Digitalisation: The shape of the industry to come

Artūrs Karlsons, Associate Director of the Berne Union, shares insights from a recent members’ survey about the export credit and investment insurance industry’s digital transformation, highlighting the sector’s constraints, priorities, and engagement with artificial intelligence (AI).

Legendary computer scientist Alan Kay, who has contributed to the development of object-oriented programming, famously said that the best way to predict the future is to invent it.

To predict how the export credit and investment insurance industry will look in the foreseeable future, we should examine the current digital development work that the Berne Union members are undertaking. A recent Berne Union members' survey gives a glimpse of our industry's present challenges, priorities, and ambitious plans for the future.

The present state of digitalisation in our industry

The journey of digital transformation is a complex one, requiring many organisations to grapple with outdated systems and modernise. Survey responses by Berne Union members highlight the urgency of this issue, with a significant 61% of respondents aiming for core information technology (IT) systems replacement. This is a critical step for operational efficiency, enhancing customer experiences, and maintaining a competitive edge. Despite the progress by some players in the market, the insurance industry in particular faces the challenge of upgrading decades-old technologies which hinder agility and growth. As technological innovations proliferate and become cheaper to access, the need for streamlined, updated IT backends is increasingly apparent, both to reduce maintenance costs and to facilitate new feature development.

If those fundamental needs are addressed, issues such as sustainable business practices and cybersecurity will also be easier to address. On that front, the shift toward paperless operations is not merely a trend. It is swiftly becoming a de facto standard, one which is gaining momentum in the industry: nearly half of the surveyed members recognise its importance. The advantages are manifold: cost savings, improved efficiency, enhanced policyholder experience, not to mention a significant positive impact on sustainability. Cybersecurity also remains a top concern, noted by 48% of respondents. In the digital age, protecting data and systems is paramount, and companies must prioritise robust security measures to safeguard their operations.

Other focus areas which members flagged as high priorities included further advancement of credit decision automation, implementing digital filing systems, and developing AI applications.

Trade-offs and priorities on the road ahead

A striking 90% of Berne Union members view digital development as a high priority compared to any other business development investment, signalling a robust commitment to technological advancement. However, this journey is not without its challenges. Financial constraints and slow in-house development processes are significant hurdles, with 35% and 55% of respondents citing them, respectively.

Moreover, the procurement process, especially in public institutions, poses its own set of challenges, with members emphasising the need for a balance between cost and quality when looking for a technology or development partner.

Given the constraints and obstacles to our members' digital transition, they inevitably make the decision to streamline the highest-priority projects.

Risk Underwriting and Policy Administration remain a cornerstone concern, with the vast majority of members (93%) prioritising these areas. The sector’s commitment to resilience and adaptability in the face of a rapidly shifting global landscape explains the high level of focus on efficient risk assessment and streamlined policy management.

While Claims Management follows as a high priority with 44%, reflecting the importance of smooth claims processing and customer satisfaction. The practical areas of Invoicing and Debt Collection are also given considerable attention, with 33% and 22% prioritising these functions, respectively. The industry also recognises the significance of customer communication, document management, and enhancing the overall customer experience. The push toward ease of doing business and automation is not just about keeping pace with technology but about leading the charge in innovation.

How are Berne Union members engaging with transformative AI?

AI is the hot topic that tends to lead the discussion around future innovations. Integrating AI into business operations is no longer a futuristic concept but a present reality. The survey reveals that a significant 63% of members are either already leveraging or planning to implement AI technologies in their business or internal processes. This shift towards AI adoption underscores the transformative impact of technology across sectors.

Document management emerges as the leading use case, with 65% of respondents harnessing AI to enhance the organisation, storage, and analysis of documents. This not only streamlines documentation processes but also augments the decision-making capabilities within our members’ business.

Interestingly, 35% of members are exploring the use of AI in underwriting decisions, preferring its nuanced capabilities over simpler automation algorithms. This reflects a growing confidence in AI's ability to assess risks and make informed decisions, thereby improving the efficiency of risk underwriting.

I would like to take a step back here and address a concern at times mentioned by some of our members: The integration of AI into the insurance industry, particularly in risk assessment and evaluation, is a transformative process that augments the capabilities of underwriters rather than rendering them obsolete. The expertise and nuanced understanding that human underwriters bring are especially crucial for complex transactions in the medium- and long-term space. As Professor Aleksandra Przegalinska highlighted during the Berne Union Digitalisation Specialist Meeting 2024 in Warsaw, AI's role is not to replace but to redefine the nature of work, allowing professionals to focus on more strategic tasks that require human insight. This symbiotic relationship between AI and human expertise is vital for the industry's evolution, ensuring that technology enhances service quality while preserving the indispensable value of human judgment.

AI's versatility is further highlighted by its application in customer service, with 35% of respondents deploying or planning to deploy AI-powered chatbots to improve customer interactions and responsiveness. Similarly, back-office management is being revolutionised by AI, with 35% of members planning to or already utilising it to streamline administrative tasks and boost productivity.

There is a growing acknowledgment within the industry that AI will play a critical role in security, with 12% of respondents already implementing AI tools to effectively detect and prevent fraudulent activities, safeguarding against risks and losses.

This is by no means a comprehensive list of AI use cases among our members, but it demonstrates emphatically that we are witnessing a paradigm shift in real time. Rather than simply trying to guess what the future will be and react to it, our industry is actively inventing it.