Contents
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Introduction 4
Findings 7
Current state 8
Future state 10
Roadmap to success 15
Business process redesign 16
Lower-cost sales and service channels 16
Legacy system fixes 17
Alternative sourcing strategies 17
Intelligent automation 18
The IA maturity scale 19
An end-to-end approach 21
Where to start on the IA journey 21
Key lessons 24
Conclusion 25
Contributors 26
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Introduction
4 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
In order to understand the current environment,
KPMG and ACORD recently completed a survey
focused on the challenges and opportunities
insurers face with respect to improving
operational efficiency. Responses were collected
from more than 60 life, P&C, composite and
reinsurance carriers from around the world, with
premiums ranging from less than US$1 billion to
more than US$10 billion.
Survey results indicate that, although 94 percent
of carriers say they are actively working on
improving operational efficiency, 55 percent
say they are behind target. In addition, most
respondents reported only limited integration
of their technology platforms across functions,
including underwriting, distribution and product
operations— functional areas key to achieving
operational efficiency.
Overall, survey responses make clear that the
majority of these organizations are falling behind
in their quest to improve operational efficiency,
and that a lack of process standardization and
strategic vision is the primary obstacle to future
transformation efforts.
The survey highlights the need for CEOs
and other senior leaders across the strategy,
technology and operations areas of insurance
organizations to carefully consider several
approaches to correct these deficiencies.
Initiatives and transformations critical to
this include:
1. Operating model and process redesign
2. Distribution
3. Legacy systems
4. Alternative sourcing
5. Intelligent automation (IA)
KPMG professionals have developed
methodologies and tools to help achieve these
efficiencies, and are working with insurers
around the world, focusing on cost reduction and
streamlining of operations. This paper will explore
the enterprise journey to achieving operational
efficiency leveraging KPMG’s approach.
I
nsurers are under more pressure than ever to effectively manage
their current operating expense environment. Persistent low
investment returns, ever-increasing competitive pressures and
enduring excess capacity have hampered the industry’s ability to
grow revenue faster than the rate of operating costs. Currently,
25 percent of every premium dollar is consumed by operating
expenses, a pattern that has held for the past 10 years or longer.
These expenses have largely kept pace with the rate of growth in
premium income among life and property & casualty (P&C) carriers,
with both growing in the low single digits over the same time period.
Operational excellence in insurance | 5
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
6 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
T
he survey included responses from 69companies worldwide, with a
majority of respondents holding titles of chief operating officer, chief
financial officer, chief technology officer or equivalents.
Respondents were split relatively proportionally
among life/health, P&C and reinsurance/
composite lines of business. Similarly, there was
roughly balanced geographic representation
among Europe/Middle East/Africa, the Americas,
and the Asia-Pacific region. About half of the
responses came from carriers writing less than
US$1 billion in premiums annually.
Primary line
of business
Headquarters
location
Carrier size
(Premium)
Life/Health
Property/Casualty
Reinsurance/Composite
North America
Latin America
EMEA
Asia Pacific
Small (<$1B)
Mid-size ($1–10B)
Large (>$10B)
30%
40%
30%
17%
15%
42%
26%
24%
52%
24%
Findings
Operational excellence in insurance | 7
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Current state
Insurers indicate they are behind
the curve with regard to gains in
operational efficiency, with a lack
of process standards and strategic
vision mentioned as key inhibitors.
Insurers that don’t focus strongly on
operational efficiency run the risk of
being non-competitive from either a
pricing or profitability perspective, and
could fail to deliver the experience
customers, agents and brokers expect.
The survey found that most carriers are
currently focusing on process redesign,
implementation of lower cost sales and
servicing channels, and legacy systems
repair or replacement initiatives.
What are the key initiatives planned or underway
for the operational efficiency gains?
The risk to the
enterprise of delaying
action is increasing
and ultimately
a threat to the
company’s relevance
in the competitive
marketplace.
