Technological solutions have revolutionized every industry, and the insurance industry is no exception. The need to incorporate the use of technology into the insurance processes is a reflection of the pace at which customers are using technology in their day-to-day lives. This makes the adoption of technology a necessity for insurers and not an option anymore. Lower entry barriers and price transparency have intensified the competition, with traditional business models being replaced with technological ones focused on serving the customers in an enhanced manner.
Most of the customers do not trust their insurers for the sole reason of not being able to communicate with them appropriately. The Morgan Stanley and Boston Consulting Group’s survey of 2014 explained insurance customers interact less with their providers as compared to other industries. The reason being the insurance industry is dominated by the presence of intermediaries, with brokers taking approximately $45 billion compensation amount yearly worldwide. Without digitalization, insurers are unable to communicate properly with customers and figure out their pain points.
This, in turn, restricts them from leveraging opportunities out of challenges to serve customers better and enhance retention. AXA’s CEO Thomas Buberl explains, “Insurance suffers traditionally from a lack of contact with customers. We want to do more.” As per Christ of Mascher, COO, Allianz, “How to get to a higher frequency of interaction with customers was always a big challenge for insurers. The digital age has brought us countless opportunities and frequent touchpoints.”
The Changing Customers
Major shifts in customer expectations, behaviors, and demographics are underway that will create maximum impact on the technological transformation in the insurance industry. Leading this pack are the millennial who see the insurance industry from a completely different angle.
Smartphones have made consumers more technically advanced and that has literally transformed their mindsets and expectations from their service providers. Now, consumers want access to information instantly, complete price transparency, personalized experience, regular engagement, etc., from insurers just like they expect from other industry’s service providers.
Top Ways Technology is Refining and Redefining the Insurance Industry
Real-Time Claim Monitoring
Now, this is something that is helping insurers in not only assessing the claim in real-time but also in preventing fraudulent claims. Cecilia Sevillano, Head of Smart Homes Solutions at Swiss Re, briefs about the same, “We know that the longer it takes people to file, the higher the probability of fraud, because they get time to think about how to build it up. When it’s immediate, it’s genuine and spontaneous.”
For instance, if we talk about automobile insurance, telematics, using contextual data, is helping insurers assess risks and fraud claims through the accurate rebuilding of crash dynamics. This also helps in settling the claims fast and efficiently.
Offering personalized solutions to customers have become one of the biggest challenges for underwriters today but technology is helping them tackle the same with ease. The quote-to-buy experience is being modified effortlessly using technology while keeping the core administration system intact.
With the use of machine learning and data analytics, insurers are able to know the preferences of customers and prepare insurance coverage that best meets their requirements and budgets. Not only this, using technology, underwriters are able to provide multiple options to customers, enabling them to choose the best product available, helping customers configure their own risk solutions eventually.
Strategic Business Decision-Making
The insurance industry is one industry that is highly competitive, and insurers have to compete hard against each other when it comes to client acquisition and retention. Making imperative business decisions focused on transforming business models is not easy for management professionals. However, big data and analytics have been driving that change now.
Decision-makers are leveraging the plethora of consumer data collected over the years to gain valuable insights to devise strategies for not only serving customers proficiently but to stay ahead of their peers, leading to scalability and growth eventually. Apart from this, data collected from external providers and partners is also being used to the fullest. In a nutshell, a shift of focus of analytics and customer relationship management (CRM) is being observed from intermediaries to prospects and policyholders.
The Rise of the Ecosystem
Insurers are entering into areas beyond their expertise to win and retain customers like never before. They are not only focusing on providing services to customers but valuable advice on the different insurance products, preventive measures, and ways to bring down the associated risks. For this, they are entering into an ecosystem where they are collaborating with the emerging InsurTech community, tech giants, Insurance Outsourcing, and adjacent industries.
However, insurers need to realize that they cannot rely on mere collaborations to win the trust of their consumers as they have to carve a niche for their own brand in their eyes.
Claims Prevention and Behavior Changes
The Internet of Things (IoT) is refining the way insurers and customers look at the insurance industry. Now, both are trying to focus on preventive measures to stop claims as this not only helps insurers but customers as well as they do not want reimbursement but want an incident to stop occurring in the first place itself. IoT helps achieve the same through real-time monitoring of the risks and let the customers know of a risky situation ahead. Another way to achieve this is by educating customers about some safe practices that will prevent them from doing anything that leads to risky situations.
Cecilia Sevillano, Head Smart Homes Solutions, Swiss Re, explains that the insurance industry is “shifting from a claims handling business to a claims prevention one. The willingness to pay for actually preventing things from happening is much stronger than buying insurance that just pays out when there’s a claim and maybe there will never be a claim.”
Nick Ayrdon, Head of Strategy & Development at Aviva further adds, “IoT is already enabling customers to avoid bad things happening to them. Some people call it prevention. I see it as empowerment of customers. In the past, that’s only been available to big businesses: sprinkler systems and CCTV systems, for example. IoT is shrinking that down to make it affordable and mass-market.”
Enhanced Data Security
There have been a lot of instances in the past where insurers have witnessed a data breach incident. This, in turn, not only hampered the image of the insurers but also made them a not-so-obvious choice amongst policy seekers, adding to further damages. However, by incorporating the use of technology into their processes, insurers have been able to put stronger security measures in place in order to safeguard the valuable data of their customers against any type of data threat.
Surely, technology is reshaping the insurance industry in a way that is not only becoming beneficial for the insurers but customers as well. Through personalized solutions, real-time risk assessment, advisory roles, instant claim settlements, a lot of processes in the insurance industry have been streamlined. Technological trends emerge year after year, and undoubtedly, new technologies in the future will further refine the insurance processes.
However, insurers need to ensure that technology will never completely replace the human role. So, do not just leave your customers at the hands of technological processes but instead complement the same with human care and interactions to make the customers feel more attached to your company and its products.