Automation and data are transforming insurance innovation

Insurance technology—also called insurtech, under the broader umbrella of fintech—has for years been causing disruption by streamlining more traditional insurance functions. Now, insurtech is driving strategic advantage and growth at a time when online channels are shaping customer experience expectations

For a historically paper-intensive industry, the pace of digital transformation is no small change for insurers. At the same time, the risk landscape has shifted over recent years. For example, drivers who used to have monthly car insurance premiums now pay for their coverage by the mile, and cyber insurance policies have become more important than ever for companies as workers have left the office for remote working.

Looking to the future, insurance companies need to focus on the experience customers want from insurance coverage and take a more digital approach to risk. To remain competitive, insurers need to be able to adapt their insurance products to external shifts more quickly. The use of data and automation will be central to such efforts.

Pandemic accelerators

While all insurance providers have experienced changes in the way their customers engage with them over the past year, the pandemic has placed specific demands on insurance technology.

• Demand for workers compensation products may be flat due to robotic or automatic solutions replacing traditional manual jobs. For example, non-human solutions are being developed for cleaning jobs. Robot alternatives are being considered for security jobs. Social distancing has meant non-human alternatives may be better adapted.
• Telemedicine has become more relevant and important as patients have moved on line during the pandemic. Medicare and Medicaid have shifted to accommodate more virtual care services to alleviate overloaded care facilities.
• The growing availability of 5G and Internet of Things (IoT) enabled devices is expected to further push insurers to digitize their operations. Even before the pandemic, IoT innovations around warranty allowed insurers to prevent loss events before they happen.  Innovations in risk measurement and detection through use of GPS technology are facilitating real time monitoring of automotive risks instead of assessments being entirely based retrospective measurement.

Alongside those pandemic-induced disruptions, here are four key areas where we see digital innovation—specifically automation and new ways of using data—driving the most significant change in the insurance industry more broadly:

• Reducing customer friction: Digital platforms are adapting to meet customer expectations of a more frictionless experience buying and using coverage online. Technology companies are digitizing traditionally human solutions around customer service voice support; transforming paper forms into electronic data; and automating underwriting with predictive processes. New apps can manage multiple policies, providers and coverages for insurance including travel, financial, health insurance and others. Life insurance testing kits can be mailed to customers to replace in-person testing. Claims processes can be fully automated; a customer can submit a photograph of a loss event online, for instance, and the technology then verifies the image is not fraudulent and facilitates payment of the claim.

Carriers will need to focus on how automation can enhance the customer experience especially as younger demographics demand digital insurance solutions.

• New products: Viruses, hacking, ransomware, and loss of connectivity have become even more pressing threats over the last year as millions of people started working remotely. But the insurance sector has also developed new products to provide coverage in this area, and technology has evolved to monitor the dark web for cyber risks and prevent ransomware attacks, losses and risks.  These solutions can be used in conjunction with traditional insurance coverage to reduce, control and provide coverage for new types of risks.
• Dynamic pricing: Technology is incentivizing risk mitigating behavior for customers, thereby changing the risk landscape for carriers and creating new strategic opportunities.

Insurers are using new types of geospatial data on physical assets for predictive modeling and machine-assisted identification of more profitable risks, making the underwriting process more efficient. Data from Internet of Things-enabled devices can inform premium pricing calculations in real-time. Commercial auto fleets can use real-time information about high-risk routes to make rerouting decisions.

Carriers who have invested in understanding their customers’ experiences, preferences, product choices and behaviors will continue to have a significant competitive advantage.

• Process improvement: Process automation doesn’t always require removal of human interactions. Process improvement combined with automation can be one of the most effective ways to boost efficiency and reduce associated costs. Some technology companies are using artificial intelligence to enable predictive form filling, for instance. Others are using the internet to connect with customers through story-telling or hyper customization of products.

Perhaps one of the most overlooked process improvements is around salvage and subrogation. Companies have developed new technologies to improve identification of recovery potential. This technology automatically identifies blind spots in the recovery/subrogation process using real-time data; uses automated workflows including claims and recovery; and can be integrated into existing processes and systems.

The takeaway: Know your customer

The insurance industry has for years been moving toward being more digitally enabled, and the massive virtual shifts during the pandemic have been forceful directional vectors for modernization. Companies need to be nimble and think strategically in order to take advantage of technologies such as artificial intelligence, machine learning and predictive analytics in developing new products and reaching new customers. A trusted partner can help guide your team along the journey of embracing new technologies and understanding how they continue to shape the market.