How RPA is Transforming The Insurance Industry

by Burak Koçak
6 months ago
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The insurance industry is currently in the midst of a profound transformation, and at the heart of this transformation lies the unassuming yet powerful technology of Robotic Process Automation (RPA).

Thinking about what Robotic Process Automation is? If so, imagine a digital workforce dedicated to managing the repetitive tasks that keep insurance companies up and running, from data entry to claims processing. The significance of this automation extends beyond mere task completion—it liberates human employees to redirect their focus towards more complex challenges, all while drastically minimizing errors and enriching the overall customer experience.

Sounds pretty interesting, doesn’t it?

In this journey of discovery, we’re about to dive into the systematic revolution that RPA is ushering into the insurance sector. By taking charge of everyday tasks, RPA is streamlining operations and fine-tuning efficiency, thereby creating smoother and more economical insurance processes.

“A typical large auto insurer could more than double profitability over 5 years by harnessing the power of digital.” (McKinsey)

Why Automation Is Essential for the Insurance Sector?

Automation is an indispensable solution due to its ability to streamline operations, enhance customer experiences, and optimize resource allocation. The intricate and data-driven nature of insurance processes makes it a prime candidate for automation. By employing technologies such as Robotic Process Automation (RPA) and Artificial Intelligence (AI), insurance companies can efficiently handle routine tasks like claims processing, policy issuance, and document verification. This not only accelerates these processes but also reduces the risk of human errors, leading to greater accuracy and compliance with regulatory requirements.

Furthermore, automation contributes significantly to the customer-centric evolution of the insurance industry. With automated chatbots and virtual assistants, insurers can offer round-the-clock support, answering queries and guiding clients through policy options. This not only enhances customer satisfaction but also reduces the need for customers to navigate complex processes on their own. Automation-driven data analysis also plays a pivotal role in risk assessment, enabling insurers to make more informed underwriting decisions by processing vast amounts of data in real-time. This results in personalized policy offerings and fairer premium pricing, aligning insurance products more closely with individual needs and circumstances.

Beyond operational efficiency and customer-centric improvements, automation fosters adaptability within the insurance sector. In an era marked by rapid technological advancements, automation allows insurance companies to swiftly integrate new technologies and adjust their strategies to remain competitive. By automating routine tasks, employees can shift their focus to higher-value activities like strategic planning, relationship-building, and innovative product development. In this way, automation not only modernizes the insurance sector but also equips it with the agility needed to navigate an ever-changing landscape while delivering enhanced value to both clients and stakeholders.

According to research conducted by McKinsey, the utilization of Robotic Process Automation (RPA) in the insurance sector has the potential to decrease data processing time by approximately 34%.

The Advantages of RPA in the Insurance Sector

Robotic Process Automation offers a wide range of advantages to the insurance industry. Here are both general and specific advantages of implementing RPA in the insurance sector:

One major benefit of RPA is “a return on investment that varies between 30 and as much as 200 percent in the first year.”

General Advantages:

  • Efficiency Improvement: RPA automates repetitive and rule-based tasks, reducing manual intervention and increasing process speed. This results in faster turnaround times for policy issuance, claims processing, and customer service.

  • Accuracy and Reduced Errors: RPA systems follow predefined rules without deviation, minimizing the chances of human errors that can occur due to fatigue, oversight, or data entry mistakes. This enhances data accuracy and compliance.

  • Scalability: RPA can handle large volumes of tasks without the need for proportional increases in human resources. This scalability is particularly beneficial during peak seasons or when handling sudden increases in workload.

  • Faster Adaptation to Regulatory Changes: Insurance regulations can change frequently. RPA systems can be quickly reconfigured to accommodate these changes, ensuring ongoing compliance.

  • Cost Reduction: By automating routine tasks, insurance companies can significantly lower operational costs associated with manual labor, data entry errors, and rework. This leads to improved profitability and cost savings.

  • Enhanced Customer Experience: Faster response times, accurate processing, and improved consistency lead to a better customer experience. RPA allows insurers to provide prompt and error-free services, boosting customer satisfaction.

  • Compliance and Audit Trail: RPA maintains a detailed log of all actions performed, which can be crucial for regulatory compliance and auditing purposes. This traceability ensures transparency and accountability in processes.

  • Employee Empowerment: Employees are relieved from mundane, repetitive tasks and can focus on higher-value activities that require human creativity, critical thinking, and problem-solving skills.

Specific Advantages

  • Claims Processing: RPA can automate the intake, verification, and processing of claims. This reduces the time it takes to settle claims and minimizes the errors, leading to higher customer satisfaction.

  • Data Entry and Validation: RPA can extract data from various documents, such as applications and medical records, and input them accurately into the relevant systems, reducing manual data entry efforts.

