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Technology has transformed many industries in the last decade, from retail to logistics and healthcare. The insurance industry has been slow in the past to modernise but there has been an increase in investments in digital insurance, otherwise known as insurtech.
Tech-focused insurance companies are set to grow as they focus on customer experience and personalisation. Any insurance company that wants to stay competitive in the current and future marketplace must meet their customers’ needs – which changes how they operate, what they provide, and customer interactions.
This digital transformation, driven by machine learning and artificial intelligence, mobile service, and predictive analysis, is allowing insurance companies to stay relevant and changing the industry for the future.
What is insurtech?
Insurance technology is any new technology adopted by insurers to streamline their processes, improve customer experience, make insurance premiums more affordable for customers, and save insurers money.
There’s a wide range of technology that can be applied to insurer operations, which we cover below.
Types of insurtech
Already the insurance industry is using innovative technology and it’s becoming more common and expected throughout the sector.
Insurers looking to stay relevant and competitive should consider embracing any of these technology trends:
Predictive analysis is the process of using data to make predictions about future events. It becomes increasingly powerful with the evolution of new technologies such as machine learning and artificial intelligence.
Insurance companies collect a lot of data about customers and other business operations. Analysis of this data is used to make forecasts about:
- Assessing risks of fraudulent claims by businesses and individuals
- Identifying future insurance requirements and trends to create new opportunities and get customers on board
- Looking at different types of claims and understanding the patterns
- Understanding risk factors linked with particular industries or insurances
- Identifying the risk of insurance cancellations.
The use of AI has become prevalent in many industries, from healthcare to transportation and manufacturing. Artificial intelligence currently helps insurance companies to be more efficient and enhance customer experience. AI has the capability to use the massive amounts of customer data available to create personalised experiences based on behaviour and habits.
Insurers no longer need to hire more customer service employees to respond to the same types of customer queries. Many of these can be answered by chatbots, available day and night. Chatbots are AI-enabled and can help more customers deal with common problems, saving insurance companies time and resources.
Bots can also complete processes such as policy application and filing claims, allowing more complex issues to be dealt with by humans. Simplifying the customer service experience and enabling insurers to directly interact with customers more frequently to offer new services based on data collected means contracts are less likely to lapse and provide more targeted customer service.
Future applications of AI will increase the ability of insurers to identify and assess insurance risk for businesses. AI software allows the insurance process to be automated, including fraud identification, underwriting, and risk assessment. Automated claims processed through data stored in the cloud will speed up the process, allowing large amounts of data to be accessed quickly and reducing the potential for human error.
The Internet of Things (IoT)
Customers are generally willing to share personal information in exchange for lower insurance rates. The Internet of Things (IoT) enables insurers to collect that data and make better decisions about risks and rates for clients. IoT capabilities have been embraced so readily, it’s predicted to be worth US$42.76 billion by 2022.
IoT collects data from devices such as smart phone and home applications, car telematics and wearable technologies such as smart watches, to make informed decisions about insurance coverage.
For example, in the past the auto insurance industry has relied on age, address and how creditworthy a driver is when setting premiums. Data such as the use of a vehicle (speed, frequency of night driving) is available to make more specific calculations on risk.
Blockchain has yet to be taken up widely as an insurance technology but the potential benefits to insurance companies are yet to be realised. Blockchain is seen as one of the most promising technologies in the world because it has the potential to solve many complex problems, such as data security and scalability, by making them more transparent and easier to manage.
Blockchain is the technology that makes cryptocurrencies possible. It’s a network of records called blocks that are virtually incorruptible. Every block links to the previous one and has a timestamp. It’s self-managed and does not have a central authority controlling it.
Blockchain technology has the potential to enhance the security, efficiency, and transparency of the insurance industry. It can be used to resolve other issues such as making claims easier and quicker by cutting out intermediaries or reconciliation periods, as well as preventing and detecting insurance fraud.
What are the benefits of technology in insurance?
There are a number of ways insurance is being transformed by digital technology, but the key benefits are:
Probably the most obvious effect, digital tech enables far greater efficiency for insurance carriers. Almost all aspects of insurance operations can be optimised for speed through the use of artificial intelligence and machine learning. Claims can be processed instantly through apps, policy underwriting can be sped up through machine learning, while customer service is vastly enhanced with live chat and chatbots.
2. Personalised services
Customers expect more attention and service in real time and ideally, they want it to suit their specific needs. Digital technology is enabling insurers to have access to the tools needed to provide an enhanced user experience without increasing demand for resources. AI and machine learning offer a more personalised experience for both insurance companies and their customers. It also increases the ability to tailor marketing, particularly via social media, to target and reach specific audiences for the greatest impact.
Historically, the way the insurance industry has operated has been awkward and cumbersome, with processes taking time and requiring a lot of double handling of information. Technology now makes both front and back end of operations more flexible, with insurers unlimited as to where they can offer services and meet customer demands more effectively. Data collected through IoT devices and wearables is used to help brokers and insurance companies make decisions on policy underwriting and new product offerings.
Customers want to pay lower premiums but have high expectations of quality and service. Insurtech allows companies to deliver personalised products and services in real time with much lower expenditure. This is passed on to customers in reduced insurance premiums, more services and products that are meaningful to them, ensuring renewed contracts and increased business. More investment can also be made into hiring people who are skilled at analytics and customer experience design, growing the business further.
The digital age is here to stay. Innovative digital transformation strategies are helping insurers to future-proof their businesses, as it is clear these technologies will continue to evolve as more businesses come to rely on AI-driven technology and predictive analytics. To stay ahead of the curve and remain relevant in a competitive market, insurance companies need to be ready for the future and adopt the tools of digital transformation now. This way they can find ways to optimise all aspects of their company.
The shift to the digital era is transforming insurance operations and will continue to do so in the future. INTELLIWORX offers digital solutions to help insurers stay competitive in their market. If you’d like to know more about how INTELLIWORX can help your insurance business, contact the team today.