— Scott Shapiro
Principal
KPMG in the US
Basic process
efficiency and process
st
andardization, including
process redesign —
end-to-end value chain
improvement throughout
the customer lifecycle
Lower-cost channels,
self-service and
automation of
traditional channels
Legacy systems fix, new
co-strategies and efficient
data transformations
Transformative
operational
automation via
intelligent
automation —
RPA through
cognitive, IA
reduces labor cost
Alternative sourcing —
partnerships,
outsourcing
Any other
26%4%
24%21%
13
%
12%
8 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Integration between systems
supporting operational processes
across functions was severely limited
among most carriers. For any given
business function, more than two thirds
of insurers characterized their systems
as either lacking integration with
other systems, or having only limited
integration. Human resources (HR) and
finance reported the lowest levels, with
30 percent and 20 percent (respectively)
of respondents indicating a complete
lack of integration. Even those functions
most frequently described as ‘fully
integrated’ were categorized as such
by less than one fifth of carriers (claims
at 19 percent, and policy servicing at
16 percent). Overall, the majority of
respondents reported only limited
integration across all functions,
including underwriting, distribution,
product operations, information
technology (IT) and contact centers.
Clearly, insurers worldwide recognize the challenges in achieving their
operational efficiency goals.
“Lack of clarity on key objectives and an inability
to agree on strategic decisions combined with an
overall resistance to change across the business“
“Scarcity of qualified resources, especially those
with a combination of technological expertise and
insurance fundamentals“
“Sheer number and complexity of obsolete legacy
systems and processes combined with a lack
of experience in improving IT processes and
implementing newer technologies“
A lack of integration across an
insurer can result in incremental and
redundant processes, technology and
data — increasing costs and impacting
an insurer’s ability to serve customers
and engage with agents.
— Mike Adler
Principal
KPMG in the US
Respondents identified several obstacles to achieving desired efficiency gains.
Key inhibitors spanned organizational culture, talent and legacy issues. Some
typical responses around obstacles were:
Operational excellence in insurance | 9
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Future state
Where are carriers planning to focus
in the quest for operational efficiency
gains? Claims (55 percent), policy
service (51 percent) and underwriting
(45 percent) were cited by respondents
as the highest-priority areas for
improvement initiatives over the next
12 to 24 months. On the other hand,
the majority of respondents ranked HR
(74percent) and finance (57 percent) as
the lowest-priority areas of focus.
The prioritization of value chain
components was one area in the study
where significant differences emerged
depending on the location of the insurer.
— While claims was cited by the largest
number of respondents overall, it was
particularly common in the Asia Pacific
region, with 75 percent of insurers
assigning claims the highest level of
priority. Policy servicing received the
second most responses (60 percent),
with underwriting (45 percent),
distribution (40 percent) and contact
centers (40 percent) rounding out the
top five.
— In North America, 60 percent of
carriers cited distribution as the
highest level of priority, followed by
underwriting, policy servicing and
claims (all cited by 50 percent of
respondents).
— Across EMEA, policy servicing
received the highest level of
responses (56 percent), followed
by claims (48 percent) and contact
centers (41 percent).
— While the finance function received
the lowest level of high-priority
response, Latin American and
Caribbean-based insurers were the
exception, with 58 percent of carriers
in this region listing finance as a high-
priority function for efficiency gains.
What are the key value chain areas identified
for the operational efficiency gains in the next
12 to 24 months? Ranked from 1 (high) to 9 (low).
(Percent respondents)
Lowest (7,8,9) Neutral (4,5,6) Highest (1,2,3)
Product
Distribution
Underwriting
Policy servicing
Claims
Contact center
IT
HR
Finance
35%
30%
30%
32%
74 %
57%
33%
33%
36%
22%
9%
6%
39%
43%
40%
39%
38%
25%
20% 23%
36%
45%
51%
55%
25%
22%
1%
10 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Value chain prioritization by region
North America:
— Distribution
— Underwriting
— Policy servicing
— Claims
Latin America:
— Finance
— Underwriting
— IT
EMEA:
— Policy servicing
— Claims
— Contact center
ASPAC:
— Claims
— Policy servicing
— Underwriting
Operational excellence in insurance | 11
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
In pursuit of these efficiencies, insurers
are looking to technology solutions to
deliver value. While processing time was
listed as a critical concern (cited by an
average of 20 percent of respondents
as a primary measure of value across
most functions), the leading factor was
impact on customer experience. Not
surprisingly, this was cited as a leading
focus area for customer-facing functions
including product, operations, distribution
and contact centers. However, it was
also among the top-ranked priorities
across less obvious areas, such as IT,
underwriting and HR. In KPMG member
firms’ experience, technology solutions
in support of insurance operations
that provide an improved customer
experience at a lower cost, and are highly
automated with the appropriate quality
and controls, are optimal and deliver the
most value.
