Content Extraction Process in Insurance
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Lloyd’s of London, as part of its Future at Lloyd’s initiative, released Blueprint Two in November 2020 as a follow-up to its initial strategy of advancing the London market’s efficiency and enhancing stakeholder experience. The initiative clearly outlines the changes to be implemented over the next two years to realize the vision set out in Blueprint One, which was released in September 2019 and which listed the different components that would make up Lloyd’s ecosystem: primarily, a complex risk platform with data-first capabilities; Lloyd’s risk exchange to process relatively non-complex, high-volume, low-value risks; a claims solution to automate simple claims; and a new syndicate-in-a-box concept to encourage innovative and accretive business and talent at Lloyd’s.
Apart from its intent as outlined above, Blueprint Two addresses Lloyd’s market participants’ concerns about the inefficiencies caused by disjointed processes and technologies used in risk placement and claims handling by transforming the processes into a seamless end-to-end experience.
Blueprint Two focuses on two core placement types – the open market and the delegated authority business – which together account for more than 90% of the insurance contracts placed at Lloyd’s. The blueprint keeps the customer at its heart, simplifies the complexity of doing business, accelerates the data value realization process, and fosters trust through open communication and transparency.
Lloyd’s plans to achieve consolidated savings of GBP800 million by adopting digital technologies that enable automation, virtual collaboration, digital contract management, automated data ingestion, electronic First Notice of Loss (eFNOL), intelligent workflow management, and third-party integration. Lloyd’s will spend an estimated GBP200 million over the next two years to support future initiatives and realize the goals laid out in Blueprint Two. As the pandemic has expedited the need to move to a new digital environment, Lloyd’s aims to move its marketplace operations from a predominantly document-based model to a document-plus-data model, ultimately reaching a data-first operating model.
For technology and service providers in the London market, the transformation program presents a host of opportunities to advance their market standing by providing:
As Lloyd’s looks at pioneering specialty risks coverage and introducing new syndicates as part of its transformation program, it needs to be mindful about how to proceed with talent acquisition and data strategy.
Coverage for newer specialty risks demands a revamped data strategy to combine data from non-traditional sources, mitigate data privacy risks, improve data accessibility for relevant stakeholders, and run analytics to enable innovative risk pricing. At the same time, dedicated effort is needed to acquire talent with relevant technology skills (such as APIs, microservices, and advanced analytics) and expertise in handling complex specialty risks, such as the protection of commercial spacecrafts, satellites or intangible risks such as the voice of a singer.
While Lloyd’s of London aims to expand its market operations globally, its market participants will also need to ramp up their enterprise software capabilities to avoid being too Lloyd’s-centric, which means enabling technology transformation of the wider London insurance market and not only for its market participants.
For technology service providers operating in the London market, this initiative represents an opportunity to develop modern software platforms built with flexibility in mind. Service providers can achieve these benefits by leveraging an ecosystem of specialist technology vendors and insurtechs, and focusing on enhanced virtual collaboration, data and security, intuitive customer experience design, cloud-native architecture, and artificial intelligence.
Insurers’ extreme focus on employee and customer experience is forcing TPAs to adapt their offerings beyond commoditized services by leveraging digital technology.
Some third-party administrators (TPAs) are building the requisite capabilities in talent, technologies and data to address the changing needs of the insurance industry, but most TPAs lag behind. Everest Group reports that the top 10 US TPAs suffered a significant drop in year-on-year revenue growth, falling from 20% for 2017-2018 to 5-10% for 2018-2019. Everest Group predicts the slowdown will continue in the year ahead under the impact of the COVID-19 crisis as TPAs look to battle against the falling demand and the changing requirements of insurers.
“Insurers’ extreme focus on employee and customer experience is forcing TPAs to adapt their offerings beyond commoditized services,” said Skand Bhargava, practice director at Everest Group. “Most of the digital-led use cases that TPAs have implemented thus far are low on the sophistication scale when compared to the use cases implemented by insurance IT or Business Process Outsourcing providers. However, some leading TPAs have showed signs of change, making intensified digital investments in more new-age partners and technologies, such as the use of IoT sensors, artificial intelligence, predictive image analytics, telematics and predictive modeling. As a result, these more innovative TPAs are reaping differentiation in the market and positioning themselves for success amidst recessionary pressures because of the greater value they are providing for their clients. Going forward, those TPAs who deliberately commit to well-executed digital transformation will not only deliver a more progressive value proposition to clients but also secure the relevance of the overall industry, especially considering the current environment.”
Third-party administrators are commonly used by health insurance providers as well as enterprises or healthcare organizations who fund their own health plans for employees. TPAs assist these organizations with claims administration as well as premium billing, customer enrollment, and other day-to-day operations of insurance programs.
Currently, the Top 10 TPAs in the U.S command only 3-5% of a $270 billion market, with some of the largest TPAs functioning on single-digit operating margins and very few keeping pace with digital transformation. By leveraging digital technology, TPAs can improve margins, drive differentiation, address operational challenges, enhance talent throughput and ensure client retention. In the longer term, digital adoption can help TPAs adjust to changing risks and move up the value chain to manage critical tasks.
Everest Group shares these findings in its recently published report, Third Party Administrator (TPA) State of the Market Report 2020: Industry Facing an Urgent Mandate to Transform. This report examines the global TPA market, particularly the property and casualty (P&C) and workers’ compensation insurance segments, including changes in client demand patterns and delivery requirements from TPAs, and the role and adoption of digital levers.
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global enterprises, service providers, and investors. Through our research-informed insights and deep experience, we guide clients in their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com.
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