Robotic Process Automation

Robotic Process Automation (RPA) is gaining interest with Insurers in the London Market. RPA can provide real benefits by reducing costs in a short timescale and with only a small upfront investment.

Over the last two decades general insurers have digitised their distribution channels, moving to online platforms to sell insurance. This was compulsory in the business-to-customer (B2C) market. This has enabled high degree of automation thoughtout the general insurance business operations. The London Market Insurers have not had the same drivers. The market is more business-to-business as it is broker led, it is paper centric and geared to handling low volume high complexity risks.

The London Market faces a number of challenges where RPA could help Insurers as part of its enterprise automation strategy;

• The London Market has been going through a prolonged ‘soft market’ and the need to reduce its operating expenses are vital.
• The ‘London Matters’ paper identified that transaction costs in the London Market is 9% greater than its competitors; this is moving price sensitive business away to competitors.
• The Insurers in the London Market have not invested in updating legacy systems unlike the general insurers. This is now limiting the ability for IT departments to respond to a steady stream of changes, integration and automation requirements.
• As the Lloyd’s Target Operating Model delivers platforms such as the Product Placement Platform, Structured Data Capture and Delegated Authority there is a need to integrate to these systems but in a low cost way.

While the desire for increased automation is not new, the maturity of RPA tools combined with the increased need for cost reduction provides a good reason to explore this.

Robotic Process Automation or RPA is the label given to a new breed of tools, which seeks to automate ‘swivel chair’ activities carried out during day-to-day business operations. This can range from data entry, checking and moving information between different systems or undertaking a set of actions against a list of defined activities. The objective is to remove the low value and routine activities carried out by a worker and replace this with a virtual worker. This will create more time and capacity for the staff to work on higher value tasks of the organisation.

To understand RPA and what it does, let us firstly understand its background.

Early automation

With the introduction of desktop computing we have always looked at ways of integrating business systems and automating tasks and decisions that could remove people out of the process.

Systems such as Word Processors, email, Policy Administration or Customer Relationship Management Systems are good at increasing productivity by storing and processing large quantities of data. However, they still rely on users to enter information across several systems to complete the process.

High volume automation was historically done through large systems Integration or Business Process Management (BPM) projects. These would be delivered at a high price point and carry long timescales. In most cases the systems they needed to consume were complex or not designed for integration and therefore it would require a significant re-engineering of the underlying systems to make them talk to each other.

As the digitisation of assets continued, there was a need for moving more of this information around in an electronic manner and performing no-touch processing by codifying the process, the user interactions and business decisions.

Many workflow (Business Process Management) vendors such as Tibco, FileNet and IBM realised that people were wanting to automate more than the business processes and introduced the concept of ‘bots’ as part of their workflow tools. A bot was a piece of code that did a sequence of activities such as send a notification, look up records on systems, push or pull information from another system driven by the workflow process. In some cases the bot would complete a whole stage by executing a series of tasks without requiring any human interaction.

These early bots worked like the RPA tools of today, but were simplified versions and shipped with a handful of connectors to systems such as email, databases and web services. The workflow tool was still central in the model with ‘bots’ acting as a bolt-on. Product vendors such as BluePrism where the first to realise that there was value to separating the ‘bots’ into a virtual workforce and it has been one of the pioneers in driving this forward.

Most of today’s RPA tools bring together the best features from the bots in the early workflow tools. They operate stand-alone and provide connectors so they can interface to many systems, they provide management of the bot environment, scheduling and tracking. Another move has been to reduce the coding effort by providing screen recording and playback mechanisms and codeless drag-and-drop configuration. All of these features have resulted in a simplified suite of tools that can be built and deployed much faster. This also allows RPA to be used where previously the cost of automation were too high and it was easier to leave a person to carry these tasks out.

What are the features of an RPA tool?

Most RPA tools provide the following:

• Adaptors to systems; these could be Excel files, Email, databases, file systems, FTP and application screens (UI). Many of them have 30+ adaptors out of the box which cuts down significantly on the development work.
• Record and playback; All RPA tools allow the facility to record and playback functions to most web and desktop applications, with very little or no coding knowledge. This is very powerful as it allows less technical or end users to record a standard sequence of events and then execute multiple times.
• Basic workflow; this is not a replacement for business process workflow; but rather it allows a sequence of tasks to be strung together and create a reusable sequence of tasks.
• Manage and Monitor; all of the tools allow a level of bot management, such as scheduling hours of execution, control remotely and monitoring activities such as execution times and auditing.
• Assisted and unassisted execution; most of the tools can run on the desktop (assisted) and prompt the user for some inputs along the way or sat on a server and run unaided
• Minimal coding – Unlike the traditional coding require minimal programming effort.
• Advanced adaptors; these are ingestion adaptors, so for example Optical Character Recognition (OCR) to read scanned or PDF documents.

