Oct 24, 2019
With the advent of disruptive technologies such as artificial intelligence, machine learning, IoT and robotic process automation, the future of the insurance industry looks bright and promising. However, success for insurers will largely depend on how quickly they break out of their legacy shells and march towards digital future with fully modernized capabilities.
The insurance industry is undergoing a massive transformation. The rise in customer expectations, increases in data, and availability of innovative digital technologies are disrupting the traditional insurance business models. Forward-looking insurers aren’t just observing this major shift, but have started taking actions by investing in technologies, reconsidering their business processes, and bringing new, customer-centric products to the market.
Reports show that 42% of insurers are already considering digital as their critical part of business strategy, and 77% indicate that improving customer experience is the key driver to digital transformation.
Digital transformation is indeed the right step forward, but with so much at stake, are you focusing on the right areas? And, are your efforts adequate enough to keep up with the emerging pace of change? What are the barriers that can block your progress to deliver digital?
To figure it out, let’s first look at how key digital technologies are building the foundation for the future of insurance.
With advances in sensors, machine learning, artificial intelligence (AI), and cloud computing, the future of insurance is fairly easy to predict, and will mostly revolve around the interplay between these technologies. Here’s how;
Big Data and Internet of Things (IoT)
Data is the new oil, and with the advent of it, you get opportunities to use the insights of your customer’s life, health, wealth and other behavioral patterns in ways that you would have never imagined. Although data-intensive, the insurance industry has failed to utilize the unstructured granular data in the form of text and voice. Building capabilities to collect such granular data, compile it and analyze the data sets can bring unprecedented accuracy in assessing your customer’s risk profile and determining tailored priced products.
Consider motor insurance for example. Utilizing IoT sensor data attached to the car, you can collect critical data about the drivers, such as their driving habits and their likelihood to be involved in an accident. Comparing this behavioral data with that of the other drivers in the database can help your team to build accurate customer profiles and offer them competitive, yet profit-making premiums. A similar possibility can exist in health and life insurance, where crucial customer data generating from lifestyle habits, activity levels, and heart rates can be collected through fitness trackers.
Data will also give a fair share of advantage to your marketing teams. By analyzing unstructured data through the calls, emails and social media networks, marketing teams will have a better understanding of customer preferences. This vital information will enable them to offer products and services that precisely meet the needs of your customers.
Unlike today, where AI is simply thought of as a tool to intelligently automate a few business processes such as underwriting, pricing and claim support, the technology will play an integral role in determining the success of your business in the future.
As AI and ML mature with advances in cognitive technologies, you will have access to Business Intelligence (BI) models that are constantly learning and adapting to the environment around them. This, in turn, will enable you to develop new customer engagement techniques and build new product categories for them with a clear picture of the underlying risks in real-time.
The advanced algorithms will be efficient enough to create risk profiles, determine the right policy and issue quotes to customers instantly. They will even handle claims routing and reduce the cycle times dramatically from days to minutes, or even seconds.
Application Programming Interface (APIs) will play a key role for insurers in helping to reach out to newer markets and acquire new customers. With the advent of it, insurers will gain new capabilities to expand their ecosystem to non-traditional partners and offer real-time insurance services to the customers.
For example, insurers can make their insurance plans available for purchase to customers when they use partner services or products. This new possibility will open new distribution channels outside the insurance industry and will generate additional revenue and new customers.
However, the success with the API economy will lie in strengthening the technical capabilities. Capabilities that allow insurers to expose business assets (such as customer records, product catalogs, premium calculations, and so on) and make them easy to understand, leverage and use by partners.
These advances may seem too futuristic but are much closer than you think. This can be sensed by the prevailing trends in the insurance industry. 80% of insurance CEOs say that AI is already a part of their business or will be within the next three years. IoT-enabled devices are helping several insurance companies to lower their premiums by 25%.
So, how can your business stay relevant today and also in the future?
Digital transformation is all about reimagining the insurance from the customer’s perspective. However, digital alone cannot differentiate your business from the rest. To ensure success, it is critical to define the areas where you would want to see improvements, such as better claim processing, superior customer service, competitive premium pricing, etc. and put your efforts in those directions. Bringing innovation through new insurance products or better customer experience through the aid of digital can definitely support your long-term growth plans.
In addition, envisioning a future that consists of tightly interconnected technologies essentially requires getting rid of the existing legacy systems that operate in a silo. In order for automation, AI and data analytics to work, there is a need to adopt new-generation IT that offers speed, flexibility, and scalability. Cloud/SaaS essentially makes this possible and is one of the preferred alternatives to on-premise deployments. Given the processing power needed to work with huge data sets generated from IoT devices and cognitive applications, cloud computing is the only way to the bright future.
Digital transformation, however, has its own set of challenges. Complex insurance infrastructure often results in lengthy endeavors even when it comes to simple projects such as launching new insurance offers. Identifying news risk and new opportunities will make little sense if your infrastructure doesn’t support quick product roll-out.
As such, a modern digital insurance software platform supporting agile strategy and quick time to market is the very first step towards successful digital transformation. A platform that supports the IoT ecosystem, injects AI and ML models to intelligently automate insurance processes, and offers a provision to generate APIs for partner integration.