The insurance market is being disrupted by the rapid advancement of technology. The market has reached such an age of digitalization, that unprecedented change is inevitable. Digital technologies are transforming consumer behavior, leaving insurers with no choice but to reassess their business models. As per a Harvard Review report, insurance agents who went digital reported a 65% cost reduction and a 90% reduction in turnaround time on key insurance processes.
Traditional insurers are also facing immense competition from new technology led insurance start-ups, also called Insurtech players. The Insurtech players are making obtaining insurance a lot easier and more user-friendly. Users can quickly compare and sign-up for a policy online and the claims process is also very fast. All of these functions can be easily performed using a mobile device. This sort of quick service is appealing to the ‘millennials’ and ‘digital natives’ who are by and large the core of today’s workforce. Another major factor that allows Insurtech players to disrupt this $4.5 trillion insurance market is that they can offer the same cover as the traditional insurer but at a much lower cost. As a result, traditional and larger insurance companies must transform themselves and embrace the digital practice, in order to stay competitive and ahead of the new age innovative start-ups.
The Six Technologies for Digital Insurance
Let us take a look at the technologies that will digitally transform the insurance industry in coming years.
- Artificial Intelligence: Be it Chatbots or Robo-advisors, (you can read about Robo-advisors in detail from the blog The rise of Robo-Advice in insurance companies) Artificial Intelligence is impacting insurance in many ways. Research on AI is assisting companies to develop systems that can perform tasks which previously required manual processing or human intelligence. Enterprise AI solutions improve time-to-market, enhance operational efficiency and enable a more intelligent way to sell and service. From quote to buy to claim, AI has the potential to make the customer’s journey very simple and automated.
- Blockchain Technology: Besides AI, the insurance industry is also focusing on Blockchain technology (to know more about Blockchain read Blockchain – The second era of Internet and how it helps IoT?). Blockchain can simplify paperwork, improve audit ability and help in fraud detection and risk prevention. It can also substantially reduce expenses.
- Machine Learning and Predictive Analytics: The insurance industry is fundamentally based on forecasting future events and estimating the value or impact of those events. New data sources like sensors, telematics, social media, mobile data etc. along with big data analytics have given insurers the opportunity to apply machine learning techniques to new areas of insurance operations. Machine learning has extensively enabled insurance companies to achieve higher predictive accuracy and thus, reduce claims.
- Internet of Things: The insurance sector is highly data driven and generates a lot of data. IoT helps insurance companies gather more data, mostly related to the behavior of their customers. IoT has allowed auto insurers to come up with usage-based-insurance (UBI) by allowing insurers to monitor how its customers drive the vehicle insured. Data from wearable devices enable health insurers to monitor the activity of its customer and offer discounts to healthier customers. It is evident that the role of IoT in insurance will only grow as insurers find more and more innovative ways of leveraging IoT.
- Hybrid Cloud-based Infrastructure: The insurance industry is highly regulated. IT teams in insurance companies struggle with what information is allowed by regulators to be stored in the cloud vs. on-premise. A hybrid cloud approach offers a way to get the benefits of the cloud and the security of keeping data protected on-premise behind the organization’s firewall. This will guarantee flexibility to customers. It is also a less costly and secure way to store information while at the same time reduces the risk of penalties for non-compliance to government policies.
- Mobility and Customer Experience: Customer experience is at the heart of the digital movement. The modern day impatient customer prefers faster, simpler services from insurance companies. In order to provide such services, insurers have to go mobile. This allows them to offer insurance services on the go. Innovative mobile apps can enable users to view policies, request for a policy quote, calculate premium, buy policies and more.
The Digital Future of Insurance
The insurance industry will see more innovation in the next 2 years than it has seen in the last decade. New technology based insurance start-ups have raised over $900 million in funding in 2016. They are going to provide stiff competition to the traditional and larger insurance organizations considering the fact that the future of this business is the digital natives. The traditional players must recognize the importance of digital transformation. They must trust in its ability to provide the infrastructure that supports the digital needs of today’s customer yet upholds government regulations. They must have confidence that automating daily workflows will put insurance agents on the right path towards competitive advantage. If there is a time to go digital, it is now.
As a insurer have you taken the digital step?
Shuvro S Sarkar
Sr. Consultant – Marketing