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The insurance industry is currently undergoing major technology-driven changes beyond digital innovations. Harsh market conditions, innovative entrants, and demanding clients are a few forces driving transformation in the insurance industry. However, every challenge presents an opportunity, and insurance companies can use these challenges to inspire growth. Below are key trends poised to revolutionize the insurance industry.
Personalized Insurance Products
The digital revolution has made on-demand, user-based, and all-in-one insurance products increasingly relevant. Modern customers prefer personalized policies that fit their unique needs instead of one-size-fits-all policies currently in place. Currently, nearly 80 percent of insurance premiums collected by insurance companies are lost to distribution costs.
However, digital technologies will eliminate intermediaries, specifically those that depend on human effort in the insurance chain. Flexible insurance options, such as peer-to-peer and micro-insurance, are slowly becoming viable options customers prefer. Lifestyle applications will also revolutionize the insurer-customer relationship.
APIs will ease the creation of insights-driven insurance offers by integrating data from different sources. A deep understanding of individual customer behavior also leads to accurate risk assessments and personalized insurance rates.
Insurers can also take advantage of predictive analytics to collect data that can aid in understanding and predicting customer behavior. Since insurers are risk-takers, analytics improves risk management. The following are common ways that insurance companies can benefit from analytics.
- Pricing premiums and risk selection
- Identifying fraud risks
- Identifying customers that risk cancellation
- Anticipating market trends
- Triaging customer claims
Using predictive models can help insurance companies achieve better accuracy and increase revenue. A 2018 Valen Analytics study found that businesses that use predictive analytics enjoyed a 3 to 9 percent revenue increase than companies that don’t.
Automation for Faster Claims Processing
Currently, homeowners who file fire damage claims have to wait for 90 to 120 days. However, this period will reduce significantly if artificial intelligence and robotic process automation take center stage in claims processing. Even though automating these processes eliminates paperwork and insurance brokers, it minimizes the possibility of fraud, reducing the time taken, cost, and effort of processing claims.
Bots are increasingly becoming mainstream in front and back-office policy servicing and claims processing. Insurers can use these bots to provide fast and personalized customer services. For instance, prominent InsurTech Lemonade claims that using a bot evaluates and pays out property claims within three seconds. SPIXII, an automated insurance agent, engages with customers through smartphone apps and other platforms to help them purchase the right policies.
Like other service-provision industries, different departments in an insurance company handle and process large volumes of data. This demands a secure and easy data transfer across departments and other players. This is often interfered with by cybersecurity attacks or other factors that cause damage to important data servers and storage area networks.
The best solution is adopting blockchain technology, which provides secure data transfer and management across different interfaces with maximum integrity. Adopting this tech to insurance processes, such as identifying management, claims processing, underwriting, fraud management, and other operations, significantly reduces operational costs.
Blockchain technology also offers smart contracts and decentralized autonomous organization capabilities that ease insurance policy management. Interestingly, over 38 insurance companies have embraced the B3I initiative, which explores how blockchain can be integrated into the insurance field.
Various technological trends have transformed and continue to change the insurance industry. Other trends, such as shifting risk from drivers to artificial intelligence and car-driving software in the auto industry, will likely revolutionize the entire industry. However, insurers also benefit from real-time data sets and the use of satellites and drones, which gives them greater visibility to risks for better accuracy.