Deb Smallwood is Founder and CEO of Strategy Meets Action, a strategic advisory firm focused on guiding insurers to rethink traditional business strategies for the digital economy.
Smallwood is highly respected throughout the insurance industry for her strategic thinking, thought-provoking research, and advisory skills on leveraging technology to optimize business outcomes.
Before founding SMA, Smallwood served as chief transformation officer for Insurance Company of the West (ICW).
For over 30 years, Smallwood has helped customers understand how to leverage technologies to differentiate their businesses and stay ahead of disruption.
She is a frequent contributor to leading insurance trade journals, and has also been a keynote speaker at major industry and customer conferences.
In this must-read Trailblazer interview, Smallwood reveals:
Read the full Q&A below.
Appian: Good morning Deborah. And welcome to Digital Trailblazers. Before getting into the topic of digital transformation, give our readers a quick overview of Strategy Meets Action.
Smallwood: Sure...All of our services are based on our extensive research around innovation, digital trends, customer experience, data and advanced analytics, emerging technologies and InsurTech.
From a consulting standpoint, we help clients bridge the gap from the current state to the future world of insurance. And digital is a critical component of that.
Appian: Thinking about digital, let's talk about the different dimensions of digital transformation. Obviously, there's the technology narrative. But what are some of the other dimensions that businesses need to consider in the digital economy?
Smallwood: Yes, so I have five points around digital transformation.
Appian: Just to follow up on that, what separates the digital leaders in insurance from the rest of the pack? If you had to pick two differentiators, what would they be?
Smallwood: First, the digital leaders are re-framing their strategies with innovative thinking. And the second would be that digital leaders are looking at digital transformation, not just from a customer experience standpoint like portals, websites and mobile but they're also looking at implementing digital transformation across the organization, and from the inside out.
"The worst thing you can do is create an external digital experience, and have a hand off that goes back into legacy processes and systems. So, the digital leaders are going broader than that, they're doing digital from end to end."
Appian: So that's how you get to the future of digital. Let's talk about research you've done around the critical success factors for insurers in the age of digital transformation. What were the biggest takeaways from that research?
Smallwood: That's hard to say. We are clearly at the beginning of a curve with digital transformation. We're just starting the journey. Insurers are struggling with how to scope this journey across the organization. They've got to figure out how to fund it, staff it, put the right team in place. So the key takeaway is that we're just starting the digital transformation journey.
Appian: Beyond that, what are some of the strategies insurers should be thinking about to overcome the digital transformation challenge? Or, is it too early, should they sit back and wait?
Smallwood: No, it's not too early. Insurers have to think big. They have to get clarity on the scope and the magnitude of digital transformation across the organization. And, then, start simple and small. They have to experiment and conduct proof of concepts always understanding how your digital transformation efforts tie back to business operations.
Where companies struggle is around being innovative Ö. The ones that are moving forward are conducting pilots outside of the enterprise, where there is no legacy process to slow things down. Where there's no skepticism saying that "this'll never work." And, where there are no technical infrastructure limitations to trying new ways to underwrite risk and provide new services.
"You have to be willing to get in there, and start experimenting and experiencing, and learning from those lessons, and just nibbling away the overall transformational journey. Digital transformation is not a big bang, one project and you're done. It's is a journey and will evolve over time."
Appian: So, don't be afraid to make mistakes...
Smallwood: That's right. Don't be afraid of the notion of failing fast...being willing to take an idea, technology or tool, and do short sprints, and maybe even throw things away and start over again. It's really hard to do that when you're impacting the business, or trying to integrate with numerous systems across the enterprise.
Appian: But what about traditional insurance companies, how do they remain relevant with the threat of InsurTech and other potential disruptors?
Smallwood: Well, I think there are three categories of companies we're talking about. There're the market leaders and there're only a handful of them, maybe less than 25, that are investing in InsurTech or emerging tech, doing extensive partnering inside and outside the industry.
"These market leaders are funding over $100 million or more into innovation labs and investments into InsurTech. And with these new partnerships and activities, they're trying out new business models, experimenting with emerging technologies."
The majority of insurers either don't have the appetite or the funds, or the resources to make these significant investments or partnerships. Many insurers tend to be more fast followers, and they are watching and tracking the successes and proof points of market leader activities.
