When the world was forced to pause, the urgency for change had never been so drastic. No matter the industry, companies are embracing digital tools to enhance agility, accelerate growth and drive transformation as a means of overcoming pain points that have emerged as a result of COVID-19, in addition to meeting the growing demand for virtual offerings. However, not every industry has been quick to adopt modern innovation. In the financial sector, insurance has experienced a technology revolution for some time but its progress has been slow, falling short of today’s expectations.
According to a survey by Information Services Group, 95% of insurers agree that customers want more digital products and services while 86% expect customer behavior to change because of COVID-19. In spite of knowing this, the insurance sector is moving at a gradual pace, making small improvements instead of rebuilding the ecosystem in order to enjoy compounded benefits.
Fortunately, as COVID-19 restrictions begin to ease, insurance companies can continue to ride the wave of innovation. Just as the banking sector relies on fintech organizations to modernize its processes, insurers are ramping up their investments in and partnership with Insurtech companies to reach their true potential. Now, Insurtech offerings such as AI, big data and IoT will be playing a huge role in reimagining every aspect of insurance, from technology and infrastructure to people and processes.
For starters, insurance companies are already working with large amounts of data. By augmenting underwriting with big data analytics, insurers will be able to realize the potential of their data assets and accelerate their underwriting to create the best value prices for their customers. The same data analytics can be used to obtain a more granular understanding of risks through real-world, real-time data from various sources. In the future, once AI-driven algorithms leave the testing lab, insurers may experience a new era of end-to-end underwriting automation. Such a breakthrough has the ability to combine actuarial models with data science to create fluid and flexible offerings based on actionable insights.
Insurtech companies are also designing new engagement systems with IoT technologies to aid insurance agencies retain customers. While some loyalty-related initiatives have been implemented in the past like auto-premium refunds, this innovation prioritizes personalization by rewarding customers that do not incur risk. For example, customers can collect points to increase their life coverage by regularly completing workout routines. To ensure data accuracy, their actions are recorded through the use of a fitness tracker that delivers information to a companion app. Another instance is the placement of motion sensors in customer vehicles that reward them for driving safely. With continuous monitoring, insurers will have a better understanding of their customers’ driving habits and dynamically price motor risks over time.
As modernization progresses, insurance companies must design AI-powered digital-centric customer experiences. This allows them to evolve from an industry that relies heavily on papers to one that utilizes online documents that supports rapid customer acquisition and remote work. Besides face-to-face interactions, creating new digital channels can help insurers reach customers in different regions. In some cases, the entire insurance application process can be automated through the use of digital forms with the guidance of an intelligent chatbot from start to finish.
Although the insurance sector is behind the digital transformation curve, this industry has the potential to change at breakneck speed. It has already witnessed and learned from banks’ partnerships with fintech startups and understood the value of digital technologies. Though digitalization will not happen overnight, many initiatives are already underway as the pandemic has given insurers a golden opportunity to power their ecosystem with groundbreaking technologies. Rather than facing future disruptions unprepared, insurers should disrupt their own products and services so they may accelerate the advancements the industry needs.
The first movers in the industry will have a clear advantage as early transformation is crucial in overcoming modern-day challenges. The time to act is now.