Technology has gradually percolated into our lives and changed the way we interact with others, consume goods, services and glean knowledge and information. Likewise, it has also changed businesses and industries as well as growing new business models and upending the old and unsuccessful ones. Technology has been reshaping almost every dimension in the world and definitely insurance is not an exception. Insurance industry is modernizing by equipping it with a wide array of integrated innovations.
The latest technological advancements with the paradigm of insurance has enabled the insurance industry to shift its typical business culture and operational strategies towards a customer-centric base. This helps the insurance industry to achieve its business goals and have a bigger value of operational excellence. The integration and convergence of Artificial Intelligence (AI) and Internet of Things (IoT) has helped insurance companies with automation features such as customer support, claims handling and settlement also dealing with complicated tasks. The importance of digital assets has created exclusive insurance products such as cyber insurance which helps to protect businesses against any ransomware attacks.
Despite the rapid technological evolvement, it is significant yet challenging to keep up with the state-of-art technologies and the impact of technologies on insurance companies. Nonetheless, in order to sustain and expand in a rapidly digitizing world, key players in the insurance industry should not only be cognizant of the evolution of technologies but also working towards adopting and leveraging their inner potential.
InsurTech Trends That Are Reshaping the Insurance Industry
1. Artificial Intelligence (AI)
Artificial Intelligence (AI) is not likely to replace humans anytime soon but due to its ability to function like humans, it is certainly changing the way businesses interact with customers and deliver services. AI is well-known among the industries globally. AI comes in handy for insurance companies in areas such as underwriting, claims handling and settlement, customer service, marketing and fraud detection.
To clarify, in the area of customer service, many insurers are investing in virtual assistants to handle customers’ enquiries like chatbots. Chatbot is a software application used to conduct online chat conversations via text or text-to-speech with a live human agent. Apart from answering questions, chatbots are available 24/7 to give general advice, address common enquiries and also check billing information and transactions for customers. InsurTech startups are no exception as they have started utilizing AI to enhance their business efficiency. Hence, AI has definitely come in handy for insurers in making insurance simple and easy.
2. Internet of Things (IoT)
Internet of things (IoT) is an ecosystem of interrelated computing devices which enables everyday objects to send and receive data. To clarify, IoT helps to gather vast amounts of data about users online activities. IoT helps to minimize manual intervention in claims and pricing. IoT also helps to provide rich new data for actuaries and underwriters to precisely assess and perform price risk for the policyholders. From the claims perspective, it helps to power automated loss notifications based on sensor data while from the marketing side, IoT provides opportunities for unprecedented insights into customer behaviour. Thus, data collected from wearables provides great insight into a person’s daily activities and overall health and fitness. This can aid insurers to create personalized insurance products that can capture the distinctive risk profile and the requirements of the consumers. Even though insurers face obstacles with the emergence of IoT such as data ownership and increasing fraud cases, they are able to overcome those challenges by developing a growth mindset.
Artificial Intelligence (AI) and Internet of Things (IoT) are powerful technologies where when merged together, AIoT would be obtained which is known as Artificial Intelligence of Things. IoT is known as the digital nervous system while AI is the brain of the system where both operate together to give the best output.
3. Cloud Computing
Cloud computing has a huge impact on the insurance industry. Insurers utilize cloud computing systems to greatly reduce the cost of purchasing hardware and software which aims to optimize the performance and internal processes. Insurers are no longer required to purchase local servers which require specialized personnel to manage as this would take up physical space and consume electricity 24/7.
Besides that, cloud computing allows insurers to collect and analyze large amounts of data known as “Big Data”. This would be easier to identify and to segment the target market. Thus, cloud computing comes in handy for insurers as the consumers can be further segmented geographically, demographically or by benefit sought, user status, usage rate and loyalty status which are tailored and personalized according to their needs.
Cloud computing also allows insurers to integrate and monitor risk data and risk evaluation within its environment which helps insurers in protecting their data against data theft and data breaches. This helps to improve the company’s cybersecurity if cloud computing is implemented.
4. Drones
Drones can be used extensively for performing risk assessments and calculations even though insurers have limited use of drones at the moment. Drones can be used to perform risk assessments in common business premises such as farms, plants, factories and other business premises which are difficult to be reached by humans. The implementation of drones can definitely help insurers in saving money associated with assessing the risk factors of the business premise. In short, the usage of drones in the insurance industry helps to increase the profitability as well as managing policies and claims more effectively.
5. Blockchain Technology
Blockchain Technology is a system used to record transactions which makes it impossible to perform any fraudulent activities such as hacking or cheating. Blockchain reduces administrative costs through automated verification of claims from third parties. Insurers can quickly verify the past claims transactions registered on blockchain for easy reference. The implementation of Blockchain Technology promotes a greater degree of legitimacy and assurance between the insurer and customer.
Also, Blockchain can properly manage, share and monetize large amounts of data. Thus, static records and/or data without central coordination can be stored and viewed by all parties for any insurance records. From the reinsurance side, Blockchain provides precise reserve calculations based on the current contracts. This helps the Property and Casualty (P&C) Insurers on knowing the remaining amount of money as they indemnify the claims. The transactions are also protected by digital signatures and are highly resistant towards data manipulation and fraud. Insurers can safely store and verify clients’ personal details which in turn reduces the risk of fraud.
Thus, the adoption of Blockchain Technology by the insurers adds a strong layer of security, immutability and transparency. It is highly valuable to the insurance industry as it saves time and money as well as enhancing customer satisfaction.
To sum up, insurers should view technological advancement as an opportunity rather than a threat. Also, collectively working together leveraging the digital world to adapt to grow in this volatile economy. Do share with us your opinions and feedback on this!
The word “InsurTech” was coined after the word “Fintech” which stands for Financial Technology became increasingly popular. The word describes the use of technology to enhance customer’s experience and to increase the efficiency of existing insurance processes and products. The implementation of InsurTech by many insurance companies in recent years has gradually changed the way insurance products are developed, processed and sold.
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Did you know that PolicyStreet was listed as one of the Top 10 InsurTech companies in Asia and also the Top 20 Malaysian Fintechs in 2020.
In case you were wondering, InsurTech is known as a subset of Fintech.
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