechanisms via agents or brokers using face to face or telemarketing challenges. Now, this is a problem as we have limited movements or unavailability of field or telemarketing agents. Also, consumers are also holding back because of financial difficulty.
So, we see a sharp drop in sales across products and regions. However, some of the products typically sold online are also seeing a rise in demand. And last but not least, insurers are changing their products and underwriting strategy to mitigate this increased risk. On the one hand, they’re tightening terms and conditions to exclude pandemic related planes for policies written after the outbreak or are introducing higher underwritings to the team. But on the other hand, they also need to support consumers and gain their trust either by favorable changes in existing policies or by introducing new products.
For example, some insurers have introduced 30-day free COVID-19 covers and are waiving off out-of-pocket medical expenses. But all of this means a substantial effort in loss estimation, rate determination, dissolving or changing risk guidelines.
Anushruti: Interesting. And as you earlier mentioned, that we are seeing an unprecedented rise in claims, traction in digital sales channels, and change in the product that sells, the traditional models are looking to be falling apart, and companies are rethinking and redefining business models and strategies. In such a scenario, how can they prioritize their key concerns?
Anirban: That’s true. And in some ways, the traditional models need to be re-looked or revamped. Let’s take digital as an example; we have claim adjusters, underwriters, sales agents working from home, and facing limited movements. So, we really need to fast forward on the theme of large-scale digitalization. For these functions to be effective, they need to be equipped with intelligent tools that combine information from different documents, data systems, or also external data. But they can also serve up insights that help in managing these high volumes of tasks and then in taking accurate decisions quickly equally.
Equally, the entire set of consumer-facing activities need to be a lot more digital, be it for consumers to submit claims, or get their customer queries resolved. Secondly, I think there is a strong need for insurers to be much more prepared and coordinated in case of events like these pandemics and how it disrupts the world economy. Now insurers and governments are coming together to introduce new products, including government-help. So, for example, some large insurers have proposed they will work with governments and other insurers to create a pandemic risk pooling scheme to cover these types of health catastrophes. Now, the challenge is that empirically the data is quite sparse. So to effectively evaluate risks for such a scenario, we will need to look at diverse sets of climate change data, natural disaster data, health catastrophes, etc. and estimate future incidence and losses using advanced analytics and simulated solutions.
Anushruti: Right. Right. And as you’ve rightly mentioned, that we can see the emergence of newer products and processes. And here data being the centrifugal force behind making this possible. According to you, how do you see analytics and AI enabling insurance companies to bring this change?
Anirban: So, I strongly believe data analytics and AI is one of the best equipment we have to deal with the situation. Insurers, they’d really need to harness the different types of new vs. old data coming from various sources and embed algorithmic solutions in their operations much more. Now, this is very important because we still do not really know the full extent of the ramifications from COVID.
So we need to look at unconventional data and use advanced algorithms to detect early signals for what might happen in the future, predict the emergence of new risk, or how sharply the losses will evolve. For example, in many countries, hospitals, and clinics, they have postponed non-critical treatments, and correspondingly some types of claims have dropped, but have we only postponed these losses? Would these losses get compounded, and actually, because of delayed treatment lead to higher claims severity? And equally, as discussed earlier, intelligent proclamation and digital processes are paramount and data, and AI has to be the key enablers for that. As many of these functions are facing high demand and resource constraints, building end-to-end intelligent digital applications with embedded AI-ML algorithms should be prioritized. For example, in the absence of a traditional sales channel, can we use a digital conversation with, say a sales engine that not only can recommend the right products, but also dynamically help customers in simulating scenarios under which these products will cover them?
Anushruti: All right. So, if I’m not wrong, as expected, the long-term projects are being put on the shelf, and some of the short term key strategic projects are taking priority. So in the near future, do we expect to see more digital transformation initiatives in this industry?
Anirban: I think that’s a very good question. I think the need for digital transformation for insurers has never been stronger, and AI and technology solutions can help. First and foremost, let’s understand and accept that we are actually in this for the long haul. Yes, in the near term, we will be back in the curve. We will manage and mitigate various fallouts, but we are likely to see the ripples for 12-18 months beyond that.
And most importantly, by the time we ourselves will open up to, and indeed demand different ways of doing business, serving our consumers and how we become consumers ourselves. Now the insurance industry will be no exception to that. So, I think the approach should not be only to look at feeling that here and now gaps in a peaceful approach, but really to re-imagine holistically how we evolve our business model, strengthen the fundamentals of our core processes and support our customers as and when needed.
So in that sense, along with driving functional initiatives, it is also critical to think about pan enterprise, cross-functional transformation journeys as that will also generate huge economies of scale. Let’s look at a scenario: For some life and non-life products, we are seeing an unprecedented surge in demand even in this time, and especially through online channels. Now traditionally online channels also have attracted higher risk and fraud profiles, but to leverage this high demand and convert that into sales, we need a granular pricing approach, we need stricter underwriting strategy and sharper marketing or sales tactics. All of these functions need to come together, and the common thread will be data and analytic solutions that serve up to actuaries, underwriters, and marketeers via digital solutions. But the beauty is once we solve this, we now have a better mechanism to engage and serve the new- age customers digitally, which will benefit us for the long term.
Anushruti: Very Well. So it is fair to say that how insurers respond to this unprecedented scenario will go a long way in building more effective processes, more inclusive products, sophisticated business models, and also in cementing a stronger relationship with their customers. Insurers can really gain in the short and long term by utilizing conventional and unconventional data digital tools and AI to stay ahead of the growth.
Anushruti: All right. It was great to talk to you. Thank you so much, Anirban for taking out the time.
Anirban: Thanks Anushruti. Pleasure talking to you.
Anushruti: Thank you so much for listening to this episode of AI to Impact podcast. That was a very interesting conversation with Anirban Chaudhury, VP & Practice head of Insurance Vertical at BRIDGEi2i. Do subscribe as we will continue the conversations with business experts and thought leaders in our upcoming episodes. They will be discussing the business impact of COVID 19 on various industries and how does the journey look for them in the future. Once again, thank you so much for tuning in. Bye-bye. Stay home. Stay safe.
2020 will long be remembered for the pandemic that wreaked havoc on the global economy and disrupted communities and businesses in unprecedented ways. In our latest podcast series: COVID19 | Redefining Digital Enterprises, we will be interacting with several thought leaders, BRIDGEi2i Business Heads, Domain Experts, and reputed AI and analytics leaders to understand the various challenges emerging out of this crisis and the way forward for enterprises in the new world order. Tune in to know more!
Anirban Chaudhry. VP & Practice Head – Insurance
Anirban leads the Insurance vertical at BRIDGEi2i. He focuses on supporting Insurers in their transformation journey using innovations that combine advanced AI applications with technology solutions.
Prior to his tenure at BRIDGEi2i, Anirban led the Direct Marketing business for AXA-Credit & Lifestyle Protection (CLP) globally and successfully drove strong profitable growth, after having set up the advanced analytics and marketing capabilities in the business.
As a passionate analytics practitioner, Anirban has successfully incubated and commercialized analytics practices and created sustainable commercial impact for businesses across many regions during his tenure with companies such as GE, HP and also a UK based consulting firm Beyond Analysis.
Anirban holds a Master’s Degree in Economics from Delhi School of Economics. In his spare time, Anirban pursues his other passions – wildlife photography and hiking!