The global pandemic has shown how vital it is for firms to understand the services they provide and to invest in their operational resilience. While COVID has accelerated the insurance industry’s digitalization, firms must strive for resilience by looking to the future and making decisions now to protect themselves from risk.
The UK regulator, the Financial Conduct Authority, defines operational resilience as the ability of firms, financial market infrastructures, and the financial sector as a whole to prevent, adapt, respond to, recover and learn from operational disruptions, such as wider scale business continuity events that could include a major IT outage, loss of access to premises or a global pandemic.
UK financial sector firms will not have a choice about whether to focus on operational resilience because new regulatory requirements come into effect this year.
By March 31, 2022, UK financial services companies must have identified their important business services, impact tolerances and maximum tolerance disruption. And by March 31, 2025, they must have performed mapping and testing of those important business services and made the necessary investments to enable them to operate consistently within their impact tolerances.
But just how are firms going to manage that? And what investments do they need to make to ensure they operate within those tolerances?
We all know the historic problems afflicting the insurance sector: legacy systems, the cost of system enhancements, and an aversion to change when it comes to the transformation and redesign of complex processes and technology. Together, they make operational resilience a challenge to implement.
There has long been a demand in the insurance industry for the streamlining of data processing and reducing operational expenses. However, it is difficult to find solutions that meet the needs of an ever-changing market, and firms want to see the results of automation within months not years.
One solution to consider is so-called “low-code” tools, which have evolved in recent years and have the potential to help firms support their operational resilience ambitions.
For those who haven’t come across them before, low-code and no-code are tools for non-professional digital developers and are a way of building applications – using visual programming techniques – without the need for significant lines of hand-written code. It can be vendor supported or used in-house to speed up a company’s digital transformation, and payback on investment can be as little as three months.
The rise of low-code/no-code solution providers are making automation accessible to insurance firms, with Gartner predicting that by 2025, 70% of new applications developed by enterprises will use low code or no code technologies.
The cost of implementation is low as these solutions don’t look to replace legacy systems but support the wider ecosystem to give businesses the right applications to manage the right tasks. Low code allows you to develop a solution quickly. You can also fail quickly, adjust and tweak it, so it’s tailored to your problem and can support your continuous improvement process ambitions. It is component-based, so you can build for one solution and reuse the same module within another solution, which allows you to accelerate delivery and make adjustments and improvements where necessary.
Low code also makes it easier for more people to get involved in the process of redesigning operational processes, so there’s far less reliance on developers coupled with an ability to create processes faster, with direct participation from those affected by the changes. Having direct subject matter experts involved in the visual programming and being able to see the outcome quickly in system form reduces the risk of requirements being misunderstood by developers and allows issues to be resolved at development stage.
Operational resilience is strengthened by the ability to make a process digital, thereby reducing the need to have people in a prescribed location, freeing them to focus on human interaction and higher value tasks. Low code platforms help achieve this ambition.
Customer experience is incredibly important for operational resilience. The insurance industry is transitional – if a customer doesn’t like the app or finds the website too complicated, they’ll go elsewhere. Low code can improve customer experience and design and remove some of those challenges by allowing a company to quickly adapt to customer feedback without going into a huge re-development program.
Throughout the pandemic, the insurance industry helped customers by using video apps such as Teams and directing calls from landlines to enable people to work from home without the need to issue mobile phones.
Low code has already brought significant operational efficiencies to both large and small organizations. In the UK, Tesco Underwriting increased operational efficiency by 57% by using low code during lockdowns. Legal & General was able to sunset three legacy platforms without increasing headcount while facing a 150% increase in claim volume and reducing claim settlements in some cases from 24 hours to 24 minutes.
In the U.S., Work4Labs, which provides social media, advanced analytics and data services to Fortune 500 companies, needed an ETL (extract, transfer and load) solution that could handle huge amounts of data without mistakes and without the need for experienced developers. Their previous ETL system involved complex coding that required continuous maintenance and manual work. The low-code solution implemented a user-friendly ETL system that migrated data with a few clicks of the keyboard rather than after days of hard work.
North Carolina State University has improved overall efficiency by using its low-code development platform to create two apps: one to handle non-credit course registration and ensure compliance for various seminars and classes, as well as a lab management solution that has cut time spent on administration by a third.
The main benefits of using low code include getting products faster to market at a lower cost, in a more collaborative way, and being able to react to change without the risk and cost of traditional development. Low code allows companies to adapt to market changes more quickly, increasing the distribution of new products and digitized offerings.
But whether these new tools are here to stay is not yet known. Will they become the legacy of the future? Up to now, most people have looked at low code and thought: “Where can we use this technology?”
But what a company should be looking at is its problem statement. For example, what does it need? How can the firm’s resilience be improved? From that, the low-code solution can be shaped around the company’s specific business problem.
One of the main obstacles to the adoption of low code is businesses’ reluctance to use unknown providers and a wariness of start-ups. But if business subject matter experts get heavily involved in the design process and senior managers act as champions of change and provide the necessary resources to support the changes, these fears can be overcome.
Another inhibitor for IT projects such as low code can be the organizational culture and people’s assumptions that they are going to cost millions of dollars and take six months to a year to develop.
But the whole point of low code is to empower end users and business analysts. Development doesn’t always need to be complex; low code is componentized and quicker to develop. You can have experts within your business building the solutions, and end users can help design, deliver and implement.
The key to making the most of low code is for insurers to choose the right vendor who will continue to invest in their platforms and innovate. Insurers must also manage their expectations. While it’s possible to effect change in a matter of hours or days, to deliver true change, these projects will take weeks or months. It’s important that firms don’t underestimate how much work is needed or the culture required to support the change.
And to minimize headaches, it’s best to create simple applications such as quote and bind, reusing repeatable components rather than completely redeveloping systems. Solutions can become more complex as an organization’s capability with low code toolsets grows and develops.
Low code can act as an enabler for operational resilience and bring efficiency to the insurance sector, cutting underwriting costs, automating manual processes, reducing processing time and supporting costs. Systems can be built for quotes, billing, underwriting, policy issues, claims and submissions among others. Zero touch systems and the efficiency they bring will ultimately drive resilience as well as revenue growth.
By embracing low code, operational resilience should become easier in the future as there is no need to adapt legacy systems, IT spend is reduced, solutions are business driven, and it’s much easier and quicker to create solutions to meet the needs of the changing business environment without the challenges of conventional IT development projects.