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In the insurance industry as elsewhere, change is continuous. As a result, observations on the industry often vacillate between, on the one hand, frustration about how similar the industry is to how it was 10, even 20 year ago; and on the other hand, just how different it promises to be in just a few years’ time. As gradual as insurance industry change may be, a given year can generally be distinguished from the one it succeeds, and this is especially the case at a time of accelerated change. In our outreach to industry experts to field views on ways 2019 is likely to look different than 2018, Insurance Innovation Reporter had the opportunity to have an exchange with Anurag Chauhan, Global Head of Insurance, NIIT Technologies (Princeton, N.J.) about some of the business and technology trends we’re likely to see in the coming year.
Insurance Innovation Reporter: What is likely to be the biggest change we will see in the insurance industry during 2019?
Anurag Chauhan, Global Head of Insurance, NIIT Technologies: In 2019, we will see insurance transform from a primarily reactive service into an industry focused on proactive, personalized customer experiences. Traditionally, fear of the unknown drove insurance sales, but now companies are turning to emerging technology to attract customers in a new way. Technologies like IoT, automation, and data analytics are working together so insurers can offer ‘experiences’ to customers, engaging them with predictive service and modern user interfaces. By altering the traditional insurance model with digital solutions, insurers will adapt to the changing customer landscape, appeal to a younger demographic, and succeed in 2019.
IIR: What would you identify as the biggest challenges insurers face today, and how will would you recommend they overcome them?
AC: I would say the three biggest challenges to insurers today are increasing profitability, reaching the millennial customer, and achieving highly accurate forecasting.
When it comes to increasing—and even maintaining—profitability insurance companies are facing challenging times with a volatile market and increasing loss ratios. Legacy systems used to work just fine for firms, but these solutions have proven to cost more than they are worth in support and maintenance costs—not to mention missed opportunities. I believe we will see companies enhancing legacy systems with digital capabilities that integrate platforms and use cognitive computing to overcome this challenge and for improved underwriting decisions. In this way, insurers will reduce costs and increase efficiency—ultimately improving profit margins.
Changing customer demographics are also one of the biggest challenges facing insurers today, as millennials begin to enter their thirties and purchase insurance in higher numbers. Attracting the younger generation will involve putting greater emphasis on customer experiences. User-centric interactions across platforms and personalized service will be the most effective way to attract and keep new customers as well as expand into new lines of businesses.
Lastly, insurance has always been an industry of calculating risk, but the accuracy of these predictions is under more scrutiny now than ever. In 2019, I expect insurers to fully engage with technologies like IoT and predictive analytics to collect real-time data and gain actionable insights based on strong evidence.
IIR: What technologies will be the most transformative for the insurance industry in 2019?
AC: Automation will be vitally important for insurers in 2019. By making some manual activities automatic, particularly in claims management, insurers can increase consistency and reduce errors in the front, middle and back-office. This is a trend that is only just beginning to gain speed, and I am confident we will see much more in the way of automated processes in insurance during 2019.
IoT will also have a large impact on insurance during the coming year [See also IIR contributor Stephen Applebaum’s “The Connected Insurance Ecosystem Comes of Age in 2019”]. While not new technology, I expect to see an uptick in adoption as companies look to digitize for competitive advantage. IoT sensors connected to insurable items like cars, homes, and infrastructure feed real-time data to insurers about their condition and performance. This sort of live information will be the bedrock of analytics and decision-making in the future and can even prevent claims before they happen.
The most transformational technology for the coming year, however, will be predictive analytics. Data collected by IoT sensors only reaches its true value if analyzed by predictive technology that can determine trends and patterns within the raw information. By identifying future likelihoods and potential outcomes with hyper accuracy, this technology will bring insurance companies closer to certainty when it comes to predicting the total number and cost of claims. It will even allow insurers to lower premiums with more ease for low claim probability.
IIR: And how will these technologies, and analytics in particular, affect the insurance experience for the consumer?
AC: We’ll see technology transform insurance into something people want instead of something they feel obligated to buy. Technologies such as IoT, automation, predictive analytics, and cognitive computing has, of course, benefited the profitability and efficiency of the insurer; however, it also provides more positive and personalized experiences to the customer. It does this by enabling data analytics to scale down to specific locations or individual customers, providing highly accurate assessments and personalized predictions. Furthermore, live data coming from IoT sensors lets insurers offer up-to-the-minute accounts of asset stability and performance. This allows customers to be notified before a problem occurs, giving them the opportunity to prevent the destruction in the first place. In the end, the big difference is in changing the core of the customer experience from a reactive service associated with natural disasters and mistakes, to proactive partnership associated with trust and safety.
IIR: Any advice to insurers about ways to attracting millennial clients?
AC: Millennials have grown up with digital technologies at their fingertips since childhood. They have experienced intuitively designed online and mobile services in every aspect of their lives, and they will judge insurers based on their ability or inability to provide this experience. A complicated or outdated user interface will affect customer perception of an insurance company – which is why it is so important to invest in front-end technology that makes understanding insurance easy and back-end technology that provides a seamless experience across all platforms. I would also encourage insurance companies to explore working with technologies like natural language processing, which will simplify the claims processes and make insurance more accessible to this new generation of customers.