Interestingly, the use of technology in insurance sector is far less as compared to other industries. The insurance industry inclines to operate along deep rooted traditional lines that have been slow to adopt digital tools and new business models. Outdated organizational structures and legacy technology have also obstructed the velocity of rate of change.
Other industry sectors, such as retail, banking and travel are already venturing their prerogatives in digital landscape. However, the need for insurance hasn’t diminished and the tech startups and relatively new insurance companies are stepping into the gap and offering new digital alternatives to consumers who prefer to do their research and purchases online. The insurance companies have realized that they can save a lot of time, money and risk by updating and automating their processes. Whatever be the case, finally there is accelerative movement in the insurance sector and customers are rejoicing that at last the insurance companies are jumping into the digital bandwagon.
The global insurance industry is worth more than $5 trillion and insurance companies are at risk of losing a share of this valuable market to new entrants. That’s because these legacy players have been even slower to modernize than their counterparts in other financial services industries.
This has created an opportunity for a group of firms known as ‘Insurtechs’. It is a combination of the words insurance’ and technology. Insurtech, is the use of technology innovations designed to make the current insurance model more efficient. By using technology, such as data analysis and AI, insurtech allows products to be priced more competitively.
Insurtech is the use of technology innovations designed to optimize savings and increasing efficiency from the current insurance industry model. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.
The opportunity is currently biggest in the US and Europe. That’s because these regions have large, very mature insurance industries. Insurtechs’ products and services mostly target retail customers. This includes small businesses and consumers. Most insurtechs are acting as enablers. This means that they offer products and services that help insurers and reinsurers improve their processes and better serve customers.
Of the main players in the insurance industry, brokers are most at risk of disruption. This is because insurtechs can easily replicate their services and are solving historical industry problems faster than legacy players. Legacy players are also innovating. In particular, insurers and reinsurers are investing in insurtechs and fintechs working with relevant technologies. At the same time, they are improving their own direct-to-consumer digital interfaces, increasing their disruptive threat to brokers.
Now the global insurance market is experiencing a transformation to digital business models that can unlock new value worth billions of dollars. With an increasing focus on personalized premiums and usage-based coverage, insurers are leveraging “Internet of Things” (IoT), advanced analytics and machine learning to develop more granular individual risk profiles. Collaboration between traditional insurance and software houses will give rise to newer models and revenue streams, higher profitability and reduced operational costs.
One of the larger changes online lately has been consumers’ willingness to engage remotely in serious transactions. This trend extends beyond insurance; where once the limits of online financial decision-making for the typical consumer may have begun and ended with their checking account, opportunities for major financial decision-making online have proliferated vigorously.
Unlike previously, today’s customer study the pros and cons before making even minor purchases. They feel empowered and comfortable by the massive trove of information available to them. Choosing the right level and type of insurance coverage depends very much on the individual’s personal situation, as well as on local laws.
How the digitization is working
Many customer wants to research their options without the distraction of interacting in person with insurance agent. Once they narrow down their options and make a list of pertinent questions, most people still find value in speaking to an agent, but 83 percent of consumers would use the internet to research life insurance before purchasing a policy if they had the option, according to the Life and Health Insurance Foundation for Education (LIFE) and Life Insurance & Market Research Association (LIMRA). One-quarter of respondents noted that they would prefer to both research and purchase online.
Prospective customer can download required App on their smartphones to get insurance services as quickly and easily as possible. They have also felt more comfortable with doing serious things at the click of a button. They can manage everything from finding the right policy or making a claim or to get car repaired etc, all from one place.
Almost every insured; especially motor vehicle insured had the agonizing experience of explaining our accident to one service agent and then getting transferred to another agent, only to tell the same story all over again. Now, insurance companies are making better use of technology to store customer history and data so all agents—whether contacted by a call centre, text or bot, can share to the same information.
The relatively new term Insurance as a Service (IaaS) is allowing people to insure expensive items like cameras and jewellery only when they are in use. This service is a prime example of using technology purely for customer experience. It allows people to keep their goods safe as needed, rather than forcing them into a long-term policy for items they rarely use.
Likewise with the help of blockchain, the insured can keep their information safe. Now all the insurance policies, health and driving records and relevant information are stored on one simple swipe-able chip that will make enrollment and claims processes even easier to process.
Furthermore, the Internet of Things (IoT) holds tremendous potential for insurance providers to increase safety among customers. For example wearable health trackers may be able to monitor insured’ health condition and prevent one’s car from starting when the driver is not well. Insurers may also be able to prevent drivers’ phones from operating while their vehicle is in operation. There are so many possibilities, outside of saving money and increasing efficiency — the question now is only a matter of time.
One thing is for sure: the insurance market is known to be oversaturated with providers. Those who jump in early to give customers what they want and need via digital transformation will absolutely have a leg up on the competition.