Survey responses indicate a clear shift
in the approach carriers expect to take
in order to achieve these operational
efficiency improvements. From the
current state to the near future, there is
an expected reallocation of resources
away from process standardization and
legacy fixes to implementation of IA and
alternative sourcing programs.
While most carriers (58 percent of
respondents) have been focused on
process standardization and legacy
systems repair, this number is expected
to fall to 48 percent in the next
12 to 24 months. We believe that is
primarily a result of insurers looking for
quick wins and cost savings through
tactical automation as opposed
to process standardization and
transformation, which may have higher
long-term benefits but typically cost
more and take longer.
IA and alternative sourcing, however,
are expected to rise from 20 percent
to 33 percent of efficiency-focused
projects in the next 12 to 24 months.
Product operations, policy servicing
and claims accounted for the highest
focus on process standardization and
legacy systems repair; claims, IT and
underwriting are expected to see the
biggest uptake in IA and alternative
sourcing methods.
Regionally, insurers in North America
are most likely to pursue operational
efficiencies through IA across all
functions, with 27 percent indicating
they will implement IA over the next
12 to 24 months, the highest level
among all regions. Insurers in all other
regions are more likely to focus on
process standardization, with this
approach listed by the highest level of
respondents (about 30 percent).
A moderate to significant increase
in automation is expected across
all functions over the next 2 years.
Respondents particularly identified
claims (77 percent), underwriting
(66 percent) and IT (68 percent) as areas
where automation will play an increasing
role in the next 12 to 24 months.
In particular, robotic process
automation (RPA) is expected to
emerge as a significant application
to reduce operational costs.
Respondents reported that RPA
implementations are expected to
expand dramatically in the near future
across almost all business functions.
22%
20%
19%
33%
48%
58%
Process
standardization &
legacy system fix
Intelligent
automation
and alternative
sourcing
Other/None
Next
12–24 months
Previous
12–24 months
How did your
organization pursue
operational efficiencies
in the past 12 to 24
months, and how does
it plan to pursue them
in the next 12 to 24
months?
(Percent respondents)
12 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
How will automation play a role in your
organization in the next 12 to 24 months?
(Percent respondents)
No change/Decrease
Moderate/Significant
increase
Product
Distribution
Underwriting
Claims
Contact center
IT
HR
60%
68%
73%
80%
75%
75%
46%
77%
40%
32%
27%
20%
25%
25%
54%
23%
Finance
Where do you see your organization heading
in the next 12 to 24 months with basic use of
RPA capabilities?
(Percent respondents)
Claims not only currently sees
the highest focus area of RPA
implementations — with 42 percent of
respondents indicating some usage —
but was also the most cited area for RPA
capability increases (64 percent).
Emerging tech, on the other hand, is
expected to play a more limited role
in operational efficiency improvement
activities. Insurtech is currently a lower
priority for carriers, with only around
half of respondents currently deploying
these technologies, primarily in the areas
of underwriting and claims. Big data and
machine learning were among the more
popular emerging technology focus
areas, with implementations expected
to double over the next 2 years in those
functional areas where the technology
is currently less utilized. The field of
IA sits at the intersection of process
automation and machine learning,
making it fertile ground for operational
efficiency gains in the near future.
39
Product
Distribution
Underwriting
Claims
Contact center
IT
HR
Finance
No significant changes
Limited increase
Significant increase
Not applicable
33%
20%
36%
22%
32%
29%
16%
26%
38%
14%
22%
26%
32%
36%19%
22%
22%
10%
29%
33%
18%
23%
13%
8%
39%
29%
23%
22%
20%
23%
39%
26%
Operational excellence in insurance | 13
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
14 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
W
hile the vast majority of insurance carriers understand the need to
improve operational efficiencies, 54 percent have indicated that
they are falling behind in reaching their objectives.
