The insurance industry is a late bloomer in adopting cutting-edge technologies.
However, the rapid growth in the new-age technologies, such as AI, ML, blockchain, big data, cloud computing, IoT, is driving a shift in the insurance industry. The insurers are making strategies to enable the digital transformation of their business.
Nearly 86% of insurers believe that innovation must happen at a rapid pace to retain a competitive edge, as per a recent Accenture report.
Global insurance funding has reached USD 7.12 billion in February 2021. Besides, the global insurance market revenue is likely to reach USD 10.14 billion by 2025.
The investment in new technologies is making the insurance industry more effective and far-reaching.
Here are the five ways technology is reshaping the insurance industry:
1- More Accurate Underwriting
Cloud computing integrates various data resources, enabling insurance companies to implement intelligent operations in customer marketing, product development, risk pricing, underwriting, and claims.
For underwriting, AI applications help determine and record the authenticity of the information provided by customers. For example, documents, recordings, and images.
Thus, this helps to speed up operations and mitigate the risk of insurance fraud. Using these technologies helps insurance companies to conduct underwriting processes in real-time. It also helps to effectively reject certain high-risk applications and reduce the loss ratio.
For example, car insurance can be transformed by connected devices such as telematics. It helps transfer important data to assess customers’ risk profiles.
It allows insurers to obtain real-time data on their customers’ driving habits, such as abrupt turns or stops made, speed, or location. Thus, these details enable insurance firms to make more informed underwriting decisions and provide policies accordingly.
2- Better Customer Experience
Insurers better understand their consumer needs by activating and collecting the right data from IoT. It enables them to offer customized advice, coverage, and tailored pricing.
These technologies help customers compare products, such as car insurance rates, review, and find plans that match personal requirements.
For example, usage-based insurance policies incorporate customer data to charge customers as per their specific needs and behaviors. Thus, it makes the consumer in charge of their own fees.
Such clever and personalization data usage benefits customers as well as insurers.
On the one hand, it improves user satisfaction by providing tailored products. On the other hand, it provides more accurate risk assessment and stable margins to companies.
Another benefit of adopting digital strategies by insurers is to enable customers to fill and submit claims digitally.
Around 61% of customers prefer to monitor their application status with digital tools.
Besides, insurance companies are adopting API and RPA, such as chatbots, mobile technologies, and voice recognition algorithms. It improves customer interactions and boosts data-harvesting capabilities.
3- Using Technology to Assess Damage Faster
An insurance policy is a hedge against a variety of issues. It may include a big car accident, loss of property, or a fire in a luxury house. In such cases, insurance companies first investigate the truthfulness of the claim and then credit the claim amount.
This is a time taking process as it involves reviewing the claim, investigating, making subsequent adjustments, and remitting payment or cancelling the claim.
Therefore, deploying AI and ML software can make the claims process simple, faster, and more effective. Machine learning algorithms can calculate damage using satellite images and drones, eliminating the human factor and significantly reducing time and cost.
As per a study by McKinsey, by 2030 AI will overtake all aspects of the insurance industry.
With the rise of intelligent machines, bio-sensors, and deep-learning algorithms in ordinary objects, the insurance sector is making a shift from pay for damage to prevent damage.
4- Identifying and Mitigating Fraud
Fraud is a great calamity for the insurance industry.
According to Coalition Against Insurance Fraud, US insurers lose at least USD 80 billion annually.
However, with fraud detection software, companies can identify and mitigate fraudulent activities.
Cloud technologies provide real-time information to insurance companies. This information supports the insurer to deal with duplicate claims, fake diagnoses, inflated claims, overpayments, or any internal employee scams.
For example, a client tries to recover from the same property fire by forged documents with a changed date. In this case, the technology will compare the claim data with the database and identify the fraud.
5- Improved Cybersecurity
Insurance companies have access to highly sensitive customer information, making them prone to cyber-attacks.
Close to two-thirds of insurers across all regions who participated in a study by Deloitte are looking to increase spending on cybersecurity.
Insurers are considering implementing “zero trusts” principles. It means imposing verification requirements on anyone seeking access to data or systems.
The focus is to invest in endpoint protection technologies to exert greater control over end-user devices.
Predictive analytics software is useful for detecting malware and suspicious network behavior. The ML models are built on a large sequence of user’s activities within a network. These activities are labeled as acceptable or normal to gain a sense of regular activity.
The insurance industry has a strong demand for investment in technology and innovative processes. AI, IoT, Blockchain, API, wearables, and Telematics are emerging technology trends to boost operational efficiency and stay ahead of the competition.
These technologies allow insurance companies to offer personalized solutions for customers, prevent risk, and improve fraud detection. They also help companies to track customer behavior and open the path to new business models.