  • Customer Onboarding: RPA can automate the process of collecting customer information, performing background checks, and setting up policy accounts, making the process quicker and more efficient.

  • Renewal Management: RPA can track policy expiration dates and automatically send renewal reminders to customers, ensuring that policies are renewed promptly and without disruption.

  • Customer Communication: RPA can send personalized communications to policyholders, such as updates, policy information, and notifications, enhancing engagement and communication.

  • Policy Administration: RPA can assist in policy issuance, renewals, and updates by automatically generating and verifying policy documents, sending out notifications, and updating customer records.

  • Underwriting: Robotic Process Automation can gather and analyze data from various sources to assist underwriters in assessing risks, determining premium rates, and making more informed decisions.

  • Fraud Detection: RPA can assist in flagging potentially fraudulent claims by cross-referencing information across different databases and identifying inconsistencies or suspicious patterns.

  • Data Migration and Integration: When insurers switch systems or consolidate databases, RPA can assist in migrating data and ensuring seamless integration between old and new systems.

  • Back-Office Operations: RPA can automate a range of back-office tasks, such as premium reconciliation, commission calculations, and regulatory reporting, ensuring accuracy and efficiency.

Top 5 Use Cases of RPA in the Insurance Sector

Automation can reduce the cost of a claims journey by as much as 30%

Robotic Process Automation has emerged as a transformative technology in the insurance sector, offering innovative solutions to streamline operations and elevate overall efficiency. The following five use cases exemplify RPA’s pivotal role in reshaping the industry landscape:


1. Registration and Processing of Claims:

Efficient claims processing is paramount in the insurance sector. RPA facilitates swift and accurate registration of claims by automating data extraction from documents, validating policy details, and updating claims databases. This eliminates the potential for human error and expedites the claims settlement process, ensuring policyholders receive timely reimbursements.

Example: When a customer submits a claim for a car accident, RPA can automatically extract relevant information from documents, validate policy details, and update the claims database. This eliminates manual data entry errors and accelerates the entire claims settlement process.


2. Underwriting

RPA has revolutionized the underwriting process. It can assess health risks by analyzing medical records, evaluate creditworthiness by swiftly analyzing credit reports, and identify instances of duplicate policies through cross-referencing. Such automation enables insurers to make well-informed decisions and offer tailored policies to applicants.

Example: RPA bots can swiftly analyze credit reports to determine premium rates based on an applicant’s creditworthiness. Additionally, RPA can cross-reference new policy applications against existing ones to identify potential cases of fraud involving duplicate policies.


3. Regulatory Compliance:

Compliance with regulatory standards is a cornerstone of the insurance industry. RPA ensures adherence by monitoring regulatory changes, updating policy terms, and generating requisite reports for regulatory authorities. 

Example: RPA can track changes in data protection laws and automatically update policy terms to adhere to the new regulations. It can also generate compliance reports for regulatory authorities, ensuring transparency and adherence to standards.


4. Analytics and Business Processes:

RPA empowers insurers with data-driven insights. By automating data collection and analysis, RPA identifies patterns in customer behavior, claims frequency, and other key metrics. This information enables informed decision-making and more accurate risk assessment.

Example: RPA can analyze historical claims data to predict future risk trends, aiding in setting competitive premium rates.


5. Corporate Offices

Within corporate offices, RPA optimizes various interdepartmental functions. It automates accounting tasks like invoice processing and reconciliation, expedites policy distribution, and manages policy cancellations seamlessly. When a policy cancellation is requested, RPA updates databases, generates required documents, and calculates refunds accurately.

Example: In the accounting department, RPA can automate invoice processing, expense tracking, and reconciliation, reducing manual effort and minimizing errors. In policy distribution, RPA can generate and distribute policies to customers, ensuring efficient and accurate delivery.


In an insurer McKinsey studied, there was a particular process where it used to take two days to handle 500 premium advice notes. It now takes 30 minutes.

Takeaway

In short, the insurance industry finds itself at a transformative crossroads, with Robotic Process Automation emerging as the linchpin of this evolution. Through the automation of repetitive tasks, RPA not only elevates efficiency but also empowers human employees to focus on complex challenges. This technology’s ability to reduce errors and enhance customer interactions sets a new standard for operational excellence.

Looking ahead, RPA’s capacity to swiftly adapt to technological advancements positions the insurance sector for continued competitiveness. By ushering in this era of automation, the industry redefines its potential, ensuring a future that is not only technologically advanced but also fundamentally customer-centric and agile.

References

Digital Disruption in Insurance: Cutting through the Noise, www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Time%20for%20insurance%20companies%20to%20face%20digital%20reality/Digital-disruption-in-Insurance.ashx. Accessed 23 Aug. 2023.