Roadmap to success
Complicating matters, insurers face myriad
options from traditional cost take-out
initiatives to emerging technology-based
solutions including automation, cloud computing
and sourcing options, just to name a few.
Internally, insurance operating environments
have grown exponentially complex. Product
and geographic expansion, M&A, regulatory
mandates and other factors have created layers
of operational systems, many of which are
homegrown or heavily customized and lack
integration with other systems.
Leveraging big data, AI and other capabilities,
insurers have the opportunity to not only
improve efficiency, but increase competitive
advantage by delivering richer customer, agent
and employee experiences. This involves the
following four key foundational elements:
1. Customer engagement (personalization,
customization, co-creation and collaboration)
2. Changing nature and value of assets
(data-as-an-asset, intellectual property,
shared assets, networks and alliances)
3. Everything as a service (services vs.
products, subscribing to what you need,
process-as-a-service)
Insurers that have not
achieved the benefits they
are seeking are beginning to
take a longer-term and more
strategic view and developing
roadmaps and leveraging
all potential enablers to help
them steer to their goals.
— Mike Adler
Principal
KPMG in the US
4. Workforce of the future (automation and
augmentation, talent gaps, contingent
workforce, collaboration)
In seeking to improve operational efficiency,
insurers have a number of options, including
business process redesign, distribution
channels, legacy systems, alternative
sourcing and IA.
Operational excellence in insurance | 15
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Business process redesign
The complexity of the business models
currently underlying the operations of
the average global insurance carrier
provides many avenues for expense
leakage. It is therefore not surprising
that the largest percent of insurers in our
survey (26 percent) indicated business
process redesign as a primary initiative
for operational efficiency gains. A lack of
standard processes, combined with an
existing complex set of over-customized
applications common across most
carriers, currently consumes enormous
amounts of time, energy and cost.
At the same time, insurers are under
intense pressure to deliver timely
and innovative business services to
maximize workforce potential, capture
market growth opportunities, and drive
competitive advantage.
Addressing these challenges
requires the constant monitoring of
operations, organizational structures
and processes by management. One
of the most common approaches
to increase efficiency and reduce
operating costs is the review and
re-engineering of the business
process operating model in line with
defined strategic goals. Key goals and
objectives of the process redesign
effort include:
— Reducing or eliminating duplicate
and parallel functions at the
enterprise, business unit or
individual job levels
— Minimizing labor-intensive tasks
and processes and rationalizing
manual workloads
— Improving the utilization of the
current IT infrastructure and
functionalities
— Developing a transparent and
coherent enterprise operation
model focused on processes
— Implementing improvement
programs supported by detailed
feasibility analysis, realistic
and quantifiable measures and
incentives, and a well-defined
implementation plan.
Lower-cost sales and service channels
Customer, agent and other market
drivers continue to push insurers
to develop and maintain an omni-
channel presence across sales
and service functions. This trend
represents both an opportunity and
a challenge for insurers from an
operational expense perspective.
Among survey respondents, 24
percent indicated lower-cost channel
options and automation of traditional
channels as a key focus of operational
efficiency improvements. Beyond
the more traditional focus of channel
transformation (e.g. agent to direct),
insurers are seeking to leverage non-
traditional sales and servicing options.
Examples include the shift from live
call center representatives to email
and chatbots. Implementation of self-
service and automation will also play
a key role in reducing channel costs
by reducing turnaround times and
minimizing errors.
16 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Legacy system fixes
The ongoing impact of legacy systems
continues to be a pervasive issue
across the industry, exacerbated by the
increasing pace of innovation and the
decline in resources with the skills to
maintain older systems. Past experience
has shown that large-scale, multiyear
technology replacements take too
long, fail too often, and are constantly
reprioritized due to their size, scale,
and complexity. A better approach
involves freezing legacy code bases
and wrapping legacy technology with
middleware and web service capabilities
which can leverage core data while
shortening time to market. Insurers
would then be able to apply analytics to
present data in the form of information
reporting and dashboards which can
enhance sales and decision-making
capabilities and enrich experiences for
customers. Undertaking this approach
may enable insurers to reduce the cycle
time of legacy system fixes from years
to months — or even weeks — while
at the same time aligning revenue and
market-share enhancement goals to
budget spends.
