New technology in the insurance industry
The insurance industry is undergoing a period of profound disruption. Demanding customers, new competitors, changing regulations, struggling legacy systems and a history of risk-averse behaviour have become catalysts for urgent innovation. Fuelled by global market opportunities, a new wave of insurance technology – or insurtech – companies have sprung up. According to CB Insights, Q1 2021 was a record quarter for insurtech investment activity, with startups raising over $2.5B across 146 deals.
With the need to accelerate transformation to retain a competitive edge in sharp focus, insurtechs are investing in essential new technology. Here are the top five trends that we think are paving the way for the future of insurance:
1. Artificial intelligence (AI) and machine learning (ML)
AI technology creates faster services with fewer errors. According to Mckinsey, AI and its related technologies will have an increasingly seismic impact on all aspects of the insurance industry, from distribution to underwriting and pricing to claims.
Consider the future of car insurance claims. Following the stress of an accident and damage to a vehicle, the process currently relies on phone calls, inspections and a time-consuming review process. AI can remove many of the barriers between an accident and a processed claim. A good example where AI powered telematics technology is used to capture and interrogate real-time data from cars to assess the extent of the damage, preventing the possibility of inconsistency from claim adjusters. AI can also automate other aspects of the insurance process, including risk assessment and underwriting.
Machine learning can help to identify possible fraudulent claims quicker and with more accuracy. ML algorithms are more effective than traditional predictive models because they can tap into unstructured and semi-structured data, such as claims notes and documents, as well as structured data, to identify potential fraud.
AI and ML are effective in helping insurers to improve claims turnaround cycles, increase efficiency, deliver a better customer experience and significantly enhance the underwriting process.
2. Internet of things (IoT) to personalise policy pricing
IoT refers to many of the popular personal devices that are connected to the internet which constantly collect and share data, including Apple’s Siri, Amazon’s Echo, and Google’s Nest. The number of connected devices across the globe is expected to increase to 43 billion by 2023.
Real-time accurate data collected by IoT devices enables insurance companies to assess risk more accurately, leading to tailored products and dynamically-priced, personalised premiums.
To facilitate the process, some insurers offer customers a discount on smart home products that help property owners prevent water damage, fire and theft. Smart home technology can be a good way to reduce claims, improve customer acquisition and retention, as well as generating new revenue streams. With the data collected, insurers can also quantify risk where it previously wasn’t possible.
3. Extended reality (XR)
XR is an emerging umbrella term for all the immersive technologies, including augmented reality (AR), virtual reality (VR) and mixed reality (MR). Immersive technologies extend an experience by combining virtual and ‘real’ worlds or by creating a fully immersive experience.
While this technology is still in its infancy, it has significant disruptive potential for insurtechs. Extended reality can make data-gathering safer, easier and faster by enabling investigators to assess potential risk by framing and reading a 3D image without ever having to visit the site. XR technology can also be used to train new insurance employees in ‘virtual’ settings as well as improving the effectiveness of marketing campaigns.
4. Robotic process automation (RPA)
RPA is software that can undertake repetitive and rule-based tasks by operating a computer like a human would, only virtually. RPA software robots can understand what’s on a screen, enter data into databases, update files and save records. With the ability to efficiently automate clerical tasks, RPA offers many opportunities for insurance organisations:
- Claims registration and processing is a good example of a manual process where insurers need to collect a lot of information from several sources. In the case of car insurance, this can include photos of damaged vehicles and property, police reports and drivers licenses. With RPA, this type of labour intensive work can easily be streamlined, ensuring customers and employees have the information they need when they need it.
- RPA can also be used to automatically flag fraudulent activity or inconsistencies in a claim. In the case of life insurance claims, RPA systems can validate death certificates on government websites to reduce processing times and save costs.
- When it comes to underwriting and pricing, the goal for insurance companies is to determine the right price for the right risk – a process which depends on collecting information regarding the background of insurable people or assets. RPA not only provides the ability to quickly and efficiently pool information from disparate data sources into a single place, but it can also analyse the history of customers’ claims and provide pricing options based on previous results.
- Keeping on top of policy administration and servicing can be time consuming and expensive. RPA robots work behind the scenes day and night to respond to customers’ needs in real time, freeing up employees for value added work. RPA can automate transactional areas of policy activities such as accounting, settlements, credit control, tax, and regulatory compliance.
Gartner predicts that “90% of large organisations globally will have adopted RPA in some form by 2022 as they look to digitally empower critical business processes through resilience and scalability, while recalibrating human labour and manual effort”.
5. Low code/no code (LCNC) tools
Low-code/no-code development tools allow insurance companies to create and roll out new digital customer experiences without having to undertake costly, complex and time-consuming development processes. Features like ease of use, high customisation, and connectivity to other IT systems underpin these next generation solutions.
As a result, insurers are creating new content-based services at speed. Whether this is to increase distribution channels, bring new products to the market, or create online versions of existing offerings, low code platforms offer a viable alternative to traditional methods. An example of this is where a car insurance company wants to develop a new customer portal which allows claimants to upload photographic evidence directly from a mobile phone. Low-code tools will allow them to achieve this quickly and effectively.
Forrester 2021 forecasts that 75% of application development across all industries will use low code platforms, up from 44% in 2020. It’s a significantly different way of quickly turning innovative ideas into market-ready products, without dependence on legacy technology or a new, extensive IT undertaking.
Innovation fuelled growth
Rapid advances in technology will undoubtedly pave the way for more disruption in the insurance sector. Organisations that thrive will be those that use this as an opportunity to create innovative products, streamline processes and drive efficiency, harness cognitive learning insights from data sources, and create a more personal customer experience.
At NashTech, we deliver innovative solutions with our agile, solution-focused approach, leveraging mainstream and emerging technologies to build custom software products that are robust, scalable and secure. As a trusted technology partner, we work in close collaboration with you to ensure you realise the value of the software earlier. For more insight into how insurtech is using automated intelligence to improve the customer experience, download our eBook or read our latest thoughts about usage based insurance. Get in touch today to find out more.