We talk about risk like it’s a bad thing. But all innovation involves risk. Which isn’t necessarily bad. Not if the consequences of being wrong about it don’t pose an existential threat. But businesses everywhere are struggling to cope with doomsday scenarios such as climate change, cyber smash-and-grabs, the global COVID-19 crisis, and more.
Looking ahead, risk trends will continue to evolve as digital transformation accelerates, as the remote work trend mainstreams, and as enterprise spending on the internet of things tops $1 trillion by 2023. For context, overall IT spending is expected to surpass the $4 trillion mark in 2021, up 8.6% from 2020 according to analyst firm Gartner. But here’s the kicker: just 22% of CEOs believe they have the risk management playbook they need to sustain the long-term success and resiliency of their business.
Which sets the stage for the following interview with insurance industry thought leader Rohit Puranik who spills the tea on digital risk and other noteworthy trends shaping the future of the more than $5 trillion global insurance industry. Puranik serves as Global Head of Insurance Partnerships, Alliances and M&A at Infosys. The following transcript of the interview has been edited for brevity and clarity.
Appian:
Talk about the future of risk management with the massive change we’ve seen with the COVID-19 crisis. What do you see as the major long-term challenges for insurers and other businesses in the wake of COVID?
Puranik:
The pandemic accelerated investment in hyperautomation. But advances in digital technology come with benefits and challenges. There are tons of benefits, and we can talk about those later. But I also see tremendous challenges in trying to automate critical processes across the organization and extracting information from these processes.
Taking Risk out of Automated Decision-making
Appian:
Can you be more specific?
Puranik:
Yes, one of the challenges companies are facing is building end-user and consumer trust in how they extract and leverage data from their processes. I think building end-user and consumer trust in how you do that is essential to succeeding with hyperautomation.
As an organization, you have to be really diligent about how you do that. I’m talking about stress testing how you implement your hyperautomation strategy. And that means spending more time in deciding which specific business processes and use cases to digitize.
Appian:
Let’s stay on that point for a moment—the decision-making process around implementing hyperautomation. We see lots of cases where decision-making gets automated in insurance and many other industries. In the past, people made many of these decisions after looking at data.
But some critics say too many decision-making processes are being automated without human involvement. As Global Head of Insurance Partnerships at Infosys, what do you make of that argument? How do you take risk out of automated decision-making, and how do you see human and digital processes fitting together?
Puranik:
So, let's talk about some specific examples. Let’s take claims as a business process. With smaller claims, there's usually no manual intervention required. Processing of these kinds of claims can be fully automated. But complex commercial claims, for example, have different data points and different channels where volume is very high, such as email ACORD (Association for Cooperative Operations Research and Development) forms and email FNOLs (first notification of loss forms).
So, technology enables you to automate the complexity of the commercial claims process. But that also means more diligence is required for the data that you feed into the decision-making process.
Low-code Speed Mitigates Cyber Risk
Appian:
On a related note, let’s talk about cybersecurity. With every new technology, there’s a new threat. Talk about cyber risk as it relates to attacks on algorithms and machine learning, and how you see the situation evolving post COVID in insurance. What are the implications of cyber threats for insurance, and what’s the best way for the industry to adapt?
Puranik:
Well, we're seeing increasing demand for building cybersecurity capabilities within the enterprise because of COVID. There are more digital channels now. There’s growing demand for applications, and customers are benefitting from that. But I’ve seen reports citing a 27% increase in claims related to cybersecurity. It could be ransomware or data breaches. The explosion of digital has opened up more channels to customers. But that means we’re also seeing more vulnerability in enterprise processes and a related increase in commercial claims.
Appian:
As you think about process automation and how low-code development enables it, talk about the role that low-code platforms can play in helping us do a better job of managing cyber risk in insurance and other industries as well.
Puranik:
So, one critical part of responding to risk is how fast you react. It could be a new product line. It could be building or integrating disparate systems across the enterprise to deploy a new capability. It could be connecting to your Intelligence Layer and orchestrating the risk management aspects. A low-code platform allows you to do this faster. It allows you to integrate different systems quickly and effectively to implement your business strategies.
Appian:
What do you make of the argument that during COVID companies that took advantage of low-code were better positioned to minimize risk than companies that didn’t?
Puranik:
I think it’s risky not to consider adopting a low-code platform like Appian. It's not only an operational advantage. It's also a better, faster way to grow your business, and launch new products. I think it's high time that companies replace legacy thinking with a transformation mindset that focuses on adopting low-code application development.
Business Case First, Then Technology. Not Other way Around
Appian:
I want to go back to something you mentioned earlier. You said that the pandemic accelerated the digital transformation movement. I think we can see evidence of that just about everywhere. That said, how should insurance industry decision makers view blockchain and other emerging technologies in the context of digital transformation? How should they be thinking about these trends from the standpoint of risk-management, governance, and security?
Puranik:
I think technologies like blockchain, AI, and machine learning should be viewed from a business standpoint. That’s what we’ve been advising our clients to do. So that means looking at the business case and not the technology first, and whether it makes sense to optimize the business case first, and not the other way around. If you want to make changes to your business processes, then see what technologies can help you do that, and add value to your customers and your organization.
I chair a board for a local nonprofit. We talked about the use case and applicability of blockchain in the organization. But I think generally blockchain is being used in silos, in pockets in insurance such as smart contracting or maybe in some cases around claims. We’re seeing some use cases in financial services and transportation. There is certainly applicability with insurance. Infosys took note of that five years ago, but we haven’t seen blockchain emerge as a major point of conversation among carriers.
(PS: Watch this space for the final episode of this two-part post with Rohit Puranik, Global Head of Insurance Partnerships, Alliances and M&A at Infosys. Finally, stop by Appian booth #932 and Infosys booth #1146 at ITC Vegas, Oct. 4-6, 2021. Click here for more details.)
