The Insurtech Bandwagon: Time to Hop On
The insurance industry has long been perceived to be steeped in tradition and driven by conservative business values. Consumers have always viewed the process of engaging with insurance companies as bureaucratic, time-consuming, and tedious. However, insurance is a pervasive part of our lives, almost on a daily basis.
Today, customers have wholeheartedly adopted digitally-driven business channels and the insurance industry finds itself in the midst of this digital storm. New products are being built and distributed, purely on the basis of data and analytics. The new players in the insurance space are using digital-only business models, making it easier and quicker for their customers to consume insurance products and services.
Traditional insurance providers need to understand that the use of digital technologies does not lead to the complete overhaul of their business operations. Instead, such technologies focus on the enhancement of the insurance value chain. Even though large insurance companies have understood the need for digital transformation and would like to initiate such change, they still find it challenging to identify the apt areas within their business that are ripe for transformation.
Trends That Drive Insurtech
According to a PwC report, more than 90% of insurance CEOs emphasize the importance of data in understanding customer needs and making enterprise-risk related decisions, yet only 10% believe that the data they receive is comprehensive. This is a clear indicator of how the harnessing of data through technology is crucial to the future of the insurance industry.
Data is at the heart of innovation in any industry, especially in insurance, as the amount of customer data being generated is huge. Also, it is a balancing act for insurers, as insurtech-led transformation is not just about changes in technology, but also altering their existing business models.
The trends mentioned below focus on customer satisfaction and retention, leveraging of customer data to obtain precise market insights, application of AI and machine learning across the insurance value chain, automation of insurance platforms, and much more.
- Business Process Transformation: Traditional insurance companies must prepare for the future right away by innovating digitally. Else, they might find their business being eroded by early adopters of digital technologies and insurtech startups. The digital transformation of insurance processes is holistic in nature, as the complete business model has to be changed, instead of piece by piece. Insurers must have a digitally driven, customer-centric business strategy in place.In terms of technology, the focus will be on API or microservices architecture, which will enable insurers to find a way to work with transactional legacy systems, as well as permit interconnectivity with other systems. RPA can also be deployed to enhance customer interaction and data harvesting.To achieve the goal of complete business process transformation, insurers must first clearly define their business processes, identify the issues that have to be resolved, and determine the opportunities that can be exploited. This will then establish what needs to be removed, automated, outsourced, and the technology solutions that provide the best possible ROI.
- User-driven Ecosystems: Customers today are looking for an integrated user experience that provides access to a set of interconnected products and services. Placing the customer at the crux of digital initiatives can help insurers rapidly scale adoption of their products and services and acquire previously unheard value.Ecosystems can help users manage and access different products and services, without having to switch between different portals, handle different login credentials, or waste time maintaining various applications. Insurers have the potential to engage and partner with players within and outside of their domain to effectively connect and engage across a much broader user base.For example, Progressive corporation has partnered with Zubie, a GPS fleet tracking system for businesses, to provide customers with insights into how their driving habits might impact their insurance premiums. Insurance companies that have adaptability as an integral part of their product design and business strategy will be able to fully exploit the benefits of a digital ecosystem.
- AI and Machine Learning: Insurers need to collaborate with insurtech service providers to take advantage of the benefits that AI and Machine Learning can bring to their business. These technologies can simplify customer onboarding and greatly improve customer service. For example, insurance used to depend on statistical sampling to build risk pools. Now, IoT sensors allow insurers to base their coverage price on real events through data obtained from individuals, rather than group data samples.AI can also be leveraged to completely transform critical insurance functions, such as fraud detection, underwriting, insurance premium pricing, and much more. AI generates a huge amount of data, which can be used to obtain more customer insights and subsequently insurers can convert these insights into actions.Insurers can identify and bridge gaps in data, processes, product, and customer interaction through the application of AI/MI and other allied technologies.
Insurtech is bravely moving forward, with or without you
Insurtech is no longer an afterthought, but the central driving force of digital transformation in the insurance industry. However, such a transformation and adoption of new technologies will not be successful without a paradigm shift in how the insurance industry works. Long-term business sustainability will be in question, if insurers fail to adopt a digital-first approach. It is important for insurers to think beyond the constrictions of their legacy systems to provide a customer-centric architecture. The path to digital transformation is not without its risks or bottlenecks, but the ultimate prize is worth the effort and time.