The catchphrase for this decade has certainly been technological disruption. Technology has swiftly percolated into our lives and changed the way we interact with peers, consume goods and services and glean information and knowledge. Similarly, it has disrupted businesses and industries as well, birthing new business models and upending old ones.
Insurance no longer looks like your friendly neighborhood agent. Even though it continues to stay tethered to traditional values, it is being affected by technological disruption. Smartphones have created a new means of distributing insurance products and lodging claims. The vast amounts of data generated and collected each day create opportunities for better underwriting and new products. Furthermore, the importance of digital assets has created opportunities for new insurance products, such as cyber-insurance.
The rapid pace of technological disruption makes it challenging to stay up to speed with all the new technologies and their impact on the sector. However, to sustain and grow in a rapidly digitizing world, players in the insurance industry not only need to be cognizant of emerging technologies but also work towards adopting and leveraging their true potential.
Top tech trends that are transforming the insurance sector:
Big Data and Advanced Analytics
Human beings are now spending an increasing amount of time in the digital realm. Consequently, their digital footprint is only becoming larger. Huge amounts of data (referred to as Big Data) about human behavior and proclivities are generated daily. The ability to harness that data to better understand customers and then deliver customized solutions can be priceless. Advanced analytics does just that. Insurers can leverage the power of advanced analytics to shift through reams of data to identify patterns that can help them create customized and competitively priced solutions for their clients.
Artificial Intelligence is not likely to replace humans anytime soon. However, the technology, due to its ability to think and work like humans, is certainly changing the way businesses interact with clients and deliver solutions. It is easy to see why AI is making inroads into the insurance industry. From assisting insurers in the distribution of insurance policies (using chatbots to sell insurance policies directly to customers or to identify gaps in coverage) to underwriting (automated data analysis and pricing) and claims assessment (policy review and automated claims assessment), AI can add value across the insurance value chain.
Blockchain technology is changing the way we record transactions, adding a strong layer of security and immutability. The Distributed Ledger Technology (DLT) cryptographically records transactions that are protected by digital signatures and are highly resistant to fraud and data manipulation. The immutability, security, and transparency that technology offers can be highly valuable to the insurance industry. Players can use blockchain technology to store and validate client details, thus reducing the probability of fraud.
Internet of Things
Data has aptly been giving the moniker, “oil of the 21st century”. Internet of Things (IoT) is an ecosystem of interconnected computing devices that can enable everyday objects to send and receive data. Motion sensors in everyday wearables can capture an individual’s day to day activities and store them on a mobile device or laptops. Data collected from wearables can provide great insight into a person’s everyday activities and general health and fitness. This, in turn, can help insurers create tailor-made insurance products that can capture the idiosyncratic risk profile and requirements of the customer.
In today’s competitive world, it is becoming increasingly important to deliver services cost-effectively. Cloud computing offers businesses on-demand computing resources in a cost-effective, high security and efficient manner. Data is integral to the smooth working of the insurance industry. Ergo, players in the industry need to effectively store and manage data. This can often be cumbersome and cost-ineffective. Cloud computing can help insurers migrate many of their tasks, especially those related to premium billing, claims processing and policy management to the cloud. This would help them reduce server costs and enhance operational efficiencies.
Insurers should view technological disruption more as an opportunity rather than a threat and collectively work towards leveraging technology to the optimal.