The key is to track use cases and adoption and usage trends. Stay active. Do small scale proofs-of-concept. Partner, talk with people, and learn.
But I go back to my earlier statement about building a culture of innovation. This is key.
Finish your core modernization implementations. Get the business and technology positioned, so when the market tips or shifts, you'll be ready to take advantage of it.
Appian: I read that the insurance industry employed over 2.6 million people in 2016, and that the industry's net premiums totaled over one trillion dollars in 2015.
Smallwood: Yes, the insurance industry is huge. There are numerous products and lines of business. There are the Property and Casualty insurers with expansive personal and commercial lines varying in different market segments, and the same for Life and Annuities. There is standard, simple and complex coverage. It's significant in terms of the breadth and depth of customers and businesses it supports.
There's also an extensive value chain, from the distribution to underwriting to servicing to billing and claims. So, from a digital transformation standpoint, I don't see the entire industry tipping. It's going to happen in pockets and slices of lines of business and market segments.
"So, back to the question of how to stay relevant? Companies can start by understanding their position they can understand who they are.They can start to look at their business and technology strategies and augment and adjust, and start to position their organization, so that when the shift happens if it's relevant to them they're ready to adapt. Otherwise, they'll get left behind."
Appian: Speaking about adopting trends and being relevant, the experts say that Artificial Intelligence (AI) is set to explode in insurance and banking. What role do you see AI playing in the future of the insurance industry? Do you see a big role for AI?
"Yes, AI will have a big role in the future of insurance. Our definition of AI is everything from chatbots to voice recognition like Alexa and Siri to Machine Learning Cognitive and Robotic Process Automation. All of that and more.Insurers are already experimenting with some of these technologies. But, we have a long way to go with Machine Learning and Cognitive."
Smallwood:It's going to really require us to know our data, and bring in external sources of data. It's going to force us to expand analytics, and figure out how to use the technology to discover and prescribe actions.Today, we use rules engines, and we use predictive models that can do automatic underwriting, but this takes the actions to the new level.
There a more advanced level of AI-powered processing that's applicable to marketing campaigns, to call centers, to underwriting, to billing inquiries and payments. And it's also applicable to claims. There are insurers that are using IBM's Watson. But many insurers unfortunately are still struggling with using advanced analytics, let alone AI.
So I think the way that many insurers will adopt AI, is by buying solutions with it already built in. On the other hand, RPA is already having an impact in the industry.
Any process that is big, simple, repetitive like data entry is a good fit for RPA.
As for RPA use cases, we have some insurers that are doing core modernization for a new policy system. And rather than do a full data conversion or manually key in the data upon renewal, they're using RPA to do the data capture of their renewal book. So right now, that is a creative way to begin to use RPA.
It's going to be a while before we see widespread adoption of AI and RPA. But this technology is very applicable to the insurance industry.
Appian: Okay, we're in the home stretch now. It's time to look into your crystal ball, and give our readers your top 3 digital transformation predictions for 2018.
Smallwood: Okay, I expect to see an increase in spend, and in the number of digital transformation initiatives in the industry. Last year, across the board, about 57% of insurers indicated that they were doing digital transformation. This figure was up 25% over the previous year.
"In 2018, I predict 75% of insurers will be implementing digital transformation plans.The other big trend is that insurers will get clarity around the scope of their digital transformation efforts. They will expand the scope of what they're doing, once they realize that it's about more than just portals, website and mobile."
And my third prediction ñ We will observe more use cases of insurers using emerging technologies or InsurTech in the name of digital transformation. For example, we're going to see aerial drones being used to inspect roof damage.
So, rather than sending a claims adjuster up on a ladder, insurers can use drones to examine the damage instead. And these detailed drone images of the claims will be automatically compared to the images from underwriting, using advanced analytics and AIÖ now that's digital transformation.
That's a new way of processing claims. It digitizes it. This is how emerging technologies will feed into new ways of doing claims and underwriting too.
Insurers will realize that core modernization isn't their only or final solution, and that they'll need digital platforms to enable transformation. I think this is going to be a big "aha" moment in 2018.
Appian is a software company that automates business processes. The Appian AI Process Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish. The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.