How Augmented and Virtual Reality Can Impact the Insurance Industry

While insurance uses are mostly speculative at this point, AR and VR have significant potential for driving improvements in areas such as efficiency, customer experience and risk avoidance.

(Image source: screenshot of MetLife conVRse virtual customer service application.)

Augmented Reality (AR) and Virtual Reality (VR) are both nascent, revolutionary technologies making inroads into conversations at all levels of technology leadership. The two technologies are often discussed in tandem, and while both are still being explored, they are distinct and represent unique sets of possibilities. Their applicability to insurance is mainly speculative, at this point, but their potential for improvement in areas such as efficiency, customer experience and risk avoidance is significant.

AR involves the use of overlaying digital elements onto the physical world in real time. While the most well-known examples are in gaming, other industries have found numerous applications for AR, including medicine, travel, advertising, and the military. On the other hand, VR is the simulation of a real-world setting in a computer or a digital environment. VR technology has taken off in education, training simulation, and gaming, with several companies offering headsets for VR applications.

Potential Insurance Applications

AR and VR technologies represent another channel through with insurance companies can serve digitally immersed stakeholders. AR and VR have potential real-world applications in improved efficiencies, loss ratios, and customer experience, as well as risk mitigation. AR has the potential to predict risks before or while they happen, and VR presents an opportunity to both prepare for and model risk in an essentially zero-risk environment.

The majority of the applications and use cases for AR and VR are likely to be seen in the property/casualty side of the insurance industry, with more rare use cases in the life/annuities side. AR can be used to gain efficiencies in cost and loss ratios through risk avoidance and customer education. Tying this into other technologies like smart homes and IoT could help the avoidance of property losses and drive down claims incidences. Allianz, for example, launched an AR-based app called “Haunted House” in Hungary through which catastrophes and accidents can be visualized in different parts of homes.

AR and VR rely heavily on smartphone usage in their current states. This represents an opportunity for insurers, as real-time data collected from smartphone usage can lead to enhanced customer insights and potentially improved customer relationships. MetLife recently deployed “conVRse” in India, allowing policyholders to enter a virtually simulated 3D setting and interact with a virtual customer service representative. VR-based customer service may offer a more immersive and individualized experience that reaches Millennials and digitally savvy consumers more effectively.

Additionally, AR and VR can enable gains in operational efficiency, though this may come at a cost to employees; the reduction of manual roles could ultimately result in job displacement. Through the use of smart glasses, which Zurich recently implemented, on-site claims adjusters and agents can document work progress in real time, access site plans, and conduct remote conferences with experts. Carriers should be fully aware of these potential consequences and employ proper change management protocols.

Increasing Relevance

The effects of both technologies on the insurance industry will increase over time, and AR is likely to have more potential uses in insurance than VR. AR’s potential lies in its ability to change how reality is experienced and perceived by layering digital elements over the real world in real time. While VR simulates reality, the results do not necessarily translate to a physical environment.

While these emerging technologies are becoming more accepted, they are still relatively immature, and their applicability to insurance are mainly speculative. Taking full advantage of these technologies will require robust digital, data, and analytics capabilities, and the potential for AR and VR to influence and enhance the customer experience is thought-provoking.

For more information on the impact of AR/VR technology on the insurance industry, Novarica’s new executive brief can be accessed at the following link Augmented and Virtual Reality: Potential Use Cases for Insurers.

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Keith Raymond // Keith Raymond is a Vice President of Research and Consulting at Novarica. Raymond previously served as CIO/COO of Futurity First Insurance Group, a distributor of annuity, life, LTC, and other products. His previous roles include AVP of Distribution Systems and Field Technology for MassMutual and CIO of Trumbull Services, an application service provider and business process outsourcer owned by The Hartford Insurance Group. Raymond also served as a Principal Consultant at HCL Technologies. Raymond holds an BS in Technology from Central Connecticut State University. He can be reached directly at [email protected].

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