The 5 Current Trends That Can Help Disrupt The Insurance Industry
The global insurance market is in the midst of a game-changing course correction that will re-define ‘business as usual.’ A ‘digital first’ urgency is sweeping across the landscape, driven by a new generation of consumers, data, automation and Artificial Intelligence (AI).
Let’s take a look at the current trends that are shaping the insurance industry and how digital technologies are driving irreversible change.
1. New Models, Personalized Products
The digital economy will make usage-based, on-demand and ‘all-in-one’ insurance lifestyle products more relevant. Customers will prefer personalized insurance covers instead of the one-size-fits-all products currently available.
Today, more than 80 percent of the premiums collected by insurers is lost to distribution costs. Digital models will make intermediaries in the insurance value chain — marked by their excessive dependence on human effort — obsolete.
Flexible coverage options, microinsurance, and peer-to-peer insurance will become viable options in the long run. Reinsurers will provide risk capital directly to digital brands, and regulatory frameworks will accommodate shorter value chains.
Lifestyle apps will re-imagine the insurer-insured relationships. Application Programming Interfaces (APIs) will enable the creation of insights-driven offerings as they integrate data from multiple sources. A deeper understanding of customer behaviors will lead to more accurate risk assessments, personalized premiums and value on a sustainable basis for better customer experience and brand loyalty, plus reduced false claims.
2. AI & Automation for Faster Claims
Robotic Process Automation (RPA) and AI will occupy center stage in insurance, driven by newer data channels, better data processing capabilities and advancements in AI algorithms.
Bots will become mainstream in both the front and back-office to automate policy servicing and claims management for faster and more personalized customer service.
AI and automation will profoundly impact and improve business outcomes in customer experience, cost optimization, operational efficiencies, market competitiveness, and newer business models.
3. Advanced Analytics & Proactiveness
Premiums will become highly personalized, enabled by new sources of tech-enabled data such as the Internet of Things, mobile-enabled InsurTech apps and wearables. With the connected devices market poised to grow strongly in the next five years, Property and Casualty (P&C) insurers will be able to extract real-time and accurate data on the loss exposure of individual consumers. This will help them proactively respond with timely and highly personalized interventions.
Drone and imaging technology will increasingly enable insurers to obtain high-definition images for remote and accurate property estimations and analysis. Additionally, insights will be built through data set relationships to create deeper granularity in individual risk profiles and protect insurers from emerging risk exposures.
Advanced analytics will be deployed to dynamically segment users and needs, model behaviors and identify exceptions, adjust policy prices, optimize business strategies, and identify new growth opportunities. Scale can be further incorporated through automation, AI and machine learning to transform insurers into active risk managers.
4. InsurTech Partnerships
InsurTech firms have been showing significant growth in the areas of auto, home ownership, and cyber insurance. Such strong growth will stimulate traditional insurers to either acquire technology capabilities or partner with InsurTech companies. With an increasing demand for innovative products and services from millennials, such collaboration will become a critical imperative.
Overall, it will be a win-win situation — traditional insurers will benefit from faster results in establishing a tech culture and InsurTech companies will get access to larger customer bases, funding and domain expertise. It will give rise to newer models and revenue streams for higher profitability and reduced operational costs. Customer experiences will be enhanced with value-added offerings.
5. Mainstreaming Blockchain
The need for huge volumes of customer data to be processed in real time by different insurance functions calls for easy and secure transfer of data across organizations and their diverse stakeholders.
Blockchain technology provides the advantage of secure data management across multiple interfaces and stakeholders without loss of integrity. From identity management and underwriting to claims processing, fraud management, and reliable data availability, the technology offers reduced operational costs. Decentralized Autonomous Organizations (DAOs) and smart contracts are additional benefits that blockchain can offer in policy management.
The above trends indicate that new value worth billions of dollars can be created for the insurance industry. The key is to understand how and when to tap into this potential leveraging existing and new technologies.