digital transformation

15 digital trends in the insurance industry

Over the past few years, the insurance technology sector has built serious momentum. New players are on the scene and they’ve attracted more funding to insurtech in 2021 than ever before. And it makes sense – changing customer behaviours and expectations mean the market is crying out for personalised insurance solutions.

In this article, we’ll delve into the main digital insurtech trends, the possibilities they’re opening up to insurance providers, and why it’s so important to watch this space.

Digital trends in insurance industry in 2021

Traditional insurance delivery is being challenged by the development of new technologies – such as driverless cars, 3D printing and drone delivery services. These technologies are making liability greyer, which means insurers must have every piece of data available to assess accurately and mitigate risks.

It’s also important to remember that, while we’re talking about emerging technologies in insurance, their applications have already been tried, tested and proven in other sectors. Law enforcement agencies use big data to detect fraud, marketing platforms use customer data to enhance user experience and unlock ROI gains, and banks access sophisticated data through emerging technologies to assess the risk of loan defaults.

 

Fortunately, the technologies we’ll cover in this article will enable insurers to address these challenges.

1. Artificial Intelligence

Artificial intelligence (or AI) in insurance can make instantaneous calculations and decisions. This helps insurers create services that are scalable, fast and reliable. It improves processes and customer engagement to meet the high customer demand and provides the ability to access data faster, which reduces human participation in repetitive tasks.

Using consumer data, AI can help insurers create more personalised customer experiences around individual behaviours. For example, in Property and Casualty (P&C) insurance, auto and property underwriters use historical and claims data. They then use Artificial Intelligence (AI) to model risk profiles that help assess risk, price premiums and to avoid risk.

AI already improves efficiencies by automating existing customer-facing, underwriting and claims processes. It is predicted that AI will enable insurers to identify emerging risks and additional revenue streams, which will be essential for strategic competitiveness.

2. Machine learning

Machine learning is a subset of AI that automates slow processes and uses collected data to automatically optimise and improve these processes. This means your customers can be serviced faster, more accurately, and have a better experience. In a recent survey, SMEs admit to wasting 81 days per year on admin. With machine learning processes like underwriting, billing, internal queries, risk assessments and more can be automated and optimised.

What does this all mean for insurers? It means reduced costs, improved customer experience, a higher volume of claims processed and resources allocated to the most impactful work. According to another survey, it was found that 66% of P&C insurance executives thought machine learning had high impact potential for commercial lines of cover, and 53% for personal lines.

3. Internet-of-Things (IoT)

Internet of Things (IoT) is a pool from which you can capture relevant data and process it in real-time. IoT-enabled devices, once opted into by customers, allow insurers to collate real-time data.

For example, it can help insurers understand how much time a customer spends driving a vehicle, how fast they drive and whether they park in secure parking. Most customers are willing to share personal information if it means accessing products that provide cover that meets their needs, and in some cases benefit from lower premiums.

It is predicted that by 2023 there will be 43 billion IoT-enabled devices and this volume of data is the key to providing high-speed, customer-focused solutions.

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4. Big data

If IoT is one of the pools from which you gather data, big data is the rest – and it’s a lot. While the IoT creates an interconnected ecosystem of devices from which you draw real-time information, big data is a huge accumulation of information from different sources for later analysis. Big data volumes are so large that cannot be processed using traditional methods.

For car insurance policies, insurers check their customers’ track record, and aggregate location data for car accidents on particular roads, wildlife or crime for where the car is parked. With big data, insurers can really refine their market assessments and optimise products.

5. Predictive Analytics

Predictive analytics isn’t new to the insurance sector. It helps insurers collect and understand data to predict consumer behaviour. However, few use it to its full potential.

The real benefit lies in sharpening the accuracy of data. Predictive analytics can help insurers with:

  • Pricing and risk selection
  • Identifying customers at risk of cancellation
  • Identifying fraud risk
  • Triaging claims
  • Identifying outlier claims
  • Anticipating trends

Predictive analytics can help companies improve loss ratios by 3-9%, and grew their written premiums by 53%, compared to a market average of 18%.

6. Blockchain Data

In short, blockchain data is a digitised and decentralised ledger. Blockchain removes institutional intermediaries during e-payments, leading to lower transaction costs while also making the ledger transparent and virtually incorruptible. Almost anything of value can be tracked and traded on a blockchain network, increasing transparency, reducing risk and cutting costs.

The insurance sector can benefit from blockchain across many lines of business, including registries of high-value items and warranties, know-your-customer (KYC) and anti-money laundering (AML) procedures, parametric (index-based) products, reinsurance practices, claims handling and peer-to-peer (P2P) models.

Therefore, it’s time for insurers to look ahead and take advantage of blockchain’s potential to accelerate automation, enhance customer experience and improve commercial performance of their business. 

7. Telematics

Telematics, also known as usage-based insurance (UBI), allows companies to gather and measure data about car driving habits, like speed, location, accidents and more. This data then helps inform underwriting accuracy and risk assessment, making these processes more accurate and less costly. For example, the more dangerously you drive, the higher the premium, and vice versa.

Telematics is powered by monitoring devices installed in cars, which today also record performance data on airbag deployment, hard cornering and many other metrics. This helps personalise pricing models by basing them on an individual’s behaviour, in turn making it fairer.

Additionally, there are multiple benefits of UBI for both parties: insurance companies now can attract low-risk drivers, reduce claim costs, enhance customer loyalty, and encourage better driving habits in their customers.

