Decoding the role of technology in insurance
22 February, 2020
News | 22 Feb 2020
Traditionally, the insurance sector has been synonymous with legacy IT systems, with heavy reliance on it. Decades of this dependence has resulted due to the nature of the business itself. Volumes of data need to be maintained due to the critical need for compliance of a heavily regulated sector. Core applications of this industry have remained the same as claims filing, policy management, billing, underwriting etc. using the same systems since many years. But, while the business has remained the same, its audience or customer segment has undergone a complete overhaul. Digital is driving buying decisions increasingly and this new customer is looking for things to happen in nano seconds, including interacting with their insurance provider while on the move, on the mobile and through digital platforms.
Carriers are realizing that they have been highly risk averse in adopting new age technologies, while other Industries have moved on creating a huge need to fulfil this gap. The past decade has seen emergence of a range of technologies with varied rates of adoption across the industry. Usage-based insurance, peer-to-peer insurance, intelligent automation and AI-based claims resolutions are already disrupting the market. Many more progressive models are being developed, giving insurers opportunities to meet customer demands. Dynamic technological innovations are transforming the insurance landscape across product lines. We can see this in usage-based insurance, blockchain, and the Internet of Things, especially in pricing and distribution.
The adoption of these technologies is driven by customer demands and the impact they are expected to create based on the need of the hour. Some of the key impact areas that I foresee for the sector are as follows:
Some of the key impact areas that I foresee for the sector are as follows:
Personalization-Bringing back the human in the insurance context is about talking to the individual, rather than to a category of insurers determined by pre-set criteria. Personalization is based on a better understanding of their needs and requirements. It brings quality and value in the interactions to make their lives easier. For e.g.: imagine a scenario where you are a safe driver or a responsible home owner who takes care of all maintenance and repairs with periodic inspection. In this case, you are a low-risk insurer and today carriers can personalize policies to benefit you, using your risk profile as a key input.
This level of personalization is brought about by advanced predictive analytics and data analytics that help the carrier to connect with the customer on a one on one basis resulting in repeated business. Personalization involves tailored customer experience through special offers, messaging, tailored pricing and designed recommendations, hyper-personalized policies (cost-effective and convenient policies driven by tools that match the right products to clients, such as one-to-one content, cross-channel messaging, NLP, image recognition techniques, and AI).
AI driven engagement-AI is driving conversations and has become a staple for many of us. Think Alexa, Siri and Google assistant and how they form part of our daily routine now. Similarly, carriers are implementing AI and ML to bring about enhanced experience for the customer or the user. Imagine a scenario where you have taken a P & C insurance for your home. The insurer’s app tracks your temperature setting, the maintenance the insurer conducts on the electrical fitting, the safety aspect etc.
This leads to the carrier offering you better priced policies keeping in mind your risk profile. Another example of how this feature adds value is in case your car meets with an accident, however minor it maybe, you can take pictures or a streaming video of the damage on the app, which translates into the loss description with an estimated amount of the loss. This leads to real-time claim processing as you have already filed it via the app. This is how AI and its related technologies are reshaping the insurance industry of 2020. It is impacting the customer journey by reforming the way claims, distribution, underwriting, and pricing process work.
Cloud becoming a mainstay-We do see cloud playing a key role in replacing on-site legacy systems of carriers. There is a shift from on premise infrastructure to virtualized storage, such as cloud where there is more opportunity to manage costs better, achieve faster time-to-market as well as more flexibility in catering to changing market needs. This enables them to offer better prices to customers as well as faster service SLAs.
Autonomous vehicles act as disruptor- Autonomous vehicles are on the roads today. This trend is set to increase globally over this decade. This means that auto insurance carriers will need to alter their policy structure to factor in this new technology innovation. Self-driving vehicles have changed the way risk is perceived and how the risk ownership is now the purview of the auto manufacturer as much as the vehicle owner. This leads to a new business model directly impacted by technology.
In conclusion, these are interesting times for insurance carriers across sectors and business lines. Technology is paying the path for new disruptions, accelerating new avenues for business as well as bringing in innovative ways to connect with the insurer. Customers form the human element in this business and the only way to succeed is to cater to the way they consume, interact and live. This is possible when you use technology platforms to bring in the human element to any customer engagement. We envisage a future where insurance will be smarter, leaner, humanistic and more clued into real life problems than before. The result will be better business for the carrier and a happier, more satisfied customer.