“Insurers need to agree on which client data should not be used”

Photo: Mutua Madrileña's Deputy Director of Transformation, Jaime Kirkpatrick. Credit: Courtesy of the interviewee.

By José Manuel Blanco

Although the insurance industry was already undergoing a revolution as a result of changes in urban mobility (car sharing, falling vehicle registrations, etc.), the coronavirus pandemic (COVID-19) is forcing it to continue transforming itself so that it can reach a population that is spending more and more time at home in the midst of a new economic and health crisis. In addition, the emergence of new technologies, such as artificial intelligence (AI) and big data, and the possible entry of big tech into the industry, are also forcing it to innovate.

Mutua Madrileña's Deputy Director of Transformation, Jaime Kirkpatrick, is aware that the insurance sector needs to be constantly transforming. That is why he is leading the company's adoption of new technologies to improve its services and customer service, aware of the new challenges and opportunities in the industry.

Every year the MIT Technology Review publishes a list of 10 technologies that could change the world. The 2020 list included tiny AI, powerful algorithms that can be run on even a smartphone. Advances in this field could improve companies' predictive capabilities, which directly relates to the insurance industry when it comes to estimating customers' policy costs. How is your industry preparing to approach this technology?

I think AI has huge potential application because of its predictive capabilities, which in the insurance industry is everything. Its value is not only in better measuring that risk [of something happening] and therefore setting a more tailored rate for the customer, but it can also be applied in areas which help us make better decisions for the benefit of the customer and the company.

So, in 2018, we launched a chatbot for general customer service which was capable of resolving specific policy queries. We have also completed this with WhatsApp, where a customer can open a claim and, with 24/7 support, benefits from not being dependent on the call centre's capacity.

Internally, AI helps us with claims handling and settlement. We have applied AI to help human adjusters: by analysing experiences in similar crashes, we can tell the adjuster which files to work on. This allows the employee to focus on the higher value-added activities, while we take away the more administrative activities.

The current AI revolution has occurred because we live in a data-driven world. Big data analytics is reaching all sectors, because it provides access to so much information. How is the insurance industry working with big data?

Data is the raw material, the fuel. The more and better the data, the better the prediction and the decision, and the more value is created. Traditionally, the insurance industry has always made its predictions on a small set of initial data: how much data do they ask from you to insure your car or your home when they don't know you? It's a small set for which we offer a price.

Understandably. You cannot initially overwhelm a customer by asking for too much data, because it will lead to a lot of reluctance to sign up. That's why the whole industry, including us, is proactively trying to gather more data from customers and non-customers to use to improve the business and what we offer. For example, to predict the next product that might be needed.

There are two challenges to capturing data. The first is obvious: I need to collect data from the interactions the customer has with me, as it has value in getting to know them and their needs better. The second is to try to acquire data from interactions that are related to insurance but are not created by the company. For example, if we were talking about cars, [the interactions of] insurance customers who go to garages: in order to gain better information, how do we get data from something that we don't control?

What are the challenges of storing and processing data?

The technology is available. The challenge is making its use compatible with operators' existing technologies, something that now needs to be further accelerated.

One of the most common problems with predictive technologies is that the algorithms have biases that can lead to the unfair treatment of users. How do you address this challenge?

This demonstrates the importance of always being able to regulate technology. We have to be very careful and honest about what information is being used: whether it is sensitive information, whether it is ethically correct… We also have to check the results of the algorithm well: if it is going to discriminate against people, it is crossing a series of unacceptable red lines. We have to ensure that the universal vocation of insurance does not exclude groups.

I think the efforts are welcome. There are codes of ethics, codes of good practice within the employers' organisation Unespa… It is important that we agree, for example, on what kind of data should not be used. If an insurer were to ask for individuals’ genetic data, I have no doubt that there would be a number of people who wouldn’t be willing to use them for life insurance.

How do you think COVID-19 is transforming the industry and its customers?

When I think about individual insurance, I think there is going to be a greater need for protection and security. And that is obvious in areas like health insurance. Life insurance, in the sense of being financially prepared for unforeseen events, are things that customers are going to attach more importance to than before.

Then there are smaller transformations. We have seen people spending more time at home, and we think some telecommuting will remain, so good home insurance will be more valued.

I think the other important aspect is the digitalisation of services. The customer has experienced a strong acceleration in the sector almost by leaps and bounds, because they were locked at home: care, service provision, medical teleconsultations, video-operations… This opens up more opportunities to stand out from competitors.

What do you see as the challenges and opportunities for the mobility sector in the aftermath of this pandemic?

The trend we saw before and will continue to see now is private car ownership. It was happening before the pandemic, but now there is too much noise to see (mobility has stopped due to health issues) and the big question is what the future is going to look like.

I think the problems associated with car ownership (congestion in cities, non-rational use of the fleet…) are likely to lead to less private car ownership, but obviously we will have to see.

And in such scenarios, what role does an insurer play?

I think the question each insurer has to ask itself is what role it wants to play. The big question is: will the car fleet, which is our pool of business, continue to grow infinitely, or will these changes lead to a smaller pool of cars, but perhaps used more and in a more efficient way?

Conscious of these changes in mobility, we want to support our customers by providing them with solutions even when they do not own a car. I would call it “honest and influential prescribers”: we help them to ration their car use by offering them options such as car sharing or other means of transport, and we move from being just a provider of insurance for a car they own to being more like a mobility solutions provider.

New technologies are favouring companies such as Google and Amazon as they enter sectors which they did not traditionally belong in. How is Mutua Madrileña preparing for the entry of new big techcompetitors?

Big tech has an absolutely overwhelming customer knowledge. They have gained formidable global scale by processing data applicable to all markets, which puts them in a very advantageous position to value, enter and operate different businesses.

When we are talking about services, which is the insurance companies' field, I think the integration between digital and physical services is more complicated and local. Think, for example, of a customer who has a car accident: an expert has to intervene, then go to a garage, they need a replacement car… It takes a strong local presence to provide these services, because you depend on different partners and suppliers.

Insurers have seen that there is a lot of talent and money in these digital solutions. We are accelerating our transformation, giving ourselves more advanced analytical capabilities, developing value-added services and integrating them into full digital experiences, so that we can provide the same kind of digital experience that an Amazon customer has with insurance.

You mentioned analytics, developing new capabilities… It is a must for any company to innovate, from the purpose, vision or values to the spaces, the way of working (collaborative) or the processes. As deputy general manager of Transformation, how are you facing these challenges at Mutua Madrileña?

Transformation is an opportunity to get closer to the customer, deliver what they need more efficiently and serve them in a way that is more convenient for them and through the channel they want with the right experience.

And I believe that transformation has to be driven from the top, but with the involvement of the team. It is very important that innovation is included in the agenda, that time is dedicated to it, that it is something important. This agenda has to be aligned with the company's strategy, accepting that not everything that is tried and tested will work, but still setting the pace.

At Mutua, we conduct our innovation work internally, with intrapreneurship programmes, and externally, collaborating with start-ups and, in some cases, investing in them or in creators of emerging companies, for example: We are partners with the venture builder Antai.

What advice would you give to peers who find themselves in the position to want to innovate and transform themselves?

First, to internalise it is a must: innovation is not an optional thing, it isn't something you just do when you have some time, but it is fundamental for medium and long-term success and, therefore, since it is a must, you have to put focus, effort and attention into it, as well as mobilising the organisation, because it is not going to happen spontaneously. It is important that it permeates down to allow a traditional sector such as insurance to compete and bring in the talent that would end up in the digital world creating companies that compete with us.