COVID-19 has forced virtually every industry to embrace an acceleration in digital capabilities. While it can be argued that digital transformation was already underway; it’s hard to dispute that it has accelerated in recent months. A recent McKinsey survey, cited in CRN, shows that worldwide, 58 percent of customer interactions were digital as of July 2020. That compares to only 36 percent of customer interactions as of December 2019, which was before the pandemic impacted business, and only 20 percent in May 2018. For companies, that is acceleration at warp speed, and that is only in one area of business.
A recent article in the Wall Street Journal, Coronavirus pandemic helps speed more CIOs toward business operations accountability, included a quote by Gartner emphasizing that the acceleration in digital transformations is driving “ a need for an executive who can view digital efforts in terms of the entire organization, coordinate activities and manage risks.” Some of the key considerations I view at the heart of this strategic role are not new topics, but areas that have raised in importance given the less predictable environment in which we are now living. These include the use of more data sources to gain insights and how cloud technologies can assist with digital transformation goals to be more agile and achieve objectives more quickly.
Insurance and finance are two industries that rely on measuring risk with historical data models. They have traditionally been slower-moving to adopt new structured and unstructured data inputs as regulatory considerations are always top of mind. Neither industry was immune to the need for interactions to go online and had to quickly adapt to the demand for capabilities such as touchless claims processing and mobile/online banking, which require more advanced data capabilities – images for claims, automation and digital signatures for account openings.
To facilitate risk modeling in this new normal, agility and flexibility is required. This will only become more important as we move into 2021 and a post-pandemic new normal. Security Magazine recently reported that Multi-cloud adoption grew by 70% year over year.
Firms realize they need agile systems that can produce deeper insights at the drop of a hat. To do that smoothly and quickly requires the adept use of cloud technologies. We’ve seen cloud deployments increasing with our customers, especially in the last 6-9 months.
COVID-19 has had the side-effect of encouraging a reimagining of what can be done with data and the cloud in heavily regulated industries. Read more below for expert suggestions from both industries.
In “Re-thinking The Insurance Industry In Real-Time To Cope With Pandemic-scale Disruption,” Monique Hesseling describes how COVID-19 is transforming the insurance industry. Insurance models, data, and systems curated for decades or centuries simply could not and did not factor in how a global pandemic would affect their customers.
For an entire business that boils down to the accurate assessment of risk through data (health, financial, environmental data, property, contractual, and other exposure data), this was a catastrophe on top of a crisis. Digital transformation has accelerated with innovative approaches to create a safe, digital continuation of business and sparked operational and product innovations.
Instead of in-person appointments or walkthroughs, insurance companies may now rely on video conferences, drone footage, satellite imagery, social media posts, and mobile apps that gather data on customers’ behavior in real-time.
Combining these forms of structured and unstructured data in the cloud can unlock new insights, both in isolation and in combination with each other. This can be done at speed, and at scale. It may not replace previous datasets, but alternative data offers another perspective to round out the historical information about an individual customer or business.
In the future, traditional and alternative data can coexist, adding resilience to the Insurance industry when normality resumes and the pandemic becomes a distant memory.
In “Are Your Machine Learning Models Wrong”, Richard Harmon explores what financial institutions should do in the face of the uncertainty caused by COVID-19. His suggestions not only address the pandemic but focus on the opportunity to take a longer-term view in implementing a strategy that expands capabilities and helps prepare for the next crisis.
First, he suggests companies modify existing models with the latest data elements and create scenario-based projections adjusted for various levels of model bias. Richard recommends extending stress testing across all lines of business and increasing the rigor from a few static scenarios to an automated system running hundreds of dynamic scenarios.
Finally, he recommends investment in building out a platform that supports the entire machine learning lifecycle to enable the industrialization of ML.
What if companies gamble on a new normal and the world reverts to more or less what it used to be like? What if 2020 is an anomaly? Moving to these new data sources is still worthwhile. It provides a competitive advantage, whatever the world looks like in 2021/2022 and beyond.
The most progressive and cutting edge companies were transitioning to the cloud before COVID-19. They will continue to do so after it has passed. This crisis has accelerated digital transformation for those already on the path and made it clear to those who weren’t that it was an inevitability if they wanted to compete long-term. Alternative data is here to stay, and I’m sure it will be getting a new name very soon.