Technology trends that will shape the insurance industry | Insurtech
In recent years, we have seen how value propositions and innovative ideas are going hand in hand with new technologies, characterized by connectivity, the democratization of access to solutions that were previously too complex, and the boom in the data environment.
The insurance sector has joined this new technological wave characterized by new exponential technologies, which are creating changes in the demand side, where the behavior of customers has changed and they now require other solutions. On the supply side, competitiveness has grown in this regard, so insurance companies will have to face new business models. But how can insurance companies prepare for change?
Experts estimate that there will be up to one trillion connected devices by 2025.
- 1 What is Insurtech?
- 2 Insurance industry trends 2021
What is Insurtech?
The Insurtech sector includes those companies in the insurance sector that take advantage of the latest technologies and are committed to innovation and the development of new products and services with the goal of reducing costs, both for clients and for the insurance companies themselves. It also seeks to improve operational efficiency and enhance the customer experience.
It is closely related to Fintech, banking, and finance, and its development is taking place thanks to the momentum of digitization, the birth of startups, and applied techniques such as Artificial Intelligence, Big Data, Machine Learning, or IoT.
Insurance industry trends 2021
In 2018, Insurtech investment reached nearly $5 billion, and since then, the figure has only gone up. This is because the way in which predictive data and the real-time in which it can be captured is changing, as well as the way in which to promote the development of insurtech insurance. Technology is enabling the creation of customized solutions, with savings and cybersecurity taking precedence. These are the technological trends that will shape the insurance sector:
Many insurance companies use predictive analytics to anticipate possible future customer behavior through data collection. But it is not the only thing, because now these companies can use predictive analytics to identify fraud risks, triage claims, anticipate trends, detect customers at risk of cancellation, predict prices…
Studies on the impact of adopting these new models have shown that companies improved their loss ratios by up to 9% and increased their bonuses by up to 53%, compared to the 18% for the market average over the same period.
The incorporation of AI for businesses and households have been slowly gaining momentum, and with the impetus of the pandemic in 2020, the process of digitization in insurance companies has accelerated significantly. Although not many companies invested massively, they will place great emphasis on digital technologies in the coming months.
Along with Artificial Intelligence comes the trend of physical robotics. According to Mckinsey, 3D printing will radically reshape manufacturing and commercial insurance of the future. “By 2025, 3D printed buildings will be commonplace and carriers will need to evaluate how this development changes risk assessments (…). By 2030, a much higher proportion of standard vehicles will have autonomous features, such as self-driving capabilities. Carriers will need to understand how the increasing presence of robotics in everyday life and across industries will change risk pools.”
Automation and Machine Learning
According to Forbes, machine learning will not only improve claims processing but also automate it. This technology allows digital files to be analyzed by programmed algorithms, improving the speed and accuracy of processing.
Its applications in the insurance sector can be extended to claims, policy administration, and risk assessment. An SMA survey notes that “66% of general insurance executives believe machine learning has high impact potential for commercial lines of business, while 53% of executives believe it has high impact potential for personal lines.”
Cybersecurity and Blockchain Technology
The last year has brought to the forefront a concern that was already on the table but is now a necessity: digital security. Remote work and the rise of internet-based services have changed the way people communicate and access services, making it crucial to focus on improving security in the insurance industry.
Blockchain is going to be one of the industry’s great allies in cybersecurity, as insurance providers are going to be able to use this technology to create smart contracts that are automatically executed, which translates into being able to track claims and update conditions.
A recent report by PwC claims that Blockchain offers a $5 billion opportunity for insurance companies for damages. This could trigger “the transformation of business transactions and information exchange on the one hand and the elimination of costly layers of overhead dedicated to verification on the other. Potential benefits include a mutually trusted version of the truth, without the need for costly or error-prone manual re-entry of data.”
Data ecosystems and open source
As data becomes more important, open-source protocols will emerge to ensure that data can be shared and used across industries. Insurance companies that don’t want to be left behind need to manage software platforms, implement upgrades and go to market with compelling products.
Code tools enable companies to quickly deploy user interface functions, as well as doing it at a higher speed while empowering employees and developing pervasive applications.
Internet of Things (IoT)
Following the topic of the great advantages that good data management can bring, we come to the concept of the Internet of Things. Most consumers are willing to share more information in exchange for savings on their insurance policies, and the IoT automates that data sharing.
These devices can be used as components of smart homes, car sensors, and mobile technologies to determine better rates, prevent losses, and reduce risk. Markets & Markets forecasts point to “a global IoT insurance market value of $42.76 billion by 2022,” so companies should not miss the opportunity to improve their revenue and accuracy.
Social networks and data mining
Social media is part of our daily lives, both privately and professionally, and it has also become a very attractive environment for insurance agents to connect with consumers. They are places where you can be creative, inexpensively, and where you can engage potential customers.
In addition, beyond the more “marketing” side, data mining of social media is improving risk assessment for insurance firms, enhancing fraud detection, and enabling the delivery of an entirely new customer experience.
These automated response systems are increasingly present on websites in all sectors, ready to perform customer service tasks. According to some estimates, by 2025, 95% of all customer interactions will be driven by chatbots. This is a very high percentage for the near future, and many insurers are introducing these virtual assistants into their platforms.
These tools mix AI and Machine Learning, allowing them to interact with customers in the most “human” way possible, saving company employees time, which also translates into money savings. These bots can guide the customer through service requests, complaints or answering frequently asked questions. Still without replacing a person in the most complex cases.
With the hybrid cloud market expected to reach $128.01 billion by 2025, it is very important for enterprises to adopt this type of cloud storage to fully leverage the power of their data.
Cloud architecture improves speed and flexibility, allowing organizations to manage their data without the need for their own infrastructure, simply by taking advantage of the services and tools offered by cloud providers.
With digitalization, mobile apps have become another technology trend that has turned into a must-have for customers and their lifestyle. These facilitate access to customer location and important data to easily launch personalized premiums.
These applications allow companies to monitor their performance, measuring parameters such as user engagement, compatibility, data security, and conversion. This is why apps are going to be so important, becoming the point of contact between both parties for any transaction.
These changes are reshaping the insurance industry, and are going to enable them to focus on the customer, improve pricing and create operational efficiencies. Some of the questions companies should be asking themselves are: Am I focused on my customer as much as they want me to be? What organizational changes are needed to drive my business through data and analytics? What functions do I need to improve first? Where do I stand on the path to modernizing to mobile devices or robots? What technologies have the greatest potential in cybersecurity? These are just some of the questions your company should be asking itself to position itself at the forefront of Insurtech, but there are many more. We help you answer them all and find the path that best suits you. Shall we talk?