4 Ways Technology Is Redefining the Insurance Industry
| date: January 14th, 2019
Technology is transforming the insurance industry and impacting insurance products offered, influencing underwriting decisions, business processes and the innovation of new products and lines of business. Technology also presents a myriad of risks that insurers need to find ways to mitigate and protect themselves and their clients against.
In this article, we take a look at some 4 key areas within the insurance industry that are being redefined by the current technological changes.
1. Underwriting Decisions
Traditionally, the underwriting process – which entails risk profiling and scoring – was a long and odious, labor intensive affair laden with mountains of paper work. Face to face interviews and traveling back and forth were a given followed by the long wait – days or even weeks – before the final decision.
Thanks to advances in technology, robust and highly sophisticated Insurance systems now make it possible to automate basic underwriting tasks and decisions. Increased connectivity through mobile and the internet coupled with an abundance of valuable data now enables insurers to make smarter, more informed underwriting decisions from the comfort of their cubicles or even on the go.
Insurers are now able to accept electronic submission and receive and make payments via mobile and online thus underwriting is now easier and faster with customers no longer having to ‘come in’ let alone spend endless hours in queue after queue.
2. Streamlined Business Processes
The insurance industry is known for its labor intensive processes that require human intervention to retrieve information, input it into their system and determine whether to take on a risk or later to pay a claim. These processes are complex and confusing due to countless procedures and endless requirements. This leads to lengthy underwriting or claims cycles that impact negatively on customer experience.
Studies reveal that more than 41% of customers who go through a bad claims experience are likely or very likely to switch insurers within a year. And 52% of consumers have purchased more from a company after having a positive customer service experience. (Zendesk)
Fortunately, technology through automation and cutting edge tools and techniques i.e. AI, advanced analytics and distributed ledgers are helping insurers streamline and simplify processes. These new technologies through features like chat bots and smart contracts are helping enhance customer experiences by bringing choice, better service and lower prices.
3. Innovation of New Product Lines
In the face of rapidly evolving insurance landscape and customer demands and mounting competition the only sure guarantee for profitability and long-time survival is through continuous new product development. Customers now expect their insurers to offer simple, transparent and flexible products and services with ease of access i.e. online or mobile.
New technologies like Internet of things, machine learning, cloud computing etcetera are enabling the creation of new product or services or making existing products more tailored and user-based and accessible through new channels that better resonate with customer preferences and behavior.
There is also increased innovation and accelerated speed to market as insurers take advantage of windows of opportunity to beat their competition in reaching customers with new or enhanced products, services and offers faster.
4. New Risks
The risk landscape is changing rapidly with the modification of old risks and the creation of entirely new ones. This is due in part to new technologies and societal and environmental changes. Emerging risks like cyber risk and geopolitical risk are particularly daunting because they are hard to quantify and understand and thus price adequately.
Insuring against risk such as cyber threats is especially challenging considering the lack of historical data and sufficient data to enable accurate underwriting as well as the difficulty involved in defining a cyber-attack.
The beauty of technology however is that as much as it is the genesis of most of this emerging risks, it also provides the ability to mitigate against them. So as new tools and modeling techniques are created, insurers have the opportunity to gain a better understanding to be able to evaluate and manage emerging risks.
The double-edged nature of technology can best be described in the words of Frank Kaufmann, the American scholar, educator, innovator who states;
“Technology improves the lives of people who can avoid being dominated by it and forced into debilitating addictions to it.”
In other words technology has two sides to it, the good and the bad. The insurance industry – which specializes in risk – is well positioned to handle both these sides of technology. The challenge would be in the HOW – how to mitigate and minimize the risks while leveraging the opportunities arising for the good of the business and the customer.