The digital transformation of insurance and the role of APS – An interview of José Galamba de Oliveira
Vincent Van de Winckel ( VVdW ): You took part in the start-up of an imminently technological bank, of which you are still executive director (BIG – Global Investment Bank). You were CEO of Accenture Portugal where you led many technological transformation projects. You have been president of APS now for some 3 years. What do you think of the state of insurance digitization in Portugal?
José Galamba de Oliveira ( JGdO ): This is an industry that has advanced later than others in the digitization effort, that is, in the effort to apply all the potential that new technologies bring both in internal processes and as a tool to bring us closer to customers. Today we can actually use technologies at all points in the value chain of various industries, and the insurance industry is the one I would say started later. But it is all in an increased investment effort to reap what technologies can bring to the value chain; It also has the advantage, because it started later, of not making the mistakes others made. Thus, perhaps it also reaches advanced states digitization faster than other industries.
VVdW : Are there lessons from the financial sector that can be transposed to the insurance sector regarding digital transformation? Which are they?
JGdO : There are 2 major impact areas here. The first has to do with using new technologies to apprehend private and corporate customers. The sector has particularities. Historically, insurance distribution is done by third parties through agents and intermediaries who are often independent. So, the sales network held the information on the customer, not the insurers themselves who functioned as product factories. This has obviously evolved a lot over the last few years and new technologies are a tremendous help in capturing the knowledge of customers who are still mostly served by third-party networks, whether they are mediators and agents or banking networks. Thanks to new technologies, much of this knowledge can be retrieved and stored so that it can then be worked on in order to develop products that are more in line with the expectations of these customers. I would say this is a great transformation in recent years. And it is true that new technologies allow us to deepen and develop mechanisms for more frequent interaction with customers. Again, historically, the contact between the insurer and the client was mostly once a year when the annuity payment or the receipt payment was made. Today, with new technologies, apps, online and direct insurance, a much closer and more frequent relationship with the customer is achieved. The idea that many of these insurances can have added value with other types of additional and complementary services makes it possible to multiply touchpoints with the customer. The big revolution was made outside insurers by bringing customers closer and getting more points with them, allowing us to get to know the customer better and thus achieve a product offering that is much more in line with their expectations. Then there’s a 2nd approach, an internal approach of using technology to streamline processes, streamline procedures, and have quicker and faster response times so that when the customer needs the insurer’s help, we have the ability give a much faster response by responding to customers in times of misfortune.
VVdW : What is the role of APS in the digital transformation of the sector?
JGdO : We have 2 roles. A first one that has been going on for some years: we have developed a set of services and have a computer platform that facilitates communication between insurers. The objective is obviously to seek greater efficiency in the processes among themselves. Just to give an example, the case of a motor accident between 2 cars involves 2 insurers. So today we play an important role because we have all insurers linked, and we have a set of protocols that allow for faster settlement of claims when more than one insurer is involved. We have defined protocols that we have agreed with insurers, and we have a set of information systems and open channels between them to make it a much faster process. When it comes to resolving motor vehicle accidents, we are, by the way, best practice when compared with response times across the whole of Europe. Then we have the second role of facilitator in that we develop workshops and seminars, and bring in experts with knowledge and know-how to talk about current issues related to all this digitization theme. Subsequently, as we enter into more competitive aspects, each one will make use of it as sees fit and as quickly as it wishes to implement any of these ideas.
VVdW : Portugal Finlab – a communication channel between innovative entities and Portuguese regulatory authorities – aims to support the development of innovative solutions in FinTech and related areas through cooperation and mutual understanding.
What do you think of the initiative?
JGdO : I think it’s a very commendable initiative. The insurtechs are companies that bring a lot of innovation, in fact. Imagining that your new products and services are designed based on meeting regulatory requirements is very important. Increased credibility results. Industry is regulated at European level, and it is good that all these initiatives comply with this regulation. We do not want to live outside the law. I appreciate this initiative, which is similar to what is done in other countries, such as England – the first to move forward with the sandbox and with partnerships between regulator and such fintechs. It is positive that this whole ecosystem assembled between regulator and insurtechs and fintechs has advanced.
VVdW : Portugal FinTech will soon open “The Fintech House”, described as space where the whole community can innovate and develop solutions that shape our future. Will APS have any form of collaboration with it?
JGdO : The theme of insurtechs is a theme that, in our view, is competitive. They are innovation companies and we here at APS, as an association, have a passive stance. What happens is that many of these insurtech companies end up having direct relationships with certain insurers. It is even a distinguishing factor among insurers. It was understood that this is competitive territory and it is the insurers that make the bridges with insurtechs. The insurtechs are an innovation space, in the sense that the insurers to come to bringing innovation into the house more quickly through partnerships. It is a win-win situation. The insurtech have access to an insurer and can scale faster. Insurers’ customer databases are very large. For insurers, this new crowd that is born in a different context than ours comes with ideas outside the legacy of insurance companies, and sometimes looks at problems in a truly innovative way, and it’s really worth a bet. This relationship is made directly with the insurers or with one or more insurers, and APS does not enter it.
VVdW : At the time of publication of the World InsurTech Report (Witr) 2019 of Efma and Cap Gemini, Vincent Bastid, Secretary General of Efma said that “data show that insurers and insurtechs want to partner, which will ultimately benefit the customer in the form of more advanced products and services”. Do you think this collaboration is already gaining strength in the Portuguese market?
JGdO : In Portugal, in this respect, we’re in the early phase. I know of some experience in the U.S.A. and England where this cooperation with insurtechs is more profound and more advanced. There are experiences here in Portugal. I know 2 or 3 insurers who developed specific programs to accelerate insurtechs. They identified a set of partners to whom they open doors and help them grow. They incorporate some ideas in their own offers supply and even, in other cases, help them cross borders and build bridges with other insurance companies, which is critical for insurtechs to grow. We are in a market that, after all, is small. But there are few stories to tell in Portugal. Maybe in a year or 2, there will be more. I see other countries where situations like this are in the hundreds. Here they will be in the few dozen.
VVdW : In your view, which areas of insurance will be most impacted by digital transformation in the coming years and why?
JGdO: The one that is already very impacted is the claims management area; in all relationships with providers, in the settlement of claims, in the way, it communicates with clients. There, there is a lot of technology being applied, a lot of digitization happening. This is where perhaps it began and has gone deeper. I would say that it already goes on in all areas of the value chain. We witness this in various types of insurance; motor, accident, travel,…. Even in healthcare insurance, currently, incorporates a lot of technology-telemedicine, remote monitoring, etc. It ranges many areas, even such that one would think less obvious, such as life insurance. For instance, in financial life products that capture savings, we start to see products by which one may automatically round up transactions to build up savings. One is starting to see such use cases abroad. Here in Portugal, some pilots appear. So surely, we will have novelty in the coming months on a more widespread use of new technology in all kinds of insurance.
VVdW : What is your recommendation to the industry regarding digital transformation?
JGdO : Recommendation here is always harder. I would say that this a one way street if we want the sector to keep its structural importance in a developed economy such as the Portuguese economy. We have to be at the forefront with products and services that go according to customer needs. This is currently done using a lot of technology. I know this often involves large investments, a concern to reach out of our comfort zone, to get out of our traditional place that is a very conservative spot. If we wish to keep this importance in society, we must invest in technology and comprehend the needs of consumers, understand the trends of society, demography, a population that is ageing and therefore, all the problems of active ageing, a reality that we are living in Portugal . Fewer and fewer children are born, and we all live longer and longer, and thankfully it is so. But this obviously is changing the needs and styles of behavior and consumption of the population. We need to address all this.