How Technology Affects The Insurance Industry
Modern technology has impacted every aspect of our lives. New data sources and technological innovations are fundamentally changing our economy and society, and the insurance industry is no exception. Insurance startups or Insur-Techs are entering the industry and giving a digital overhaul to the services provided by the standard insurers and their intermediaries. Technology is redefining the role of insurers from mere loss indemnification to helping the insured on how to prevent, mitigate and manage risks.
We can say that insurers today are not just risk protectors but risk predictors and prevention as well. The traditional insurance services like underwriting, pricing, claim handlings-all become more efficient and transparent thanks to digital technology. Let us now look at five up and coming technologies and how they are changing or likely to change the insurance industry in the days to come.
Blockchain and Insurance:
A blockchain is a distributed digital ledger maintained by network nodes, recording transactions among nodes as they happen. Information fed into blockchain is public property and cannot be erased or modified. Blockchain technology can help insurance companies to overcome today’s challenges and create more transparent operation based on trust and stability. Here’s how blockchain technology can help the Insurance industry;
• By using smart contracts and blockchain the speed of claim processing and other such services can be increased. It also helps in eliminating mistakes made in manual procedures.
• Data is more safe and secure and there are little risks of identity thefts and frauds. In the US the insurance fraud is estimated to be around US$80 million.
• Automated processes provide a more relaxed and customer-friendly experience. The customers don’t have to submit a million papers and go to different counters to make things happen.
• Smart contracts and blockchain-based payments could generate new revenue sources such as micro and pay-per-use insurance.
The Internet of Things and Insurance Industry:
The Internet of things (IoT) refers to any device that can be connected to the internet to send and receive data. This includes but not limited to smartphones, smart tv, cars, smart homes, laptops, sensors etc. The IoT could radically change the insurance industry. With 6.4 billion devices already connected to the internet and 5.5 million connected daily, the potential is huge. For practical reasons, insurance companies need to continuously collect data from a remote location to continue working in a seamless and inexpensive way. So far, the insurance industry has been slow in responding to this potential but it is waking up. The IoT provides traditional insurers with big opportunities to expand and evolve their business models. It facilitated them by:
• Creating opportunities for better and more frequent customer interactions.
• Driving efficiency through sensor-based automation
Additionally, IoT enables the traditional insurers to tap completely new areas of business by;
• Enhancing risk engineering
• Offering proprietary data and analytics solution to third parties
Artificial Intelligence (AI) and Insurance Industry
AI along with automation has transformed every segment of our socio-economic lives. Insurance is no exception. It has been impacted by AI and automation in the following ways:
• The automation of complex tasks like property assessment, risk evaluation, etc. have helped cut down redundancy and ensured seamless operations.
• AI in the claims process has brought quality and lesser handling time. The incidence of fraudulent claims has come down considerably by employing AI.
• Machine learning is used in evaluating risk and identifying cross-selling opportunities.
• Advanced facial recognition is also coming into play with a few insurance companies offering policy on the basis of a selfie.
Big Data and Insurance:
On a daily basis, an unlimited amount of data is generating. Advanced analytics are helping insurers in managing risk, settling a claim, driving profitability and pricing premiums better and faster. By using powerful analytics and data warehousing tools it is easier to extract valuable data which in turn helps in evidence-based informed decision making. Big data and predictive analysis is to expand customer relationships. Improve internal performance management and enhance customer value proposition 20-30%, according to a study.
Augmented Reality/Virtual Reality and Insurance:
These technologies can give customers a more engaging experience in learning about insurance products and services. They can help in areas like accident recreation, claims handling process and many others like;
Learning about Insurance: Through these technologies’ customers can acquaint with insurance products and services making interesting videos. These videos can simulate real-life situations to showcase the value of life, health and other insurance coverage plans.
Virtual Driving Tests: Customers can ask to take such tests to ascertain their driving skills and determining the extent of their insurance coverage.
Machine Learning and Insurance:
Machine learning or ML can facilitate better underwriting, reduce the occurrence of fraud in claims data and ensure a transparent payment system. ML models can help in identifying lapsed payments, billing anomalies and make personalized offers. New ML-based tools can help in arriving at the right price and risk selection for their clients. It can also pinpoint fraud. ML-based technology like Telematics uses a policy holder’s data to assess and calculate policies and insurance premium charges correctly.
With modern technology at their beck and call it’s time the insurance companies take a cue and adopt and adapt their business models to evolve into more robust and digitally inclusive entities. This is the way forward for them and there is no escaping from it.