How Digital Twins are Transforming the Insurance Industry
The insurance industry has found in the power of data its fundamental pillar for making its business decisions. However, it now also has the opportunity to understand its customers and its business thanks to the advent of technological innovations.
Digital twins are one of them, and they are delivering industry improvements, such as in underwriting, claims processing, or fraud detection. But this is just the beginning, as they could completely transform the way you do business. Here’s how!
Why are Digital Twins Important for Insurance Companies?
Digital twins are computer models, replicas, or virtual simulations of physical objects such as devices, assets, products or processes.
One of their biggest advantages is that they work in real-time, which is a big plus in any industry, but especially in insurance, as they rely heavily on this data being up to date to make critical business decisions.
Digital twins also take advantage of other technologies such as IoT sensors, AI solutions, or data monitoring systems to help insurers define new policies, reduce administration costs, evaluate customer assets, etc.
In fact, Data Bridge Market Research forecasts that, by 2027, the global insurance market with digital twins will reach $77.53 billion. And 87% of industry executives agree that this technology will strengthen their ability to collaborate in strategic partnership ecosystems.
Hence its importance, as digital twins can act as a virtual laboratory for industry professionals to predict and assess any risk scenarios and make smarter decisions. They are not only a solution to improve processes, but have also become a very valuable tool to help insurers deal with large-scale events such as pandemics, natural disasters, etc.
Areas in Which Digital Twins can Improve the Industry
Digital twins can change the dynamics of the insurance industry, both in its customer engagement and business operations as well as in revenue generation strategies.
They provide a platform for simulating possible scenarios, where the most important applications are:
Insurers already use data to better understand the customer and cross-sell other products where possible. They have made great strides in creating digital copies of their book of business, but with digital twins, they can go a step further.
These take the available customer data sets, which include interests, external events, habits, or secured assets to get a more holistic view of the market. From that, consumer behavior patterns are simulated, allowing executives to better understand profiles and practice relevant sales across the omnichannel spectrum.
Underwriting is the process by which insurers price risk. It is closely related to computational power and the volume of data evaluated.
Thanks to digital twins, insurers can expand the data set they had for common risks such as accidents, heart attacks or fires and thus estimate the potential damage. Thus, the simulation capability of digital twins improves the underwriting process and enables insurers to set competitive rates.
The claims process affects a company’s operational efficiency and customer satisfaction towards it. It is very important to improve it in order to give a correct and quick response to policyholders when they experience an undesirable situation.
The advantages of digital twins can be leveraged to improve the accuracy of these claims and streamline the process. For example, in an automobile accident, a digital twin can be used to simulate the damage conditions and predict the impact. The result can be compared to the claim and processed accordingly, eliminating the need for expert examination.
Adding connected tools throughout a company’s processes is a great opportunity to drive efficiency and improve decision-making. By introducing a digital twin to operations, processes can be automated, and data can be analyzed differently to give it more value.
Digital copies of physical documents can be scanned and stored and converted into a platform that sorts and automates work based on the type of document and where the customer is in the transaction process.
In the United States alone, the total cost of non-medical insurance fraud represents an expense of $40 billion annually. This results in insurers having to raise their premiums, which directly affects their customers’ pocketbooks.
However, thanks to digital twins, fraudulent claims are now detected: they digitally reproduce the event that causes the actual damage. As a result, companies can more thoroughly examine statistically inconsistent claims to determine whether they are actually fraud.
Insurers need to evolve their business to a digital and automated model. Digital twins offer a valuable source of intelligence for insurance companies. That’s why at Plain Concepts we help you prepare for a smarter future where you can harness the power of the most innovative technology.