Innovation. Digital transformation. Disruption. We hear and read about these concepts so much that it’s easy to gloss over what they mean to our current business challenges. As Chief Data Scientist for
Signal vs. Noise Can Be a Groundbreaking Concept for P&C Insurers
In theory, most of us appreciate the concept of signal vs. noise: the signal stands out as a clear marker from an otherwise crowded or disorganized (noisy) environment. But, there’s more to the concept that may provide fruitful ground for insurers searching for ways to distinguish themselves in a highly competitive and rapidly evolving industry.
Noise is incoherent. In mathematical terms the addition of N uncorrelated or incoherent things, results a variance N times as big as the original. In non-mathematical terms, noise can be thought of as any set of things (numbers, concepts, products, etc.) that, when grouped together, result in overcrowding with no clear standout; this kind of clutter is both messy and counterproductive.
Signal, on the other hand, is coherent. Compared to noise, when small signals are added together the signal is N squared times as big. The result is a group of similar elements that work together to achieve a common goal. Think of how a symphony comes together or how your favorite online retailer’s supply chain works to execute the immediate delivery of goods to your home. Signal is the result of things that come together to compound the effectiveness of each part and differentiate itself from the background.
So, what does signal vs. noise have to do with innovation in insurance?
Our industry is facing some pretty significant challenges right now; low performance rates, increasing expectations from customers who now require a higher level of service than ever before, and mounting competition. Carriers need to find ways to reduce expenses while becoming their own version of a signal beaming out from all the industry noise. That’s where innovation comes in. But, achieving innovation doesn’t just happen.
Technologies Behind Today’s Innovations
AI, the Internet of Things (IoT), and mobility will transform insurance. These three capabilities are recreating the world as we see it. And we know this because this is what we’re buying in our personal lives. Phones, smart assistants, and the devices that let you turn on the lights remotely or through your voice; it’s all IoT, delivered through mobility, run by AI.
Pyramid of Innovation
To achieve innovation, it’s helpful to understand where innovation can come from. The pyramid of innovation offers a great framework, depicting a hierarchy for innovation (see image below). The foundation is product innovation, followed by process innovation, with business model innovation sitting at the narrow tip.
Product innovation obviously relates to products you sell; continuing to make improvements in individual products to address a specific problem or create specific value.
This is relatively easy to do and can provide incremental improvements. Business model innovation on the other end of the spectrum refers to changing the way money exchanges hands (think Netflix® and ride-sharing services). Business model innovation is thrilling because people tend to see these instances as striking gold, which may be true in some sense, but these examples are quite few, and far between. Process innovation, however, provides an avenue for transformation, without needing to find the proverbial needle in a haystack.
Process innovation can be defined as revolutionizing basic workflows and providing novel methods to create better product pipelines that when fused together result in a cohesive, and coherent, package.
At CCC, we’ve invested in the innovation of process, namely how the software development lifecycle needs to adapt to thrive in the era of big data and data science. Working with this new model, we create solutions that span and address complete workflows to see where the computer can find patterns and thus automate existing processes. By using the latest technologies, we are helping insurers bring innovation to their processes, transforming the insurance experience for policyholders.
A New Claims Process at Work
Imagine there has been an accident. The accident was automatically detected with AI examining telematics data. By understanding the rate of change of the vehicle using sophisticated calculations, it is known that an accident has occurred. No photographs needed; AI and telematics come together to initiate a new claims process, unseating the FNOL process that has been in place for 100 years.
Customers won’t have to call you when they get in accidents; you will know immediately, and you will be able to contact them.
Next, the facts of the accident are automatically initiated by a chatbot, requesting a photograph to which AI will be applied, helping the insurer determine whether the car is likely to be a total loss or not. Your current process meets a fork in the road, but with today’s innovations, if reparable, the same chatbot can request some additional facts about the accident, ask for some additional photographs to find the damage.
The chatbot can then ask the driver if he wants to file a claim. If he does, the AI-powered process can display various shops, such as those in the geographic area with the skills to repair that vehicle. The claimant can see the ratings provided by previous customers who have repaired their vehicles there. Furthermore, the claimant can see available times to schedule an appointment to get the car in the shop, similar to customer experiences in other domains, i.e. booking a restaurant using OpenTable®.
These ideas are not science fiction; rather they are the actual result of having an agile experimentation processes that effectively and efficiently turns ideas into reality.
This example shows a series of real-world solutions that work seamlessly together to transform how claims will be handled, taking significant time out of the process, driving accuracy and efficiency in decisions that can be costly, but perhaps most importantly, creating a consumer experience that can drive insurer loyalty. A coherent series of steps that work together to drive differentiation in the noise. And, it might be hard to believe but the solutions to drive this disruptive process are in production today at CCC.
Benefits for Insurers
New models for innovation, and advancing technologies are changing everything. Here’s what you stand to gain:
- Increased success in keeping up with consumers’ liquid expectations.
Advancements in other unrelated industries affect ours. As consumer experiences with other companies improve over time so does their expectations for ours. Using process innovation to create a seamless workflow can help you continue to provide the best possible experience for both consumers and staff.
- Better business decisions backed by data.
Process innovation is all about having a continuous workflow from which you extract insights that inform future decision making. As noted earlier, messy and incoherent workflows drown out signals that provide important data for continued process improvement. The key is to focus on the most important aspects of your process and automate where it makes sense.
- Transformational enterprise.
Once you’ve applied process innovation to one stream, expanding out to include big picture workflows has a transformational effect on helping your business become its very own signal amongst competitor noise.
In order to stand out, insurers need to innovate. The concepts explored here are revolutionary in terms of their impactful results on both consumer experience and claims as a whole. Process innovation and the concept of signal vs. noise has already catapulted the success of
Process innovation is the signal you need to stand out from all the noise in today’s insurance world.
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