I recently talked with two experts from Microsoft – Brian Cartwright, Industry Executive, and Steve Rush, Data and AI Director for US Financial Services – to discuss how SAS and Microsoft’s strategic partnership can help insurers accelerate their digital transformation journey.

The rate of digital transformation in the insurance industry has accelerated at an unprecedented pace due to COVID-19. This trend, added to ongoing challenges such as complex regulatory environments and changing customer expectations, is forcing everyone in the industry to think differently. To expedite their transformation journey, many insurers have made significant investments in digital technology across the areas of sales, policy administration and financial management.

Addressing trends and challenges

In 2020, insurers had to surmount the trials of a global pandemic while continuing to address regulatory compliance standards and shareholder requirements. This balancing act forced greater emphasis on business processes and operations – and the value of technologies supporting them. At the same time, new accounting regulations like IFRS 17 and LDTI challenged insurers to seek out cost-effective solutions to meet these new requirements.

As Brian explains, “Across the globe, three forces have impacted insurers – increased claims due to COVID-19, catastrophe occurrences possibly linked with climate changes and market volatility. Additionally, potential increased incidences of fraud will lead to more stringent investigations to tackle those claims.

"Insurers will need to contend with moving markets that typically require more risk calculations to manage their finances. This all points to the need for insurers to quickly assemble vast amounts of information to make faster, more informed business decisions. These new insights are enabled by technology.”

What other changes are expected? A Q4 2019 research report from Novarica Research Council that surveyed the CIOs of 108 insurers stated that insurance technology (insurtech) startups’ need for advanced technology entails a shift from “full-suite” systems toward best-of-breed point solutions. The report also highlighted that cloud is no longer emerging. 2020 was seen as the year when insurers would fully embrace moving out of their data centers, even for core systems. ​Insurers have discovered that digital enablement means more than simply having agent-customer portals.

Understanding the value of data and analytics

Today’s insurers are primed to benefit from analytics because they’re sitting on a treasure trove of data in their core administrative systems.

“Data is at the center of every company today and has become a key strategic business asset,” Steve explained. “Every device, every customer, every activity – everything that’s happening in the world around us – is producing incredibly rich data that can help us create new experiences, new efficiencies, new business models and even new inventions. This is creating a significant impact on the way claims, underwriting, risk and fraud are addressed. Customers are using this as a differentiator as they reduce costs due to improved operational efficiencies and accuracy.”

Analytics helps insurers generate faster, better insights across a number of areas. This includes implementing loss-predictive models at the underwriting stage, predicting future risk policies, and performing fraud detection and analysis as claims are processed.

With digitalization at the forefront of many insurers’ strategic road maps, web and social media data can be a great source of insights for orchestrating the customer experience. Understanding the details of web search behaviors helps insurers smoothly engage with prospects and policyholders across multiple channels – making relevant offers and providing services to customers while they’re on the website.

To grow business profitability in such an environment, insurers will need to consolidate data from different lines of business and source systems into a single customer view. This consolidated customer view will enable interactions and decisions based on an accurate, complete view of the relationship between insurer and customer. Unified customer data can also be a rich source of lead generation for insurers’ distribution channels.

By going a step further to incorporate advanced analysis and predictive modeling, insurers can uncover the connections among customers, products and claims. This means not just understanding what has happened in the past – but predicting what is likely to happen in the future. A future-ready insurer, Steve said, can stabilize existing operations and accelerate profitability by understanding its optimum product mix balanced by operational efficiency.

A future-ready insurer can stabilize existing operations and accelerate profitability by understanding its optimum product mix balanced by operational efficiency.

Four ways to optimize performance

There are four key elements that work together to help insurance companies optimize performance:

• Capital efficiency. Insurers must be able to effectively use capital for investment strategy, liquidity and portfolio management. This will position them to write the most profitable book of business from a risk and capital perspective while minimizing compliance costs.
• Minimized leakage. To lower fraud losses and ensure claims are settled in the most economical manner, insurers must reduce operational losses and increase operational efficiencies.
• Maximized profit. Offering the most profitable product mix through the most cost-efficient channels to the profitable customers is key to building profits.
• Clear insights into the business. Having the right technology infrastructure to support vast amounts of data is crucial. Analyzing this data and using it to make better-informed decisions will steer insurers in the right direction.

Insurers can achieve broad benefits by embracing robust analytic capabilities. At a strategic level, they gain deeper insight into the business. Analytics also helps insurers transform customer interactions from merely efficient to informed conversations. In turn, they can target marketing efforts more precisely and improve response rates, even amid resource constraints.

Transforming the business model: SAS and Microsoft

Innovation is at the heart of transformation, and we believe digital transformation is core to those engaged in the pursuit of better-informed decisions.

SAS and Microsoft have joined forces to define the future of analytics, including machine learning and artificial intelligence in the cloud for insurers. The partnership is about SAS and Microsoft making the best possible analytics models readily available on an analytics platform that allows virtually unlimited consumption by users, applications and business processes. This strategic partnership will free insurers to run their analytics workloads in the cloud to meet business goals faster and drive cost-effective innovation.

SAS analytics on Azure gives insurers a comprehensive and fully integrated cloud-native solution for managing vast data workloads efficiently while delivering a satisfying user experience. That’s the future of artificial intelligence (AI) on the cloud: to provide businesses with the critical insights needed to make trusted, automated and analytically driven decisions.

As Brian puts it, “Insurers are using Azure to cut costs, move faster and incorporate cloud-enabling tech – like IoT and cognitive services. The Azure cloud enables seamless growth with elastic storage and compute to meet needs and deliver results faster. It provides state of the art security to give customers the confidence to run their business there.” By bringing SAS industry models to Azure, customers will have more choices when it comes to analytics and AI.

SAS insurance industry models enable insurers to deploy analytics for specific tasks and areas of their business – such as regulatory compliance for IFRS 17 and LDTI, customer insights and real-time decisioning, insurance claims fraud and anti-money laundering. In turn, they not only gain fast business insights; they save time by avoiding the need to adapt generic models to specific needs.

Trusting in a proven cloud and analytics provider

Insurers face the dual responsibility of managing risk and providing a unique customer experience. At the end of the day, trust is important to ensuring strategies turn into action that positions insurers to meet their business objectives and generate customer and shareholder value.

We believe insurers must look to the future with new technologies, including advanced analytics and AI, when solving the problems of today. This requires innovative thinking and a willingness to act on new opportunities.

I am excited to embark on this partnership journey with Brian and Steve as SAS and Microsoft build a next generation of analytics capabilities to help insurers benefit from the multifaceted power of cloud computing.

Read next: Learn more about SAS and Microsoft.