What RPA is not

• RPA is not artificial intelligence, although some products are starting to look at implementing machine learning. They are in the majority data and process automation tools running on a predictive basis (that is you have to tell it a set of actions to carry out)

Why RPA and why now?

• RPA tools have come of age. RPA tools provide all the components to undertake large amounts of automation with very little effort and cost, meaning that tasks that may have previously required a large investment can now be achieved at a much lower cost point.

• Easy to calculate Return on Investment. The cost of RPA tools vary from £5,000 to £15,000. The target would be for one RPA robot to replace one worker, however depending on the tasks this could be between three and five workers.
• Lower cost and implementation time. Typical system integration projects and workflow (BPM) projects are in the region of 12 weeks – 12 months and the cost of implementation can be between £250k – £1m+. Typical RPA implementations can be done between 6-10 weeks and therefore much lower cost.
• Legacy systems interface. With some legacy systems it may not be easy to automate interactions with these. Many of the London Market systems are many years old and do not support a full range of API’s. RPA provides a solution through object recording and playback to talk to these systems.

Scenarios where you would not want to use an RPA tool?

• RPA is not the right choice in high volume processing situation, there is a big overhead from the RPA tools itself. Coding the automation directly at application or database layer is much more efficient where the transaction volumes are large.
• Where there is a requirement for business process management (within or across a department) then a BPM tool may be a better fit. RPA will not solve the organisational process management issues. However, RPA can still be used alongside a BPM tool.
• If the intended systems have accessible API’s (application programming interfaces) or if we have multiple systems with open API’s then it would be advisable to use this and automate at the code level.

How can a London Market Insurer leverage RPA?

A large portion of the activities in the London Market are based on the paper centric processes. Even where digitisation has occurred and paper no longer exists, the underlying business processes have not been always adapted to take advantage of automation technologies. RPA can therefore add greater value in the London Market than in general insurance business.

To identify the value and ensure the right use of RPA the first step will be an assessment of the business processes. This could be by functional area or by targeting a specific business process. The assessment will drive out;

• The business process and its steps,
• The current levels of automation,
• What systems being used as part of the process,
• Volumes and frequency,
• It should include process improvement opportunities to take out redundant steps

In a study of ‘underwriting efficiency’ 82% of underwriters said they spend less than 50% of their time on underwriting activities. The remainder of the time is spent on collating data, updating systems and other non-underwriting activities; in the same study 72% of underwriters said they use between 1 and 5 systems to carry out their underwriting activities. There is good scope for RPA to take out most of these non-underwriting activities.

If we focus on the Underwriting, RPA can perform low value re‐keying, pull information from external systems and spreadsheets, reduce time consuming handoffs and perform manual logging, and task-tracking activities. RPA can streamline the underwriting process by talking to multiple systems and reducing the low value activities that may be part of the current Underwriters activities.

This will free up underwriters to review more submissions and in less time. It will help underwriters to focus on the underwriting opportunities. This will allow the underwriting team to spend more time with brokers instead of having to manually feed and co-ordinate the systems.

Typical savings

The benefits of RPA will vary between different insurance organisations and the existing processes it has in place. A simple measure is the cost of a human capital versus a virtual worker. RPA tools typically cost between £2000 and £5000 (plus the configuration and implementation costs), if they can replace between 1-3 back office workers the return on investment calculation is easy to do.

Robotic Process Automation Tools

This is not an in depth of the look at the products available. Most of the current tools are very similar in capability. Here is a summary of the key product vendors in this space as per the Everest group quadrant:

Conclusion

With the need to reduce costs and a desire to focus the workforce on high value activities, RPA has come at the right time for the London Market. With the soft market conditions and growing competition we need to look at ways of reducing costs with minimal investment. RPA provides an ideal technology solution to the business challenges at the moment. I believe RPA is the ideal solution in the short term to reduce costs, automate some of the lower value activities and at very attractive cost point.