8. Chatbots

Chatbots enable positive customer engagement experiences while limiting resource burdens. With machine learning, it’s possible to build sophisticated chat bots that can predict and handle most customer queries 24/7.

One example in the insurance world is Geico’s “Kate”. “Kate” helps people access policy coverage, billing information and more from their smart device 24/7.

Implementing a high-quality chatbot will enable insurers to streamline customer engagement, while creating an overall better experience for the user.

9. Low Code

Low code technology makes building websites, apps, or implementing software updates accessible to everyone, enabling far greater speed to market. Rather than asking a developer to build something from the ground up, non-IT professionals can utilise user-friendly drag-and-drop website and app builders.

This means insurers can limit their expenditure on highly trained IT professionals and the time spent on building user-friendly software experiences.

10. Data ecosystems and open source

Data ecosystems are networks of interdependent digital services users access to satisfy a need. For example, the health data ecosystem comprises information from patients, healthcare providers, pharmaceutical companies, and so on. As users interact with an ecosystem, valuable data for insurers is collected.

Amazon collects and shares buyer and seller data in their marketplace to partners across industries using open-source protocols. They do this to deliver a better service to their users.

Partner ecosystems will account for 30% of global revenues by 2025. For insurers to access valuable data for their own purposes, they need to build ecosystem partnerships with relevant companies and platforms.

Download now: Insurtech trends: The future of connected insurance. [Free virtual roundtable recording] 

11. Cloud computing

Cloud architecture allows organisations to manage their data without needing costly IT infrastructure. Instead, data is stored in the cloud and managed with the services and tools offered by cloud providers.

For insurance, there are two major benefits to cloud computing: reducing operating and capital investment costs and increasing business agility. With cloud technology, insurers can scale existing IT services to keep processing time to a minimum.

The cost and efficiency benefits mean it’s vital for businesses to adopt cloud storage to fully leverage the power of their data. And it can be done securely. In some countries, intelligence agencies are using cloud storage for top-secret government data. No wonder the hybrid cloud market is expected to reach $128.01 billion by 2025.

12. Use of drones in insurance

Using drones as an insurance technology tool is a fairly new thing. Drones are predicted to be widely utilised by insurers across many stages of the insurance life cycle. This includes collecting data to calculate risk before issuing a policy, aiding in preventative maintenance, and assessing damage following a loss.

A great example of applying this new approach and deploying drones to aid risk and damage assessment on homes is Farmers Insurance. Drones can perform roof inspections and other assessments and then transmit their data to the cloud for analysis. This is another great instance of IoT and other technologies working together in the insurance industry.

13. Mobile applications

Mobile apps are another technology that have turned into a must-have for customers and their lifestyle. Today, customers are using apps for virtually anything: from booking cars, shopping, organising rent and utility bills to managing property or their business. Adding insurance at the point of sale within the same experience can help make a user journey less fragmented and improve customer experience.

Additionally, apps facilitate access to customer locations and other important data that can help easily determine personalised premiums. They also allow companies to monitor their performance, measuring parameters such as user engagement, data security, and conversion. This is why apps are going to be an important point of contact between both parties for any transaction.

14. Micro-Insurance 

Less of a technology itself, and more of a general insurance trend, is micro-insurance. But, micro-insurance is wholly dependent on technology. It’s the practice of providing coverage to low-income households or people with minor savings.

Micro-insurance makes insurance affordable by pooling small contributions from many individuals into consolidated packages. This is known as risk pooling and demands sophisticated data collection and analysis to mitigate risk.

By addressing the consumer demand of a large group that has previously been overlooked by insurance providers, micro-insurance offers fresh avenues for policy providers to grow and scale.

15. Social media and data mining

Social media may seem surprising to see on this list, yet its role in insurance is growing beyond marketing and advertising strategies. With social media data mining, it’s now possible to improve risk assessments for insurers, as well as use it to investigate fraud. Insurers can look at the social activity of insureds and compare it to claims records, looking for any discrepancies.

A Morgan Stanley report cited a tool utilised by carriers to investigate claims throughout the assessment process that examines the social relationships between parties involved – and monitors their activity on the day of the loss to look for red flags.

Download now: Insurtech trends: The future of connected insurance. [Free virtual roundtable recording] 

Benefits of using digital insurance technologies

With technological advancement running at its current pace, implementing tech solutions isn’t a “nice to have” anymore. It’s a necessity if you want to stay in the game. Customers will increasingly choose companies offering secure and instantaneous services when and where they need them. From communication to policy administration or claims, insurers must have the infrastructure to meet customers where they are, and digital insurance can make that possible.

Insurers get the chance to leverage the benefits from the aforementioned tools, including:

    • Reduction in service costs: Going digital is proven to increase cost savings, both for insurers and insureds, with more accurate underwriting driven by big data, AI, and predictive analytics.
    • Agility to work faster behind the scenes and develop new product offerings in half the time: Digital insurance is also increasing the speed to market of new products, another revenue generation opportunity.
    • Flexibility: You get flexible tech that lets you experiment endlessly and integrate with distributors and digital partners
    • Secure technology: Encryption protocols ensure that all software solutions are secure.
    • Improved productivity and user experience: Only implement what is needed now, so insurers can grow as they go, adding new tools and features only when they need them.
    • Scalability: You can manage risks with a steadfast and secure technology that will guarantee an unlimited scale.

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