Alternative sourcing
strategies
Alternative sourcing strategies were
cited by 12 percent of respondents
as a key initiative for cost saving,
and were expected to see an
increase in adoption over the next
12 to 24 months. These programs,
which include shared services and
outsourcing, seek to provide insurers
with enhanced competitiveness
through reduced operational costs,
greater access to qualified talent,
harmonized processes, improved risk
management and increased focus on
core competencies. A well-designed
alternative sourcing delivery model
can enable insurers to compete more
effectively by transforming internal
operations through:
— centralization of non-core functions
to achieve economies of scale
— harmonization of processes to create
standardized procedures
— more effective management of talent
to align skill sets
— reduction of ongoing internal
operating costs
— leveraging of investments in
technology.
While cost remains a key
consideration, service quality and
governance, process improvement,
and increased integration are also
top-of-mind factors in designing an
alternative sourcing framework that
enables insurance organizations to
leverage the most appropriate internal,
external and blended solutions.
IA in retirement forms fulfillment
KPMG in the US helped an insurance client automate key
elements of its retirement forms fulfillment process for customers
requesting a roll-over or cash disbursement. The original process
required a customer service representative (CSR) to validate
customer information by phone or fax, record notes in the system,
print customer forms and a cover sheet, and route the form to
the mail center before it was sent to the customer. This manual
process not only required significant employee hours, but also
resulted in slow processing times for customers.
Robotic process automation (RPA) now mimics CSRs’ actions,
completing, validating and routing forms automatically for both
onshore and offshore call centers, freeing up CSRs to handle
more difficult customer inquiries. With this end-to-end solution,
KPMG helped automate more than 75 percent of the annual
workflow volume.
Case study
Operational excellence in insurance | 17
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
I
ntelligent automation, which was identified as a key cost take-out
initiative by 13 percent of survey respondents, should be visualized as a
backbone capability spanning the value chain.
Intelligent automation
Carriers must create new capabilities by applying
IA to policy intake, claims and other areas, and
then leveraging those improvements across the
enterprise. Ultimately, the organization must take
what it learns in these initial, siloed forays and build
it across its varied processes, lines of business and
geographies.
18 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
The IA maturity scale
Level 1
Level 2
Level 3
Level 4
Level 5
Static
Incremental
Organized
Institutionalized
Transformative
Most
insurers
12-month
target
— IA activities not organized
— Little central control and
governance over business
processes and data
— Manual processes
— Disorganized data
— IA setup in planning stages (e.g. Center of
Excellence (CoE))
— Cost reduction with process focus
— Emergence of proofs-of-concepts of IA
within functions
— Scope of technology is limited
— Data and analytics is embedded in functions
— Digitized tasks fall outside of enterprise
resource management processes
— IA setup in pilot, e.g. in the form of a CoE
— Deployment of automation across functions
using a narrow scope of solutions and
processes
— Data and analytics as a key focus area
— Coordinated processes, technology and governance,
and multichannel delivery for scale and adaptability
— Wide range of IA options
— Widespread functional deployment of IA
— Ongoing rationalization of technology as ecosystem
becomes mature
— Data and analytics is governed as part of CoE
— Well-established IA CoE for enterprise
— Multifunctional, multichannel business service delivery synced end to end
— Full range of IA options
— Transactional, expert and analytic services
— Business outcome-oriented governance
— Enterprise deployment
— Responsive adaptation of machine deployment
Most insurers
are developing a
12-month roadmap
that takes into
consideration the
following factors:
— Integration with
business strategy
— Focus on business
outcomes
— Scalable operating
model
— Control over data
quality
— Technology stack
integration
— End-to-end process
focus
— Talent management
— Adoption
of cognitive
technology
Operational excellence in insurance | 19
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Pursuit of operational efficiencies today vs. the
next 12 to 24 months (Percent respondents)
23%
25%
10%
9%
29%
19%
21%
33%
Previous
12–24 months
Process
standardization
Legacy
system fix
Intelligent
automation
Alternative
sourcing
Other/None
Next
12–24 months
12%
19%
KPMG’s approach
to building a center
of excellence is to
leverage the benefits
of appropriate
governance, while
enabling an innovative
and agile approach to
deployment.
