Insurance Transformation. The robots will handle the damage
02 September 2019
Digitisation and automation trends, in line with the developing artificial intelligence, to a certain extent are opening a black box in many fields. On the one hand, they provide a huge potential for innovation in terms of working with data, on the other hand, however, a question arises whether sensitive information is safe. The same applies to the insurance industry, where the winner must not only efficiently analyse and use the huge amount of client data in order to be able to provide better services, but they must also efficiently protect this data. Even in the age of robotisation, the work with human emotions still remains of extreme importance, stated Pavel Mencl, Chief Executive Officer of Generali Pojišťovna, for the Roklen24 server.
In mid-February you stated in one interview that the previous year had been a “mystery in the field of innovation” for you. Can you be more specific on this issue?
I used this term rather in the sense that we were completely busy with legislative issues that move the markets. This has included data and client protection. These are hot topics today probably in all companies, both small and big. Due to this, our company was forced to suspend a number of activities towards the client for as long as one year. We were working hard all through that year to satisfy legal requirements and to secure the data protection, and to improve sales processes towards the clients. I perceived this situation as a stop, as a time to ask myself what to do next.
On the one hand we are trying to become simpler. Yet on the other hand we are forced to implement measures which, from the clients’ perspective, make the process more complicated. Let me state one example. Recently we held a conference, and with great triumph we were admiring what an excellent process for the sale of life insurance we had. In this sense we got the policy selling time of about one hour. When I look 15 years back, we were able to sell a product of similar quality within 20 minutes.
If particular innovations come into question – what innovations would they include in your opinion?
We need to protect, process and evaluate a huge amount of data. Who can do this efficiently, that one wins. However, we also need to communicate more efficiently with clients. We want to be efficient in respect of spending our funds. We may be lacking qualified employees. I think that the first area entering robotisation is the communication with the client. This includes the administration of client’s requirements, their evaluation and response to them.
On behalf of our company I would like to mention one thing which is in progress and which we are proud of. This is the Emma system. The system is able to transcribe spoken words to text, which amounts to a tremendous volume of data representing a fundamental support for us. Our efficiency rate is around 99% and if I am not mistaken, we have transcribed into text and evaluated more than six million conversations.
Do you do this on your own or is this provided by an external company?
On our own. Our call centres have appropriate technology available. And I think that this is just the first example of where our steps will lead us in the future. Another thing that I perceive as very sensitive from the point of view of data protection is remote identification of a client. The ability to recognise a client by voice, signature or face. Plenty of activities in the insurance industry will be dedicated to this area.
Another related issue will be intelligent claims handling. There will be some artificial intelligence that will lead the client through the claims handling process completely, without any human assistance. From reporting a claim up to the payment of benefits. This is the future that will be put into practice, in my opinion, within five to ten years. The Czech language presents certain challenge for the automation processes, of course.
However, no artificial intelligence yet can evaluate emotions which play a crucial role. “I like you, I have a good feeling about you”, that is where the human factor remains very strong. The processes in an insurance company must continue to include a certain amount of emotions. Settling a claim per se is a strong emotional issue, either positive, or normal. Or, as part of this settlement, we address our clients’ comments on this process.
Can you see somewhere else in the world that this process is any further? Such as in America or in Asia? Are any markets significantly more ahead?
Voice recognition is already quite well developed technology. In respect of its everyday use, this is a matter of several years. Implementation of fully automated claims settlement, as I have mentioned, depends on the degree of maturity of any particular market. This will be significantly easier in the countries where generally simpler products and conditions are in place. I believe that the process of automated claims settlement is feasible for certain products in accordance with applicable law. However can you imagine that somebody would do something fully automatically? I cannot remember any fully automated and digitised insurer who would communicate with clients without a piece of human element.
Let me get back to GDPR. How would you evaluate this issue? How many people were engaged in this in Generali?
With respect to the client data protection, this basically meant a year of hard work. IT teams, product and claims handling teams were involved in these activities. This was a project inevitably penetrating through the entire company. We were assessing possible impacts. Of course, the implementation is very expensive, both from the point of view of processes, and also from the perspective of money. I can say that we have passed through this process with honour. We serve as a model example for other companies within our holding. What we have covered up to today is in my opinion a huge piece of work, which we managed to complete last year.
We are talking about the minimisation of the use of paper – so called paperless work, and at the same time the requirements laid down by the European Union and the Czech National Bank. What is your position in this point?
I have basically mentioned this issue. With regard to the policy selling process, from the client’s perspective we have more and more paper. Just in terms of life insurance, there are about 40 sheets with information and terms and conditions. On the other hand we want to be responsible and do sustainable business...
Over the last three years, we have managed to digitise 40 percent of all communication. This is a tremendous step forward, it refers to millions of papers a year. That is where I can perceive a meaningful pathway. The share of electronic communication with clients in Generali is about 60 percent. Of course, even digital communication must also meet regulatory and statutory requirements. It simply is not about using a paper form anymore. In addition we must also store these documents. In short, we communicate in a different way than the previous generation. Or, as we used to five years ago. Restricting the use of paper is for us definitely a meaningful way that we actively support and develop.
