The insurance industry, for a long time, has been driven by traditional business models. It continued its legacy business process and products for quite some time. But with the intervention of innovative technology, the insurance industry has witnessed positive outcomes.
Advanced technologies and digital platforms are providing new means to measure, control, and track risks. They facilitate effective engagement with customers and enhances business productivity.
These technologies supported by dedicated insurance software are opening the market for new insurance offerings. It has provided an opportunity for traditional insurers to transform and reinvent themselves. Moreover, it has compelled them to respond to new market challenges.
In this article, we will focus on how technology is reshaping the insurance business. Besides, how it is presenting new opportunities and driving factors of change.
Key Drivers of Transformation
Innovation and Technology
Innovation in mobile and data has impacted every business model. Certainly, the insurance division is also not lagging. It is the result of rapid innovations in the form of efficient insurance software and technology. As a result, the insurance sector is in a tussle with new technologies’ risks and opportunities.
Customer Expectations and On-Demand Marketplace
The insurance industry is known for low customer touchpoints and slow tech adoptions. In a survey conducted by Morgan Stanley and Boston Consulting Group, it was found that consumers interact less with insurers in comparison to other industries.
The slow digitization has obstructed the potential of interaction between insurers and insureds. Moreover, the lack of touchpoints has reduced the chance to gain insights into customer needs. Thus, resulting in prevented customized products.
Based on the experience in other industries, the insureds expect high-touch & innovative processes. They want services that focus on customer experience and needs. Hence, have high expectation for technology-based services. They are looking for convenient and personalized solutions that fulfill their needs. As a consequence, this poses a challenge for insurance providers.
- Digital Switch
Another progress in the insurance sector is the digital platform. It has directed the focus to meet customers’ requirements. This has paced up the competition, innovation, and change in the insurance industry.
Startups are implementing technology to reduce operational costs and enhance their client’s experience. This will improve convenience, transparency, timeliness, simplicity, personalization, and customer engagement.
Besides leveraging the low-cost technology platforms, the new players have challenged the traditional market players.
Technologies Transforming Insurance Sector
The introduction of various technologies has evolved the insurance landscape. These tech solutions have shaped the transformation in the industry. Some of the key innovations are IoT, Blockchain, ML, AI, and Insurance Management platforms.
- Internet of Things (IoT)
The Internet of Things (IoT) is a prime example of how new data sources are improved. It automates much of the data sharing process. The insurers can use data shared by the customers from IoT devices that enable them to understand clients’ needs. It assists them in deciding rates, mitigating risk, and preventing losses.
Internet of Things also supports other insurance technology by providing first-hand data. This improves the accuracy of risk assessment and gives insurance holders the power to impact their policy pricing. On the whole, it plays a pivotal role in the current transformation of the insurance industry. It has allowed insurers to model risk and underwrite policies.
The impact of IoT is unending. According to Gartner, the number of new things connected to the internet will rise. It will jump from 6.4 billion devices in 2016 to 20.8 billion by the year 2020. This will have positive implications for the home, health and car insurance industry.
- Machine Learning (ML)
ML not only enhances claims processing; it also automates the entire process. The digitized files accessible via the cloud are open to analysis. They can be easily analyzed using mechanized software and programmed algorithms.
The automated system improves processing speed and accuracy. While the cybernetic review effect not only claims management but is also utilized for policy administration and risk assessment.
- Artificial Intelligence (AI)
Artificial Intelligence plays a significant role in changing the insurance industry. The AI-based tools and applications profit the insurers by providing definite solutions for insurance operations and claims settlement. The emergence of IoT and mobile apps has increased the potential of improving the processes. This function includes insurance plan selections and analysis as well.
The use of smart tools by insurance buyers has given insurers access to clients’ personal information. This allows insurers to serve them with tailor-made policies. AI-based technology also enables companies in fraud detection. It helps insurers to execute intelligent underwriting algorithms in their claim management processes.
Furthermore, it assists insurance providers to devise customized sales techniques. It supports them to handle the rising competition in the market. Evidently, AI has made a significant contribution to insurance technology by bringing revolutionary changes within the otherwise tedious insurance industry.
AI-based insurance software provides complete solutions to insurance agencies. The software assists many functions from knowledge precision, policy personalization to fraud detection. These applications have streamlined and increased the productivity of the insurance industry. Moreover, the adoption of this insurance technology has proven to improve the prevailing business.
- Blockchain Technology
Blockchain is a Distributed Ledger Technology (DLT) that enables speedy verification of the transaction. It maintains a secured record of transactions via cryptography and computational power. This eliminates the role of a trusted centralized authority, besides providing permanent records and audit track of transactions available on computers worldwide.
It is built on innovative technology that digitizes and codify data by placing all the information on an inviolable and permanent distributed database. Hence, Blockchain has the significant potential to impact various industries.
Observers also believe that this can lead to a variety of improvements in the insurance sector. This technology will establish a degree of transparency and accountability, which otherwise was not possible.
It will allow the insurers to mitigate risk and fraud, assist and organize back-end operations, introduce new products, and reduce costs. Besides, blockchain will provide simpler and augmented data access to parties.
Insurance businesses lose billions to fraud every year due to physical processes. However, implementing Blockchain technology can prevent these fraudulent practices.
An insurance report by Ernst and Young states, Blockchain can “end error, negligence and detect fraud by providing a decentralized digital repository to verify the veracity of customers, policies and claims independently.”
It creates a common record of truth, helping firms save time and improve productivity. Furthermore, all transactions on a blockchain are time-stamped and perpetual. The identities are safe and data is reliable, hence easing the fraud detection and reducing its scope.
- Insurance Management Platforms
The new insurance solution has led to the emergence of innovative insurance management platforms. The advent of these platforms has reinvented the method of company operations, thereby lending a helping hand to business owners and managers. It comprises tools that analyze market potential and enable customized services.
They serve as a customized solution that provides insurers with a ready-to-use platform, keeping them a step ahead of the process. Moreover, the implementation of software enables a cost-effective and efficient management system.
This benefits the company and maximizes profits. The applications of insurance software are designed to resolve complex activities and tasks. It adequately answers the needs of a business and performs the job in less time.
All in all, the emergence of technologies and innovations have begun to transform the insurance industry. Insurance technology has introduced modern methods to measure, control, and price risk. It has improved engagement with customers, lowered cost, increased efficiency and expanded insurability.
This has presented the insurance industry with tremendous opportunities. As a result, they can now modernize existing products and create new services. Besides, insurance technology has also led to the foundation of many new startups. These startups are implementing improvised ways. Also, they are out doing conventional methods, thereby providing a better experience to the customers.
In short, tech-savvy governance in insurance will expand the potential of the business. This will further fuel innovation and transformation. There will be demand for more customized and agile insurance software to enrich customer experience and boost organizational efficiency.