— Scott Shapiro
Principal
KPMG in the US
20 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
An end-to-end approach
Insurers need to consider an end-to-end
IA approach to maximize the benefits on
investments. IA should be envisioned
as a continuum of growth, starting with
some basic RPA capabilities and then
advancing to machine learning and
natural language processing (NLP) over
the next 12, 24 and 36 months following
a technology roadmap.
Insurers will continue to face a variety of
needs relating to business processes,
and the necessity of changing how they
carry out those processes in order to
keep up with the industry. This means
that insurers will need a clear strategy
to leverage technology to assist with
their business processes. We think it
is important for insurers now to move
beyond the pilot stage, leverage lessons
learned through initial implementations
of technology such as RPA and AI, and
apply them to end-to-end processes in
order to realize efficiencies.
In addition, we advocate the cultivation
of strong change-management
capabilities to enable this growth
and maximize adoption of new or
changed capabilities. These must
include good communications skills,
in order to effectively articulate why
these transformations are good for the
organization and its people.
Where to start on the IA journey
It is important to recognize that
the starting point for developing IA
capabilities isn’t nearly as important
as simply making the decision to start.
Lessons learned in deploying one
aspect of IA can then be leveraged to
improve other business processes,
whether they are closely related or not.
For example, an organization may
choose to start with creating a digital
virtual agent. They may devote
resources to the automation of call
centers, using IA tools to enable
intelligent conversations, create
valuable insights, and anticipate and
predict certain events or customer
demands. Another common focus area
is the core processes of underwriting
and processing of claims, as well as
time-consuming and manually powered
back-office work, in areas such as HR,
finance and compliance.
Case
study
IA in HR ticket
gatekeeping
When this global insurance client
came to KPMG, its HR department
was using a manual process to
route more than 50,000 internal
and external HR tickets through its
CRM system each year. Human
“gatekeepers” were required to
read and categorize emails based
on priority, functional category,
region and other criteria, requiring
both significant employee time
and creating potential errors due to
human judgment.
KPMG in the US implemented an
end-to-end automation solution.
Under the new process, an RPA
bot accesses the HR tickets in
the CRM queue, extracts relevant
information and passes the
information to a machine learning/
NLP module. This module ingests
and processes the unstructured
text, predicts the required priorities
and categories, and returns the
result to the RPA bot, which then
selects the relevant values based
on the prediction.
This automated process now
handles 85 percent of annual
HR ticket volume, routing tickets
more quickly and accurately
while freeing up the HR team for
higher-value activities.
Several years ago, the insurance
industry would have been at level
one of the IA maturity scale — the static
stage — characterized by disorganized
and decentralized activities, processes
and data. Now, we believe insurers are
beginning to advance up the scale. In
fact, the number of survey respondents
implementing IA is expected to double,
from 10 percent today to 21 percent
over the next 12 to 24 months.
Most of the insurers we are working with
are at level two, the incremental stage.
At this level, we are seeing insurers build
some IA capabilities, and in-house data
science organizations are being formed
and are working on projects. However,
we think it is time for insurers to work
on scaling these disparate programs and
projects to achieve a level of maturity
that is not broadly evident in the industry.
This requires the right governance
to bring capabilities together in an
orchestrated fashion.
We are seeing many insurers creating
a CoE around IA as a way to scale. But
we also urge caution in such efforts,
because if there is an overzealous
effort to centralize and strongly govern
these activities, there is a risk of losing
the spirit of innovation both in lines of
business and in operations.
Operational excellence in insurance | 21
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Where to start IA in
the insurance
v
alue chain?
