Cultivating trust in an increasingly digitalized world

"It's not just about efficiency; it's also about being responsible and transparent"

Cultivating trust in an increasingly digitalized world

Risk Management News

By Kenneth Araullo

In an increasingly digitalized world, the concept of trust becomes more prevalent, especially as we start to understand the importance of proper ethics that must come together with better efficiencies. For the insurance industry, and especially for its risk management side, digital trust is particularly integral, as the notion of this concept provides what is arguably the backbone of the segment.

“Digital trust refers to the level of confidence that customers have in an organisation's ability to protect and responsibly use their personal data in a digital environment. This concept becomes more integral in daily life as technology advances,” said Daisy Ning (pictured above), Swiss Re head of life and health reinsurance for APAC ex. China.

In conversation with Insurance Business’ Corporate Risk channel, Ning explained that this concept is incredibly integral since the industry relies heavily on exchanging personal data between parties. Security for this data is paramount, and trust can only be established as long as its safety is guaranteed. With emerging technologies at everyone’s fingertips, threats and dangers stemming from cyber crimes also scale in measure, and Ning urged everyone to pay attention to the “ethical and legal complexities” – the alternative being the loss of trust and reputational damage.

“It's not just about efficiency; it's also about being responsible and transparent along the journey,” she said. “If we look at this in the context of digital underwriting, there's a significant opportunity to strengthen digital trust, while also transforming the insurance process. By harnessing advancements in AI and machine learning, as an industry we can further automate the underwriting process, increase efficiency, reduce human error, and provide a faster, smoother experience for customers.”

Citing her home turf as an example, Ning explained that there has been significant progress in using automated underwriting engines to process both first-level and second-level medical evidence, a breakthrough in the field. These efficiencies allow insurers to make more accurate risk assessments and price policies more fairly, in addition to a better customer experience for insureds across the region, thereby closing the protection gap.

“The shift towards digital underwriting is also fostering greater transparency. This transparency not only strengthens trust, but also leads to more personalised and fair insurance products,” Ning said. “But insurers must remain vigilant about data privacy and security; ensuring transparency with customers about how their data is being used. In doing so, the industry can strengthen digital trust and solidify customer relationships in the digital age.”

There is still a place for tradition

Despite the increasing scale of digitalization, Ning said that there will still be a place and time for tradition in the industry, which mainly comes in the form of personal, face-to-face, and agent-based transactions.

“A considerable segment of customers still prefers and value the personal touch and the reassurance that comes with face-to-face interactions. This is particularly evident when dealing with complex policy matters, where customers may find discussing their requirements and apprehensions in person more comforting,” she said.

Characterising the industry as a spectrum with a vast array of customer preferences, needs, and technology comfort levels, Ning said that a diversified approach will always work best. Insurers, therefore, will need to be efficient in their efforts to offer different and personalized approaches that will work best across different kinds of policyholders.

“As an industry, we must continue to innovate, and capitalise on the opportunities offered by digitalisation, yet maintain a respect for traditional service preferences,” Ning said. “The most promising approach appears to be a hybrid model that combines the benefits of both digital and traditional methods, offering the efficiency of online transactions along with the comfort of personal service, thus catering to a wide array of customer expectations.”

These considerations are also applicable to underwriting, Ning noted, especially with fears over artificial intelligence eventually supplanting the workforce with its unmatched efficiency. While machine learning and AI are invaluable to automating many aspects of the field, human expertise will remain pivotal in the process.

“While computers may streamline the process and enhance efficiency, they are unlikely to fully replace human underwriters. Our innate human ability to empathise, negotiate, and make informed judgments continue to be crucial,” Ning said.

In the future, as we evolve these technologies, Ning forecasts a certain evolution to the underwriting role that takes on a more managerial approach, one that requires proper judgment and expertise. She also stressed that digitalization should not be viewed as a strict replacement, but – as one industry veteran would put it – a tool that will enhance and augment their capabilities.

“The future of the insurance industry is not about making a choice between digital and traditional methods but making the two work in harmony. Insurers that can achieve this balance will be able to cater to customers' needs and build trusted, lasting relationships,” she said.

Making AI more trustworthy

Part of cultivating digital trust in today’s landscape requires companies making efforts to make certain technologies more trustworthy, especially to risk managers and insureds. As AI continues to gain traction in insurance, Ning said that there is a key aspect that needs to be met in order to make it as valuable of a proposition as it can be.

“To fully harness these benefits, AI needs to earn the trust of policyholders,” she said. “Swiss Re's proactive participation in the Veritas initiative, a project led by the Monetary Authority of Singapore (MAS), stands testament to this. The initiative aims to promote fairness, ethics, accountability, and transparency in AI and data analytics, aligning with Swiss Re's commitment to developing responsible AI.”

Part of the reinsurer’s recent Institute report also provided insights on how companies can achieve digital trust in an AI-prevalent space. Ning cited the concept of “explainable AI” (XAI), which can be a “game-changer” in the right hands. This concept calls for making AI-driven decisions easier to understand, in addition to making things clearer for clients and in the process boosting their confidence in the system’s fairness and accuracy.

“Another method, mobile ethnography, allows us to understand customer behaviour better. Using mobile technology, we can study how people behave and feel about AI. This real-world insight can help the design of digital insurance products that are easily understandable and aligned with customer values,” Ning said.

Ning also said that insurers face a challenge in that customers hesitate to share their personal data with companies; recent research from a management consultancy found that this trust is higher in APAC countries with more personalized products being the end goal for most. Regardless, Ning said that giving clients full control over the data they provide can be a good measure to earn digital trust for the technology.

“While AI presents immense potential for the insurance industry, its successful implementation depends heavily on building and maintaining digital trust. Using technology like XAI and mobile ethnography can make the digital shift smoother and strengthen customer relationships,” she said.

Part two of Daisy Ning’s conversation with Insurance Business Corporate Risk will be published in the coming weeks. Stay tuned.

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