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Everyone benefits from having an innovative, competitive, financially stable insurance industry, but finding and maintaining that stability in a rapidly changing marketplace isn’t easy. Accenture Research estimates that digital transformation offers insurers in mature markets the chance to increase profits by up to 100 percent. And with VCs continuing to pour billions into InsurTechs globally, there’s no time like the present, or yesterday, for incumbents to adopt a digital approach.
Yet less than 20 percent of top life insurance carriers have a policyholder mobile app. How do you get from no mobile app to a world with driverless cars, drone assessments and virtual doctors? To get there, gain insights into their customers and build new products, companies across the ecosystem will need to curate all of their data assets, and some they don’t even have yet, into a 360-degree view and assure its provenance, governance, availability and security.
Despite being slow to change and often hindered by legacy IT and regulation, insurers must catch up to other industries—and to the upstart InsurTechs—to build resilience into their systems and become data-driven businesses. Here are five reasons why.
- Accurately assessing risk and paying out claims quickly is essential
Companies realize that there is a new way to evaluate and price risks, based not only on smart, experienced people but also on historical data, new insights, geospatial and economic drivers. Much of this data is currently “left on the floor” due to the limitations of legacy systems.
For instance, homeowners update homes and their contents all the time, but how often do insurance policies get updated? Not nearly as often, in part, because it’s a cumbersome process to do so. Homeowners should be able to take photos, do virtual walk-throughs and conduct virtual interviews with an assessor. Consumers should also be able to access insurers through any available channel (e.g., email, cell phone or social media), and be assured that the information they share—in effect their data—gets to the right place and is then easily accessible and shareable with others to speed claims processing.
Massive amounts of data are available; it’s just a matter of gaining access and making it meaningful. If not to assess risk, then to meet consumer demand. The data used to control driverless cars can (and will) be used to for insurance purposes, and cause a major shift in insuring “drivers” altogether. Similar scenarios are going to play out in smart homes, smart health and beyond.
- Retaining customers is always king
Consumers expect to access insurance, just like any other service, through their phone. If the consumer has a bad experience, they’ll seek a better one. The upside is that insurers that keep pace with consumer demands will build a consumer-centric experience that helps retain and grow their base, as well as improves access to useful information. And the plus side for consumers is greater price transparency, quality comparisons and claim accuracy that will help them better differentiate insurers in a market where “online comparison shopping” for everything has become the norm.
- Increasing automation will save costs and create better service
According to McKinsey, automation can reduce the cost of a claims journey by as much as 30 percent. Once legacy restrictions are addressed by better data integration platforms, then text mining, machine learning, algorithms and eventually AI will become a reality and enable an automated workflow where highly analyzed and contextualized information flows through an automated analysis then to an underwriter who can then make faster and better claims decisions.
- Preventing fraud is a must
While most fraud analytics tools can guide investigatory resources in the right direction, data remains the key to developing a holistic view that can evolve as new data sources become available—and as fraudsters continue to adapt their techniques. Catching an instance of fraud, waste and/or abuse (FWA) is beneficial, but what is needed now is a data-focused prevention strategy that allows systems to move away from simply flagging singular abnormalities to linking information together in ways that uncover fraudulent networks.
- Adapting to new regulation requires new technology and architectures
Regulation is a strong driver to change. If insurers’ data governance and security policies, and more importantly, actual practices and technology, aren’t keeping up with changing regulations and consumer privacy demands, the consequences get very serious indeed.
Anthem’s data breach settlement earlier this summer has opened the floodgates to a different kind of scrutiny, and doubtlessly more lawsuits, with monetary and reputational impact well beyond that of a fine.
As in the banking sector, regulators put more and more pressure on insurance companies to control the way they run their business, handle personal data, manage relationships with customers, and more. Demands are being fine-tuned and the timeframe to adapt is getting shorter and shorter. This doesn’t mean insurers should keep data locked away, data sharing is the hallmark of the new economy. Companies should be prepared to report on any information located anywhere in their IT landscape and know exactly where it is and who has access to it at all times—all of which is possible when data is properly managed, governed and secured.