New business and/or
renewal processing
Enrollment
Retention
Marketing and
channel strategy
Channel
development
Channel profitability
Product monitoring
& management
Portfolio
management
Product
launch
Policy construction
Product innovation
Product research
& analysis
Product strategy
Contact planning
and execution
Risk assessment
New business FNOL & triage
Investigation
Evaluation
Adjudication
Settlement
Fraud handling and
investigation
Litigation
Recoveries, salvage
& subrogation
Renewal
Endorsement
Cancellation
Bind
Issue/complaint
Customer service
Call center
Class 1: Basic
automation
Class 2: Enhanced
automation
Class 3: Cognitive
automation
Limited
opportunity
Account structure
and coverages
Rating and pricing
Portfolio risk
evaluation
Sales and
distribution
Underwriting
Claims
Intelligent
underwriting
Cognitive claim
intake
Claims analyzer
Legend
Product
development
Digital virtual
agent
Smart product
development
Cognitive
enrollment
Cognitive
call center
Cognitive
claims
Fraud/Legal/
Claim recovery
vendors
Predicted legal
reserve
22 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Where to start IA in the insurance
value chain?
New business and/or
renewal processing
Enrollment
Retention
Marketing and
channel strategy
Channel
development
Channel profitability
Product monitoring
& management
Portfolio
management
Product
launch
Policy construction
Product innovation
Product research
& analysis
Product strategy
Contact planning
and execution
Risk assessment
New business FNOL & triage
Investigation
Evaluation
Adjudication
Settlement
Fraud handling and
investigation
Litigation
Recoveries, salvage
& subrogation
Renewal
Endorsement
Cancellation
Bind
Issue/complaint
Customer service
Call center
Class 1: Basic
automation
Class 2: Enhanced
automation
Class 3: Cognitive
automation
Limited
opportunity
Account structure
and coverages
Rating and pricing
Portfolio risk
evaluation
Sales and
distribution
Underwriting
Claims
Intelligent
underwriting
Cognitive claim
intake
Claims analyzer
Legend
Product
development
Digital virtual
agent
Smart product
development
Cognitive
enrollment
Cognitive
call center
Cognitive
claims
Fraud/Legal/
Claim recovery
vendors
Predicted legal
reserve
Operational excellence in insurance | 23
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Widespread deployments of IA solutions across the insurance
industry have resulted in some key lessons learned.
Key lessons
1. Don’t underestimate the power of good data —
Sufficient volumes of quality data must exist to train
models properly. Accessibility and availability of data
can help scientists to build accurate solutions, or
equally inhibit their ability to build trustworthy models.
2. Produce more with the same number of people —
Leverage IA to reduce the administrative task load of
employees through automation, freeing them up to
perform high-value tactical and strategic work. Just
as importantly, use IA to drive insights and detect
issues and opportunities in data that is too large
for traditional approaches to effectively accomplish
meaningful results.
3. IA solutions are not plug‑and‑play — While many
application program interfaces (APIs) and prebuilt
platforms are great accelerators, most solutions also
require custom programming and training to attain
target accuracy and results. Long-term efficient models
need to be well trained and improved over time.
4. Carefully select opportunities for deploying IA —
Make sure the cost to implement is being balanced
with expected ROI from day one. Prioritize back-office
computer-to-computer interaction use cases; IT, finance
and accounting are particularly good places to start.
Insurers can then take what they
have learned in developing these
basic capabilities, and leverage that
knowledge in subsequent focus areas.
Insurers must ask themselves: How can
I migrate this expertise across functional
areas and lines of business? It is vital to
take stock of the business’s entire value
chain, and construct an orchestrated
roadmap accordingly.
Finally, it is important to recognize that
IA is not a one-size-fits-all technology.
One of the keys is to understand the
concept of employing a platform that
can be customized for your business’s
purposes and strategy.
24 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
T
he innovation and change currently being felt across the insurance
industry are pervasive and significant, and will continue to expand at
an accelerating pace.
Conclusion
In order to address these challenges —
while at the same time maximizing
value — operational efficiency programs
should focus primarily on the creation of
a leaner, more flexible, organization, with
cost reduction as a consequence, not
necessarily just the target. A structured
approach to cost management therefore
means thinking beyond short-term cost
savings to assess and question underlying
business models. By focusing on some of
the key dimensions of the business, leaders
can identify the core cost drivers and take
steps to effectively manage costs in a
sustainable manner.
