The drive to digital in South Africa – Discovery Insurance 01 June 2021
The return on investment from digital initiatives is embedded in the business and therefore difficult to isolate from ongoing initiatives to improve business operations, generate new revenue in existing businesses, and start new businesses. Nevertheless, we track several metrics which provide an indication of the performance of our substantial investments in digital initiatives. These include:
1. Active digital users on our mobile application:
a. In South Africa, Discovery has more than 470,000 mobile users that access our mobile application at least once every month.
b. In the United Kingdom, Discovery has more than 600,000 mobile users that access our mobile application at least once every month.
2. Customer ability to resolve queries without human intervention:
a. The return on investment from a single project to launch a Virtual Agent on a chat channel was more than R30 million. This channel now has more than 100,000 active users and had the highest percentage of total channel users register for our Covid-19 vaccination program.
3. Operational efficiencies:
a. A reduction in agent handling time. While Discovery does not disclose specific metrics for our agent handling time, we measure this internally. To give one example, the efficiency created in our identity and verification process using digital technology reduced agent handling time by 15 seconds per call. Since Discovery takes more than 50,000 member calls per day, this is a substantial operational saving.
b. A reduction in quote lead times through the deployment of our AI Quote service, which automatically generates a quote based on an existing insurance schedule.
c. Our unique Discovery Digital ID which identifies members across our business areas and incorporates sophisticated digital onboarding and identity verification practices.
4. Reductions in our internal human resources costs:
a. Employee and manager self-service and approval processes via mobile applications
b. Artificial intelligence assisted interviewing processes, and
c. Electronically signed and distributed letters of appointment.
In addition, we have current initiatives that use digital technology to create business value:
1. Enablement of work from home, including work-from-home for servicing agents and knowledge workers. This has enabled Discovery to reduce office space requirements by between 20% and 30%, although these savings are somewhat offset by the need to invest in technology. There is also a softer benefit in our ability to attract and retain talent.
2. Launching of new businesses that would not have been possible without digital technology including:
a. Thirty new global partners enabled through our cloud-based Vitality 1 platform hosted with Amazon Web services. This includes a franchise model where we can onboard new partners in a matter of weeks.
b. Our joint venture with Quantium, which enables us to monetize anonymized health data.
c. Our innovative short-term insurance model, which is built on behavioural driving data, collected using technology sourced in part from our investment in Cambridge Mobile Telematics.
3. Our investments in data science and data science indices. This investment has enabled us to minimize churn through member sentiment analysis; reduce fraud - saving several tens of millions of Rand every year; and increase sales by identifying underserved members and segments.
4. Our employee engagement score and employee churn metrics for IT staff are at global best company levels. While there are many factors that contribute to this, our program to adopt Digital Lean-Agile practices and culture is a significant driver.
How have you driven your digital agenda?
Our digital initiatives are driven by our Group and regional executive teams and focus on specific and market-relevant initiatives in broad categories such as:
• Digital Member Engagement
• Digital Intermediary Experience
• Digital Customer Experience
• Leveraging Big Data
• Developing Transversal Digital Building Blocks
How much have you invested in digital?
While digital is embedded in our operational practices and difficult to separate out, a recent analysis of project capital expenditure showed that 44% of this expenditure was on projects that are primarily or wholly digital. Discovery has more than 3,400 staff and contractors (approximately 20% of our total staff complement) involved in our information systems landscape. Unlike many companies with a substantial investment in legacy systems, we estimate that more than half of the staff are involved in various aspects of our digital strategy including digital member engagement, data science, digitizing our back office systems and processes, and managing the risks inherent in digital business models.
On a scale from 1 to 5, how do you rate the value generated by digital?
Since our insurance model is based on shared value generated through behavioral data which is almost entirely collected, stored, and processed through digital mechanisms, Discovery is highly reliant on digital business practices to enable our core business. We do not believe that a rating is relevant in a business model that includes digital at its core. Digital is not a separate initiative in Discovery but is embedded in our core business.
Has digital lived up to expectations? Has it really transformed the financial services industry?
Digital is not a single encompassing concept and can broadly be thought of in three categories. The first is the evolution and modernization of information systems that are required in any business. In this regard, the value-add is now beyond doubt and financial services companies that have failed to digitally enable existing channels are losing market share and destroying shareholder value. The second is the adoption of new ways to service customers and manage and price risk. In financial services this has enabled behavioral insurance and digital-only neobanks - both trends that Discovery and others have utilized to create radically new business models.
While many of these business models are still early in their life cycle and require substantial investment, it seems clear that the returns to successful innovators will come and markets seem to be pricing these future returns into current valuations. The third is leveraging cutting-edge technology such as advanced applications of artificial intelligence, data science, the Internet of Things, and Blockchain technologies. While the signs are promising and there are many successful deployments of these technologies in Discovery and other financial services companies, these technologies are themselves still maturing and the ability of organizations and members to adapt and change to take advantage of these technologies is still evolving. There seems little doubt that these technologies will transform financial services, but it is too early to say that they have done so already.
How much more can digital contribute to the financial services industry going forward?
There are still substantial opportunities for business model innovation within financial services and it seems highly likely that existing firms that are alive to these possibilities will change significantly to capture this value and new firms will emerge to take advantage of these opportunities. There are many underserved markets in financial services and many adjacencies between financial services and industries where behavior, risk, payments, and purely digital value chains play a significant role. These all create new opportunities and threats for incumbent players and new entrants alike. Discovery will continue to use our expertise in behavioral risk to enter new markets and industries both directly and in partnership with others.
What are the key threats to digital going forward and how prepared are you to manage them? (evolving customer needs driven by BigTech; blurred lines between industries driven by ecosystem integration etc.)
Discovery has a highly integrated business model built on the Vitality platform. While we accept that new threats and challenges will emerge to target this model, we believe that the integrated nature of this model creates value for our engaged members and intermediaries which will be hard to replicate through the application of any single technology change. We think that the changes driven by Big Tech and others are far more likely to create opportunities for us to partner and generate new value for our members. We are actively engaged with big technology players and have already launched products based on these engagements. We are extremely focused on increasing the engagement of our members with our business model and we continue to find new ways to create shared value for our members.
Want to know more about digital transformation in South Africa? Download your free copy of Efma-Oliver Wyman paper Digitizing financial services in South Africa