Top 7 InsurTech trends paving the way towards Insurance 2.0
2019 has been an exciting year for the insurance industry so far.
Technology is fundamentally changing every aspect of the insurance business. Drones are revolutionizing claims processes, wearable devices are transforming life insurance, and social media is empowering underwriting and risk assessment.
Gone are the days when insurers could watch the digital transformation unfold from the sidelines. And yet, we have barely scratched the surface of what’s possible in the insurance industry.
In today’s relatively less digitally mature insurance market, there is a huge opportunity for insurers to capture market share with innovation.
Staying ahead and adopting the technologies of tomorrow is the only way insurers can remain relevant in 2020 and beyond. We compiled a list of top 7 technology trends for insurers to pay attention to as they plan their transformation programs.
1. Real-time IoT data changes everything
Traditionally, insurers had to rely on proxy data to assess risks, but it is all about to change. Internet of things (IoT) and Telematics technologies are giving insurers access to real-time data that is directly actionable for underwriting, risk pricing, and even mitigation.
The rise of usage-based insurance
IoT technology is making the very concept of Usage-Based Insurance (UBI) possible. For example, in car insurance telematics are already being used to measure several indicators relevant for underwriters.
Consumers are generally willing to share data if it means a better price, better product, and a better experience. Interactive policies, whereby the company receives extra data and then uses it to adjust premiums or give discounts, are starting to make headway. A deeper understanding of policyholder behavior and individualized risk data allow insurers to personalize insurance offers to their customers’ needs.
For example, Allstate started to give discounts to drivers willing to install a monitoring device in their car.
Here are just a few insurance use cases that are already being transformed by IoT:
Vehicle Tracking in Auto Insurance
Adjust premiums based on:
- Miles driven
- Time of day
- Where the vehicle is driven
- Rapid acceleration
- Hard braking
- Hard cornering
- Airbag deployment
Biometric Data in Health Insurance
- Warn the insured of a medical issue before it sends them to a hospital
- Adjust premiums based on exercise levels
Insurers are becoming active risk managers
With IoT-based monitoring, risky behaviors can be detected and acted upon in near-real-time. It is safe to assume that tech-enabled loss prevention will increasingly become a key feature in the insurance product. Instead of being passive risk-takers, insurers are increasingly becoming active risk managers.
2. The rise of AI-powered claims processing
The wealth of data that insurers now possess is so overwhelming that it can only be taken advantage of with AI-based technologies that are built to act upon that data.
Manual processes are becoming less and less hands-on across the board, as automation joins forces with front-end customer experience technologies to increase efficiency. Insurers still spend a disproportionate amount of the premium on manually handling the claims process. A self-service approach, whereby the customer provides video and images at FNOL (First Notice Of Loss) through a digital portal, and then the information is passed through an AI-powered review process for an immediate payout is going to become the norm in the next couple of years.
The combination of the front-end experiences and AI-powered back-end technologies will create a reality where the vast majority of cases are handled within minutes without human involvement and money is paid to the customer in a matter of hours. Self-service portals powered by AI-based back-end technologies are becoming the norm for all core processes – claims management, customer onboarding, and policy renewals.
3. Customer experience becomes a competitive advantage
Research shows that retail insurance customers, especially the younger ones, are increasingly drawn to innovative insurance products that are delivered in a seamless, digital-first way.
Look at Lemonade. Lemonade is outperforming incumbents on key dimensions of customer experience that matter most to consumers. In just a few short years, Lemonade has captured a significant market share in the previously impregnable US renters’ insurance market with its personalized and digital-first offering.
4. Driving efficiency and creating growth with RPA
Insurers are increasingly focusing on cost reductions through efficiency gains. RPA (Robotic Process Automation) and BPM (Business Process Management) technologies are making waves by expediting and streamlining the way that insurers operate, significantly reducing overhead. RPA paved the way to digital innovation with legacy systems that up until now were blocking innovation, leaving insurers stuck in the 1980s, if not worse. Indeed, automation technologies such as these are a godsend for enterprises that have to deal with a lot of manual tasks and processes.
Today, RPA is the fastest moving technology in the insurance industry. Current trends indicate that the market for RPA is on track to grow at a compound annual growth rate (CAGR) of 60.5 percent through 2024.
5. Data management with BlockChain
With IoT and telematics technologies generating tremendous volumes of personal and sensitive data, data management becomes a burning issue.
Due to the inherent security and immutability of the distributed ledger, data can be securely stored and accessed, new clients can be quoted and onboarded faster than ever before, claims can be processed quicker, and the risks of fraud can be significantly reduced. The potential savings of applying distributed ledger technology to manage data in insurance are astronomical.
Blockchain applications in the insurance industry
- Driving efficiency through process simplification
- Reducing claims processing time
- Improving risk management
- Better claims experiences
- Fraud prevention and KYC
6. Growth through partnerships with InsurTech startups
We’ve all heard this story before – new market entrants are out to disrupt and potentially destroy incumbent companies. But this couldn’t have been further from the truth. In reality, most digital transformation solutions and success stories to date come from collaboration between different types of industry players – incumbents, InsurTechs, and consumer brands.
Insurtechs bring to the table agility, innovation, and technology, while incumbents are experts at managing, assessing, and pricing risk, in addition to having loyal customers and formidable capital. Combining these very different strengths seems like a sensible strategy in a consumer-driven market.
And insurers are voting with their wallets – insurance tech investment reached record levels in 2018 and continues growing at a rapid pace. Collaborative projects cut across all lines of insurance, with a lot of activity happening in the fields of IoT, Big Data, underwriting innovation, new types of insurance like Cyber Insurance, and new business models.
Insurers benefit from focusing on their core competency – managing risk, while InsurTech’s increasingly support incumbents with technological solutions for improving customer experience, managing data, and driving efficiency.
7. The rise of no-code and low-code platforms
Low-code/no-code platforms are changing the way enterprises create new digital products and applications. Outsystems, Uniface, Mendix, and EasySend’s no-code platform all point to successful use cases in serious business applications.
Thanks to the low-code/no-code platforms that were built to answer the unique compliance, risk management, and security requirements of financial enterprises, the development of the front-end customer experiences are significantly accelerated, helping insurance companies to enter the fast-paced and consumer-focused era.
Get ready for an exciting ride
One thing is clear – we are nearing a data singularity event in insurance. Insurance companies are increasingly becoming automated AI-driven and data-based systems for managing risk.
Powered by technologies such as AI, Blockchain, and IoT, we are entering the era of extreme personalization and real-time claims resolution.
In this data-rich era, success or failure truly lies with the insurer’s ability to derive value from that data – both in terms of achieving efficiencies, reducing costs, accurately calculating and managing risks, and improving customer experience. Insurers will increasingly benefit from Tech startups whose core competency lies in technologies such as blockchain, AI, IoT, and big data analytics.
So far, we only saw a glimpse into what’s possible. We’ll keep an eye out for new developments in the insurance world, so make sure to sign up for our newsletter for the latest updates, delivered straight into your mailbox. Ready to convert your paper and PDF forms into smart digital eForms? Schedule a demo with our team!