Operational excellence in insurance | 25
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Contributors
Michael Adler is a Principal and leader in KPMG in the US’
Insurance Advisory practice. Michael works closely with
leading insurance companies to drive transformation,
adopting digital, data, analytics, technology and best
operational practices. Michael has a proven track record of
delivering business value on large, complex transformation
programs utilizing the latest and most innovative technologies
in conjunction with an insurer’s existing capabilities. At
KPMG in the US he has recently led significant operational
transformation programs leveraging intelligent automation
capabilities such as RPA and AI.
Michael Adler
Principal, Advisory and Leader,
US Intelligent Automation
Lead, Insurance
KPMG in the US
Scott Shapiro
Principal
Actuarial and Insurance Risk
KPMG in the US
Marc Finkelstein
Manager
Management Consulting
KPMG in the US
Scott Shapiro is a Principal with KPMG in the US and has over
25 years of experience in the insurance industry both as an
insurance executive and a consultant. Scott is the insurance
leader for KPMG in the US’ Risk Consulting practice and
specializes in operational improvement, data & analytics,
and transformation.
Marc Finkelstein is a Manager with KPMG in the US
Insurance Advisory practice. Leveraging intelligent
automation, Marc has successfully delivered cost take-out
and end-to-end process improvement engagements to
insurance clients.
David Sterner is the Vice President of R&D at ACORD,
where he is responsible for leading global market research
activities in support of ACORD’s strategy, as well as the
goals and objectives of the organization’s member firms.
Dave has over 20 years of experience delivering strategic
research to the insurance industry. His focus includes
financial and operational benchmarking, issues-based
surveys, and developing insightful viewpoints on business
and technology topics.
David Sterner
Vice President,
Research & Development
ACORD
26 | Operational excellence in insurance
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
About KPMG
Today’s insurance executives face complex market issues such as
regulatoryuncertainty, evolving governance and risk management frameworks,
sustainingoperational performance, and maintaining liquidity.
KPMG’s insurance professionals can help transform today’s uncertainty
intoopportunity. We view the current challenges facing insurersas possible
breakthroughs that can transform their operations and create asustainable
advantage. We have accepted that change happens and business willnever
stop changing.
KPMG member firms work with leading insurers to help them redirect
these changes — with thegoal of creating answers to their most pressing
business questions.
About ACORD
ACORD, the global standards-setting body for the insurance industry, facilitates
fast, accurate data exchange and efficient workflows through the development
of electronic standards, standardized forms and tools to support their use. For
nearly 50 years, ACORD has been an industry leader in identifying ways to help its
members make improvements across the insurance value chain.
ACORD engages more than 8,000 participating organizations spanning over
100 countries, including insurance and reinsurance companies, agents and brokers,
software providers, financial services organizations, and industry associations.
With the tools and resources provided by ACORD, our members are equipped to
address current business and technology imperatives while influencing and shaping
the future.
Learn more at acord.org.
Operational excellence in insurance | 27
© 2019 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor
to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be
accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm
vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Designed by Evalueserve | Publication name: Operational excellence in insurance | Publication number:
136188-G | Publication date: March 2019
kpmg.com/socialmedia
Contacts
Country
Michael Adler
Principal, Advisory and Leader
US Intelligent Automation Lead,
Insurance
KPMG in the US
E: mic[email protected]
Chad Miller
Director, Insurance
KPMG in Japan
E: c[email protected].com
Hendrik Jahn
Partner, Financial Services
Transformation Insurance
KPMG in Germany
Karen Parkes
Partner, Management Consulting
Operations Advisory
KPMG Australia
Julien Pavillon
Director, Financial Services
Strategy and Business Transformation
Insurance
KPMG in France
Roman Ryzer
Executive Director
Management Consulting
KPMG in Canada
Simona Scattaglia Cartago
Partner,
Technology & Accounting
Change Implementation
KPMG in Italy
E: sscattaglia@kpmg.it
Scott Shapiro
Principal
Actuarial and Insurance Risk
KPMG in the US
Lee‑Han Tjioe
Partner, Insurance
KPMG China
Mark Wylie
Director
Management Consulting, Operations
Insurance
KPMG in the UK
E: mark.wylie@kpmg.co.uk
Laura Hay
Global Head of Insurance
KPMG International
Gary Plotkin
Global Advisory Operations Lead
KPMG International