There are start-up companies engaged in insurance, such as Mutumutu. In June, Partners announced a launch of Simplea insurance company. I am not sure whether you noticed the DOK.cz project. How do you perceive these firms?
Over the last two three years, I simply have not seen any successful start-up in our industry. Sometimes I have a feeling that these start-ups have not passed successfully through all legal requirements. That may result from the fact that our industry is, from the start-ups point of view, pretty much regulated. I think that this is the main reason that underlines success or failure of these companies. To do good business in the insurance industry means having a certain size, as the profitability here is in the range of several percent. Therefore you must have an appropriate size, or, you must venture into a higher degree of risk.
Meanwhile, we perceive these start-ups, which are established in the Czech Republic and which are trying to recover their market space, as dead end trials, maybe due to their ignorance of processes, ignorance of complexity, evaluation ... When I consider what we, as an all-purpose insurance company, have gone through, what we have worked out with the Czech National Bank in order to do our business well... I honestly am a bit sceptical about any wide-ranging success of such start-ups. Their paths are often of course a bit inspirational, yet I must add that here in Generali we have a number of smart ,skilled people who understand IT and are able to find and put into practice surprising and very useful solutions.
How do you like the Mutumutu idea? This insurance is aimed at a particular target group – young people who play sports.
As a target group, they are interesting. No doubt about it. We, as an all-purpose insurance company, aim at everybody by our nature. Nevertheless, each target age group has its specific behaviour. For us, this group is also attractive, and that is why we also have a particular solution for them. I think that it will depend on technological equipment and on the method they want to offer the product and services. What will be important at the end is that each start-up must be able to become profitable. This is especially important in the insurance business where huge demands are put on financial stability.
Can you describe the Generali client portal?
We are talking about a very fast way towards the digitisation and robotisation. All insurers and probably also banks have one handicap, which is the fact that their client portfolio covers all generations. So always, implementing something new in this area, we must ask ourselves – for whom are we doing this? If it is also for the older generation, we must continue to stay simple and easy to be understood. That’s how our client portal was created. Probably we have not implemented things which would be nice and actually very modern, but we have rather preferred simplicity. Currently we have, I think, the most simple and understandable portal for client servicing. Definitely amongst insurance companies, but I think our portal is also easily comparable with those of banks.
Let’s get to car insurance and the Internet of Things (IoT). What do you think, where is the key to a happy insured motorist?
We, the Generali Group, have participated in the implementation of assessment of client behaviour which could result in a better segmentation and better price range. Those clients who would accept being monitored would be given a better price. The conclusions for the Czech Republic, and in fact not only here, are clear. Currently, clients have no confidence in this solution. They refuse to be monitored and assessed, even in exchange for a discount of several hundred crowns for better behaviour behind the steering wheel. We can just guess that this is music for the future, that probably the coming generations will live knowing that their driving style is monitored and assessed each day. However, now it is too early for that.
So we can say that this is a good solution, yet we need to move it forward in time. Each of us wants to have a certain degree of freedom. A car used to hold the feeling of freedom and independence. Which means – this is not the correct path. Moreover we are not alone in the market. Currently all major car makers already have various technologies built into their vehicles. They are able to assess the need for service, in the event of an accident the car itself will call for help... However the question is how to link these technologies with the insurance business – such as evaluation of behaviour and driving style.
So far this varies from country to country. We in the Generali Group have put something similar into practice in Italy, where – based on the clients’ behaviour – the car insurance cost varies over a wide range. Nevertheless it still applies that based on our investigation, Czech clients neither want to be monitored nor evaluated in respect of their driving style.
When we look at the Internet of Things, is there the right time for that now? Sensors for households which are able to detect leaking water.
The sensors, as well as smart mobiles, will obviously become sooner or later a standard. Some building companies have understood this and automatically provide their new houses with security devices that have sensors connected to the Internet. In respect of the insurance business, the following types of risk are concerned: risk of leaking water, risk of fire and risk of theft.
The question is whether insurance companies are currently able to provide their clients with high-quality sensors, as the client will logically link these sensors with the insurance company rather than with the technological company that has developed them. In fact it will be us who will be guaranteeing the quality, servicing and success rate of such devices on behalf of third parties. There are insurers who went for it to the fullest. At the moment we are testing pilot operations and taking our time, in order to guarantee the reliability of the sensors. And also to provide a guarantee that the client will receive a quality service along with the sensors.
Last year did not bring any devastating natural disasters. However, the drought is being discussed quite intensely now. Do you think that this is a new phenomenon? Will it present a challenge to your industry?
Definitely it will be a challenge. We perceive this in particular in relation to agriculture, and hence with the crop quality, there may be an impact on the building industry and, of course, on water management. The drought definitely presents a new phenomenon. The changes in climate are something we strongly watch and discuss what to do with it, in particular with respect to the fact that this is a risk we are able to influence and evaluate, and whether we are able to provide our clients with a solution which would be attractive for both parties.
I cannot miss the opportunity to ask you about the sectoral tax, i.e. taxation of insurers’ provisions (reserves). What is your opinion?
