How Technology is Revolutionising the Insurance industry
/To understand how the Insurance industry is reacting to new technology we have to understand the fundamental cause of the disruption and what the catalyst really is – the Insurance trade is built on customer services and managing risk, to make that a little simpler - it is human resource heavy.
Areas that we have considered where technology can innovate efficiency in the Insurance Industry include User Experience, Risk Assessment and Underwriting (quote and bind), Prevention of Loss, Cost of Reduction and freer access to speciality markets.
So how will this evolve in 2017?
Insurance companies are systemically inefficient, processes having not changed in decades and as an industry – relatively risk adverse (pardon the pun). So this year we can see a multitude of software developers waging an assault on these problems from within the industry itself, vast sums are being invested by the major 4 broking houses to improve their customer relations and interface processes, whilst smaller brokers are setting up mobile APPs for immediate quoting – all valuable exercises.
We are all very aware as professionals now that the internet has revolutionised the way we interact with the provision of professional services, planes trains and automobiles are ordered in minutes to carry us to our destination – the current food delivery revolution is relatively old technology put to good use, albeit slightly unethical with regard to wage and personal liability standards (another conversation for another day).
What web developers refer to as UX/UI – an abbreviation of User Experience and User Interface, appropriately as most insurance companies interface with clients online, has become without question a major priority for the industry leaders, each competing to become more streamlined and personal to their clients. As the Insurance Industry is by far one of the most customer service-focussed.
What improvements to the industry can we expect?
Smaller insurance companies are leveraging their ability to near immediately implement new technology far quicker than larger companies, undermining their ability to retain clients on mass – this is a good thing for small operators, not such a good thing for shareholders of major Insurance firms. But that’s nothing new, this diversification effect has been seen in banking and the financial services sector for the last two decades, so it is with no real surprise that we can see it happening in the Insurance industry now also.
As customers become younger, more tech savvy – they remain captured by the zeitgeist, no longer are younger consumers purchasing policies based on the cut of the suit of their broker, they’re purchasing because their interface is becoming tailored to their social demography and personal interest.
Process parts such as instant claim processing, bundling service streamlining policy management, using quote and bind bots to make underwriting painless, which are all now becoming standard features in the development of any insurance business.
For most consumers – they take the above as a given as they are used to this quality of service elsewhere in their professional lives.
Insurers are becoming aware that their products aren’t as important as the reason they’re selling them, leading to markets adapting to create magazine style consumer behaviour for certain insurers. The honest approach is to insure that a lifelong customer isn’t lost due to one single bad experience; this is where UX/UI becomes really important for service providers.
How are underwriters adapting?
‘Machine learning’ or ‘AI’ is to most a science fiction thriller, for insurance underwriters it is the ability to assess risk in real time allowing them to calculate and underwrite risk at a fair price to the client. Underwriters are becoming better equipped to protect their consumers at an increasingly fairer premium.
Infinite applications or is there a glass ceiling for developers?
Prevention of loss for insurance brokers and underwriters is as you can expect – of paramount importance, we see insurers moving from previously just compensating for losses and moving toward learning how to intimately mitigate loss.
Protecting against loss is preventing a claim from happening before it happens. Advancements in cyber security, global telecoms monitoring (intellectual property crime) and connected sensors in the motor industry all contribute to reducing risks before the incident occur.
What does appear to hold back development, at least for now, is the legislative framework regulating the industry, as technology brings with it great advances, it does bring unfortunately the ability to be used in an unethical fashion, this is where regulatory bodies will need to increase their efforts to advance as quickly as those they regulate and vice versa.
How are insurers reducing operational costs?
Simple – they’re using new technology to advance out-dated processes, which are inefficient. These may be that they are using uniform applications to reduce the risk of online fraud, applied applications to enable instant claim processing, better underwriting tools and interfaces for clients or just customer record management systems that cut down the operational overhead on a large scale.
What will be the new insurance landscape?
With technological advance, so too comes changes to the markets that they facilitate. In the last twenty years the Internet has provided huge changes to the way we interact on a daily basis, business and general standards of living.
These familiar advances create unfamiliar liabilities and opportunities. Autonomous driving will when it graduates reduce insurance claims decreasing the auto insurance market size, meaning that insurers will find new niche markets to rely upon such as “speciality insurers”.
Risks in the future will not be able to be covered with blanket policies as they have thus far, far more specific tools and expertise will be required as liability classes shift.
