Like virtually any industry in the world, the insurance industry is becoming more and more technology-driven. According to Reuters, global investment in insurance technology startups reached a whopping $10.5 billion last year. Insurance companies of all sizes are looking to digitally transform their business and use solutions that allow keeping up with growing customer demands and industry regulations.
According to Accenture’s “Technology Vision for Insurance 2021” report:
It would be fair to say that insurance technology (or simply insurtech) is already a vital part of the business for both insureds and insurers. But what is insurtech anyways? To put it briefly, insurtech is the use of technology that impacts the efficiency of the business, customer service, and regulatory practices in the insurance sector.
Overall, the industry professionals indicate three key trends that will shape the global insurance sector in the next decade:
- Social. The focus is shifting towards customers. It's no secret that modern buyers have even higher expectations from a business than they used to. These new demands have accelerated the switch from cold-blooded marketing to increased customer satisfaction across industries worldwide. Insurers think about what clients need and help them get it most conveniently. Customer satisfaction and retention are becoming one of the company's key performance indicators, and this new paradigm comes with better services and products.
- Technological. Insurers analyze how they can take advantage of recent advances in artificial intelligence and machine learning to solve business challenges and turn Big data into valuable insights across the insurance value chain.
- Environmental. Unfortunately, the frequency of climate-related disasters has grown in recent years. The emergence of more sophisticated risk models allows addressing these catastrophic events more effectively. Additionally, major European insurance groups recognize sustainability goals as their own strategic goals and adhere to the Responsible Investment and Sustainable Insurance principles. For instance, the largest insurance and reinsurance companies such as Allianz, Munich Re, Swiss Re, Zurich, SCOR, and AXA decided to terminate the insurance of coal-fired power plants and mines.
Nowadays, the widespread use of smartphones and tablets, coupled with cloud computing, provides users with constant access to the Internet. What’s more, the rapid growth in computing power and storage enables the accumulation and analysis of enormous amounts of data, not to mention the growing number of active sensors and devices connected to the Internet.
All these technological advances contribute to the digitalization of the insurance industry. In this article, we're going to surf through the most prominent technological trends that will shape the sector in 2022.
Regardless of the industry, how can one improve products and services effectively? Through customer feedback, surely. One of the ways to gather feedback is wearable technology: fitness bracelets, smartwatches, and smartphones that control the user's physical activity.
Historically, data has always played an essential role in the insurance domain, and modern technology allows analyzing large amounts of customer data. This way, insurers can process data from fitness bracelets to analyze them and mitigate risks. The question is will clients agree to transfer their data?
In this regard, it makes sense to stimulate them with significant discounts or individual conditions. For instance, the British insurer Vitality is offering customers a 40% discount for data access using devices from Withings. Active customers can earn points and redeem them for, say, free Starbucks drinks or movie tickets.
In the US, John Hancock, an insurance company with 160 years of history, went even further. The company has required all health insurance policy purchasers to provide the company with access to physical activity data using Amazon Halo. This way, John Hancock life insurance clients can benefit from John Hancock Vitality, a program that (in the company's words) "can save you money and offers tools and resources to help you live a longer, healthier life."
Getting health data is essential for employers too. For example, if social packages for staff include VHI (Voluntary Health Insurance), then employees will wear fitness bracelets more willingly. This practice helps collect data on the team's activity and health. Companies, where it is customary to take care of employees’ physical condition, get sick less often. This way, businesses can increase employee loyalty and save on health insurance.
The use of artificial intelligence and machine learning have already simplified customer service and claims handling for insurers. With artificial intelligence involved in the assessment, insurers can minimize the human factor and decide on payments in a timely fashion.
Even a tiny shift towards automation in insurance leads to significant savings in time and money. Therefore, insurance companies are actively using artificial intelligence to process user requests and calculate the cost of insurance faster. AI capabilities also improve claims turnaround cycles and completely change the underwriting process as we know it. Companies such as Hypatos or Automation Hero enable insurers to automate their working routines and go paperless.
Personalized experiences also play their part. As said earlier, when buying insurance, customers expect insurers to offer a unique user experience. Artificial intelligence tools can analyze huge amounts of consumer data and provide a personalized experience based on specific behavior or habits. What’s more, AI-powered chatbots improve the communication process and help reduce wait times.
Machine learning techniques can drastically ameliorate such a vital part of insurers' job as claims processing. The technology is notorious for driving improvements in customer service. Again, it's all about automation: the algorithms speed up the process with pinpoint accuracy, eliminating human error.
The technology is also a perfect tool for introducing a recommendation engine. When sorting through the list of customers, this engine can identify clients with insufficient or excess insurance and offer them exactly what they need at the given moment. Finally, machine learning-driven predictive models provide insurers with a detailed understanding of various claims costs.
As Microsoft Azure consulting specialists, we suggest checking out the Azure Machine Learning services quickstart to get familiar with Azure Machine Learning Services. Next, you can adjust risk models with tips in the Actuarial risk analysis and financial modeling solution guide.
Another important trend is predictive analytics, the technology helping insurers better understand and predict customer behavior. Predictive analytics is effective in areas such as dealing with the risk of fraud, underwriting, pricing selection, and identifying clients at risk of cancellation. A survey by Willis Towers Watson claims that life insurers who use predictive analytics revealed a 67% reduction in expenses and a 60% increase in sales.
Perhaps, the use of predictive analytics and AI is especially tangible in underwriting. Last year, about 40% of life insurers incorporated AI-based and automated underwriting or planned to do it in 2022. The technology makes it possible to automate the adjusting of data models, which is a great time-saver. What's more, the use of more precise data models results in more accurate predictions about a customer's risk profile. The thing is, compared to traditional models, AI goes "deeper" under the surface and analyzes such data as emails, geospatial location, and data from smartphones and social media.
There’s no such thing as a list of technological trends without blockchain. Jokes aside, the technology helps insurers cope with competitive challenges and boost online sales, which is especially important in the context of the COVID-19 pandemic. A distributed ledger will provide an opportunity to detect (and fight) fraud, share data with third parties in a trusted environment, and increase the security of confidential info.
In addition, the blockchain will provide an opportunity to optimize costs and simplify insurance payments. The PwC report indicates that blockchain solutions could cut up to 25% of expenses, resulting in an industry-wide saving of $5-10 billion.
Cloud technology is storming the industries worldwide. Many insurers use the cloud as a crucial element of their growing infrastructure, and this trend will grow bigger in the decade to come. For instance, the survey by Sollers Consulting claims that 8 out of 10 insurance companies will adopt the technology by 2031.
As technologies improve, competitors in the insurance market will have the same advantages and opportunities. Success, however, will depend on those who take advantage of these opportunities first. Industries’ innovation is in full swing, and new emerging products change the market for good.
Here at Akveo, we guess 2022 will be a busy year for the insurance sector. Traditional models evolve, and more and more companies focus on customer-centricity and intelligent business processes. Nowadays, digitalization means more than having go-to-market agility; it's the trend that will define the industry for the years to come. As a custom software development company, we can develop a robust insurance solution to incorporate new technology into your business model and invest in your future.
P.S. If not specified otherwise, the pictures used in this article are taken from Accenture’s “Machine learning in insurance” report.
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