My personal opinion is that this presents a short-term solution of an outage in the budget. However this solution does not deal with the complexity of what to do next. My feeling is that the whole matter is a bit chaotic as especially in life insurance this solution is very complicated. None of us wants to cause harm to our clients. Sometimes, it is nearly impossible to determine future profits. What may happen is that in the end we will cause damage to our clients. In addition, we perceive this trend in surrounding countries also. Let me remind you that the very first sectoral tax was imposed on banks which, once upon a time, had received state aid during a period of crisis or disaster. The Czech insurance market is and will be very stable, and we have never needed any state support, not even in the worst years of crisis. When generating provisions (reserves), we, insurers, are very prudent. We perceive this deliberate state intervention as a cause of fluctuations in market standards. And at the same time, we must see the issue from mathematical point of view as this tells us how to generate provisions, moreover, there are requirements for insurers’ solvency which is affected by this. We will see how this will all end. Thanks to the Czech Insurance Association (Česká asociace pojišťoven – ČAP) we have clearly expressed our opinion that we want to continue in discussions about this matter and that we do not understand this as the only possible solution. This solution can be for example in the form of a national investment fund which would allow better use of the funds or which would systematically work with them.
Let us focus on this year now. You have mentioned that an important topic for Generali will be to keep the profit growth. How do you intend to achieve this?
We already responded to the price development last year. It should be noted that an insurance company lives with a relatively high inertia. When you are able to set up something, say, in monthly intervals, you will feel the full impact of it approximately after one year. We have already started with the optimisation of prices. In particular in car insurance where we see a huge growth in prices of repairs, price of work and spare parts – this must all be reflected in the growth in an average claim. The cost of labour in car garages grew last year in the range of ten percent. And we, as a good manager, simply had to take this into account.
At the same time, I am happy with how well this year has been developing for us. It means in line with our expectations, as well as with those of our shareholder and the Czech National Bank, of course. We launched the price optimisation last year and this process also included explaining to our clients in an understandable way what happens in the market, because it is not that we were just increasing prices, we must respond to what is actually happening in the labour market. And here the facts are unambiguous: prices of labour and repairs are growing significantly.
You have mentioned the improving quality of services and yet more intense focus on client’s satisfaction as the most important springboard. Can you be more specific in this subject?
As we were talking about the digitisation, robotisation and automation topics, the client is on the other side. The client should express some emotion. When I can feel something and I am able to express emotion, either I like it or I hate it, but it does have some meaning, you can work with this. Without emotions, you know nothing about the client, about whether he likes you or not.
We have a complex system called Medallia, evaluating client’s behaviour specifically in turning points of his behaviour – when concluding a policy, terminating a policy, claims handling, upon any change or a need of services. That’s where we apply our effort and we have relevant processes in place. We contact our client and ask him for his opinion, whether he was happy, unhappy, whether he will recommend our services to anybody else, or, what we should do in a different way. We evaluate the answers purposefully. We even have a process where we publish about 100 answers from clients (once these answers have been approved by the clients) on our website; so we hold a package of approximately 600 current comments from our clients. We not only help ourselves, but also help the clients to navigate through this.
I believe that the client must always be at the centre of our interest. In fact, the incentive schemes prepared for our colleagues in the call centre who work on the client feedback agenda are designed in this manner. On the basis of this we are able to adjust our processes so they do make sense to the insurance company as well as to the client. I think that this is the subject we are going to improve further. This is the crucial step. To be digital, yet not to loose the client. What may happen is that the client might say: when this artificial intelligence is talking to me - I can see absolutely no difference, so I do not see any reason for me to stay here. And this would be a shame, as emotions definitely belong to insurance, either positive emotions or emotions leading us further, telling us what we have done differently compared to what our client expected. And this is what the artificial intelligence will never be able to evaluate without the interaction with people. Human factor simply is and will be of fundamental importance in the insurance business.
How many employees do you have at the moment, also in relation to the labour market? Are you happy in this respect or do you miss employees at certain positions?
The Generali Group in the Czech Republic currently employs more than four thousand people. What is important is that we share our processes in the Group involving several insurance companies as well as an investment company or a pension fund. For example we have a call centre that uses one tool for calls at one place. That is an example of our responsibility towards clients, to spend their money efficiently.
As for the missing employees, I think that we suffer in the same manner as the entire sector. The lack of people is in IT, in general we see a lack of experts. The Czech market is really very small in respect of specialised professionals. And yet our group has a very good offer of opportunities for an international career. We are striving to further increase the attraction. We cooperate with universities, try to support education, and of course it is also meaningful to build close relationships with students.
Pavel Mencl (51)
Graduated from the Faculty of Mechanical Engineering at VTA Brno, where he received the title of Engineer in 1993. Then he was working with VUMS software and Buehler motor and in 1995 he joined Generali as Regional Director in Hradec Králové. Since 2007 he worked as Business Director and in 2008 he became a Member of the Board of Directors. In the same year he began his studies at the University of Pittsburgh, where he received an MBA two years later. In 2015 he was appointed CEO of Generali Czech Republic.
(Source: roklen24.cz, 9.7. 2019)