Uncategorized Here are insurance technology trends that are emerging in 2020
As with every other industry, insurance is becoming more technologically advanced (and some may say, disrupted) by the day. Though the transformation is much too slow.
There are several reasons for this, but one that may or may not surprise you is that insurers are struggling to attract and retain top-talent despite insurance being a multi-trillion dollar, high-growth industry.
In the last three years, insurtech funding has increased by 60% in the US (from US$1.46 billion to $2.44 billion according to CB Insights), while it’s more than tripled in Asia (from $140 million to $506 million). This may seem impressive, but it’s also necessary.
rance infrastructures are established in developed economies, which is a double-edged sword. Companies are struggling to modernize complicated legacy systems and develop new ways of working (with a strong focus on the customer) without sacrificing the old approaches that got them where they are today.
In this area, new players and companies in developing economies are at an advantage – they are able to develop digital-first infrastructures that incorporate the latest technologies from the outset, without concerning themselves with making old, analog ways of working function in a new world. It’s up to established insurance heavy-hitters to ensure they don’t get left behind.
So it’s no wonder that a vital area for improvement has emerged – advancing human intellectual capital.
In the US, only 2% of university alumni plan to work in insurance. Young prodigies are choosing consulting, finance, or technology companies instead. This means that many insurers lack the skilled staff required to follow, apply, and develop new insurance innovations.
With this interplay in mind, we’ve compiled a list of the patterns that are shaping the insurance industry – leading with the need for strong talent to make everything else happen.
Human intellectual capital.
It’s one thing to be aware of the innovations shaping the future of your industry, but implementing them is quite another. And without talented, skilled staff, you have little hope. This is the barrier faced by many insurers, which is why human intellectual capital needs to be a key focus if they don’t want to be left behind.
Why is human intellectual capital particularly a pain point for insurers? Employing and retaining talented, technically skilled staff isdifficult and costly for any company, let alone one in an industry that’s come to be considered ‘uncool’ – which, let’s face it, insurance has.
Younger candidates, in particular, are showing little desire to venture into insuranceover other, more ‘exciting’ industries, such as those in the tech space.
Additionally, retaining experienced staff is a key concern. Especially when it comes to achieving the levels ofcustomer satisfaction that insurers are striving for. After all, happy, experienced employees lead to happy, loyal consumers, and in turn, brighter long-term prospects for businesses.
Which is whereinsurtech might provide added value. Insurtech partnerships could enable insurance companies to position themselves as dynamic, connected, and potentially disruptive – helping them rise above their old and stuffy image.
What’s more, the prospect of being part of the adoption, enhancement, and development of innovative technologies may assist with employee attraction and retention. Employees are more satisfied when they have opportunities to upskill and learn at their own pace. And the innovation that’s closely associated with insurtech is all about constant learning and growth.
Personalization & data.
Insurers are starting to put the customer at the heart of everything they do. By activating and collecting the right data – from IoTs such as connected cars, activity trackers, and even toothbrushes! – they’re able to better understand consumer needs and offer customized advice, coverage, and tailored pricing. This shift indicates insurers are now viewing consumers as individuals, rather than customer segments.
Usage-based insurance policies, for instance, tap into customer data in order to charge users according to their specific needs and behaviors, putting the consumer in charge of their own fees.
Such personalization and clever data-usage benefit both customers and insurers. Along with improving user satisfaction, tailored products enable companies to enjoy more accurate risk assessment, and stable margins.
And while asking users to share their location with your business might sound invasive, a study by Morgan Stanley and BCG suggests that customers are ready to share it (in return for the aforementioned benefits) as long as companies are transparent about how it will be used.
For insurers catering to the growing markets in Asia, Africa, and the Indian subcontinent, tailored offerings based on data collected from wearables and telematics will be key. Over 60% of citizens in these areas struggle with a lack of income security. So insurers that ease the pressure by offering break periods and enabling customers to postpone paying until they’re able to may prove to be more attractive in these areas. Our social initiative team ran a program in Rwanda to help microinsurance firms find ways to serve people who don’t qualify for traditional insurance plans. Read more about it here.
Examples of insurers using IoTs
Beam uses IoT technology to offer dental insurance. Customers receive a ‘smart’ toothbrush that tracks how well customers take care of their teeth and provides personalized insurance plans based on this teeth-brushing data. In doing so, the firm claims they can offer rates up to 25% cheaper than competitors – a deal customers are sinking their teeth into.
Wearables and telematics monitor customer behavior throughout the day, with many consumers already using brands like Fitbit to monitor their activity, exercise, food, weight, and sleep habits. Understandably, insurers are scrambling to get a piece of the pie. North American life insurer John Hancock replaced its traditional offering with interactive life insurance altogether.
Insurance companies are adopting digital strategies. Not just for savings and efficiency, but for increased customer satisfaction with a whopping 61% of customers confirming they prefer to check their applications online.
Of course, transitioning from paper trails to online-only isn’t easy. According to McKinsey, nine out of 10 insurance companies say they’re struggling to develop the technology infrastructure they need, blaming legacy software and the sheer magnitude of their IT systems.
What’s more, internal processes across the industry are unnecessarily complicated, and many companies are duplicating their efforts, with TechCrunch suggesting that insurance brokers are becoming obsolete in this mobile-first world. This means that some 1 million jobs in the US alone could be automated, which would cut costs by up to 40%.
But digitization (tacking digital processes onto existing ways of working) is not always enough. Digitalization (involving a complete transformation of existing business models) is also required.
So, how are companies doing it? To overcome the complex-legacy-system problem and enable new offerings, companies are adopting API or microservices architecture. But keeping the customer at the center of these developments is key.
Some companies have struck the right balance using robotic process automation (RPA) – software that supports human staff by performing complicated back-end tasks for them in the blink of an eye. Not only is RPA benefitting customer interactions, it’s also boosting their data-harvesting capabilities.
Examples of digitization in insurance
Where do we start? AI and machine learning have the potential to impact every aspect of the way insurance businesses are run, making almost every process more efficient.
Specialized functions such as fraud prevention, anti-money laundering, underwriting, and pricing are set to be overhauled using this transversal tech. Meanwhile, the data collection opportunities AI provides will help companies achieve automation (robo-advisors are incoming) and enhanced personalization.
Of course, AI isn’t mature yet, and a human touch is still needed to help it do its work. But companies that fail to adopt AI now may find themselves left behind by the time autonomous versions appear.
Examples of AI in insurance
Shift Technology offers AI-based anti-claims-fraud detection software. The company developed their automation solutions specifically for the insurance industry and the unique challenges insurers face.
Blockchain enables the creation of a digital ledger that can’t be altered. Using this technology, insurers can reduce the admin costs that come with reviewing claims and checking payments made by third parties – blockchain ensures all of this information is shared, fraud-protected, and easy to verify.
According to PWC, blockchain could particularly benefit reinsurers – reducing the steps involved in the process and leading to potential savings of USD $5-10 billion worldwide. For example, reinsurers in healthcare could cut costs and save time using smart blockchain contracts to quickly verify consumer data and insurance history, reducing the back and forth that’s commonly involved.
Additionally, blockchain can be distributed widely without the risk of duplication, enabling increased transparency and improved workflow governance.
Examples of blockchain in insurance
Teambrella is a peer-to-peer insurance platform that enables its users to cover each other and vote on premiums and reimbursements. They use blockchain to handle payments securely and ease the burden and worry exchanging money between peers may cause.
This innovative insurance startup offers homeowners and renters insurance powered by AI, blockchain, and behavioral economics. Lemonade also donates excess profits from premiums to worthy causes, but we digress.