Customer needs have always been at the core of the insurance industry's agenda. Today, customer needs are changing more rapidly than ever before because technology is developing faster, and customers integrating new technologies into their daily lives with relative ease. Similarly, businesses must also adapt to these changes to remain competitive.
Take a look at the five ways technology is changing the insurance industry:
1) Workflow Automation
Machine learning has been a hot topic in the insurance industry in recent years. Artificial intelligence can help insurers automate many of their time-consuming tasks, including data collection and analysis. "One insurer turned to AI technologies to automate the pre-renewal underwriting process, which was 75% more efficient than manual processes," Jeff Wargin, chief product officer at Duck Creek Technologies, writes. Furthermore, more insurance companies can potentially use machine learning for fraud detection since AI is excellent at identifying anomalies based on pre-existing criteria and has shown to be more efficient than human analysts.
Jim Bichard, the global insurance leader at PriceWaterhouseCoopers (PwC) in the UK, recently wrote that there are already AI solutions for a range of insurance processes, including:
- Claims and benefit management
- Products and pricing
- Sales and distribution
- Underwriting and risk management
- And many single solutions with a range of applications across the value chain
2) The sharing economy and machine learning
As the sharing economy booms, insurance companies respond to this technological change by offering new policies that support this new trend. Sharing economy is about people providing each other with the use of land, property and services. They include everything from renting out your home on Airbnb to sharing a car with others through Uber or Lyft, such as TaskRabbit and Fiverr to traditional services such as dog walking and home cleaning.
Using machine learning and big data, insurance companies can provide sharing economy companies and their customers with insurance policies that will cover them while sharing. When it comes to general liability, for example, Bernie Horovitz, CEO of Y-Risk, LLC, says new technology can provide a more accurate risk assessment that will benefit both the insurer and the insured.
"General liability policies are most likely priced using static exposure bases, such as square footage of a building," Horovitz said. "But wouldn't it be more accurate if you use sensors that measure movement, traffic and perhaps footsteps in the store? Our future could actually be a pricing model to charge per step."
3) APIs and Innovation
Application program interface (API) is a set of tools that allows companies to share data with each other. The ability of separate entities to communicate and share information about their customers should lead to increased innovation within the industry. Insurance providers can develop new products by using other companies' APIs to access unique data sets. For example, a business insurance company can use an API to cross-reference data with a company that specialises in cybersecurity, providing insight into risk management that might not have been possible before.
4) Fraud Detection Software
Insurance fraud is a huge problem, but it's also an opportunity for insurance carriers to improve their offerings. AI-based tools are being used more frequently by insurers to detect fraudulent claims. Fraud detection will become even more critical as telematics and wearable technology help collect data on driving patterns that can be used to challenge fraudulent claims. The future of insurance fraud detection will also include blockchain and other decentralised technologies that can help carriers ensure data is stored securely without giving up their competitive edge.
5) Retaining Human Capital
While jobs in the insurance industry increasingly disappear because of emerging technologies, including those mentioned above, there is also a growing need for human intellectual capital to manage these technologies and run tasks that cannot be automated. For example, workers that understand how machine learning algorithms work and can explain them to business leaders will become increasingly important in the coming years. With machine learning and other systems requiring specialised knowledge from experts in the field, insurance carriers will have to find new ways of retaining their existing employees as well as attracting top talent going forward.
In brief, the insurance industry is becoming more competitive than ever. As emerging technologies change the way people do business, carriers must adapt or risk losing market share to companies that can provide new products and services with better technology. "Insurers should act now to develop a more ambitious vision for how technology can elevate their organisations," read a McKinsey report last month, "To embrace the potential of tech trends, winning insurers will build their tech talent, put tech trends and their business implications on the leadership agenda, and be willing to disrupt their own products and services."