The insurance industry is rapidly changing due to digital transformation. Insurers are transforming how they approach policy management, customer service, claims assessment, product development, inspections, and much more.
In this post, we’ll look at how digital transformation is reshaping the insurance industry and explore the top 11 digital transformation trends that you need to know to remain competitive.
The Rise of Insurtech
Before we dive into the top 10 trends, it’s important to understand the role of Insurtech in digital transformation.
Insurtech is a term used to describe companies that use technology and innovation to disrupt traditional insurance processes.
These companies leverage data and digital technologies, such as AI and machine learning, to create innovative products, services, and processes.
The integration of Insurtech into the insurance sector has improved customer engagement, simplified operations, and enhanced personalization capabilities.
And, as this McKinsey report notes, the amount of investment in this sector has surged in recent years, which is great for fueling innovation, but also adds increasing pressure to scale quickly and implement these new technologies.
Challenges of Digital Transformation for Insurance Companies
Of course, with any new technology, there are also challenges for insurers to consider. Regulations and compliance requirements necessitate additional risk assessment, data security measures, and privacy protocols.
Additionally, many organizations lack the resources or expertise needed to implement insurtech solutions and formulate a successful digital transformation strategy.
So, although insurtech has gained momentum, the fact remains that the traditional insurance industry is notoriously slow to embrace new technology.
11 Technology Trends Driving Digital Transformation in the Insurance Sector
Despite these challenges, the case for insurance digital transformation is clear: it can improve customer experience, optimize operational processes and provide insurers with a competitive edge.
Given this, let’s dive into the top 10 digital transformation trends reshaping the sector.
This one might be surprising, but Drones are actually seeing widespread adoption in the insurance sector. In fact, insurance carriers started securing FAA permission to use drones for pre-loss and post-loss applications back in 2015.
Drones can be used to survey an area and collect data quickly and accurately, which can be invaluable when conducting a risk analysis, inspecting damage, assessing and adjudicating a claim, and preventing fraud.
And, as this article notes, drones are a faster, cheaper and safer way to complete riskier inspections for adjusters, such as roof inspections and post-disaster inspections, in some cases improving a claims adjusters workflow by as much as 50%.
The Sharing Economy
You might be wondering how insurance companies are taking advantage of the sharing economy.
In fact, insurers are already offering innovative services and products that tap into the sharing economy – such as peer-to-peer insurance, microinsurance, and on-demand insurance.
By leveraging the power of networks and technology platforms, insurers can offer flexible coverage options to customers at a lower cost than traditional policies.
Also, peer-to-peer insurers such as Lemonade are revolutionizing the industry by introducing community-based models that allow customers to share risk and reward with each other.
Whether it’s mobile payments and digital wallets, or customer portals where customers can easily access their policies, insurers are increasingly leveraging mobile technology to provide a better experience for customers.
This is particularly important in the current climate where more people than ever are working remotely and relying on digital channels to get things done.
Additionally, with insurtech start-ups constantly developing new mobile apps for anything from managing claims to customizing premiums, the insurance industry is continuing to shift towards mobile technology-driven solutions.
AR and VR Technologies
Again, not the first thing that comes to mind when we think of insurance. But there are numerous opportunities for insurers to use virtual reality (VR) and augmented reality (AR).
For instance, customers can use virtual reality to virtually inspect a property before taking out a policy or make more informed decisions when filing a claim, while insurance adjusters can use VR to conduct remote inspections and view properties without having to physically be there.
Additionally, insurers can use AR to visualize complex data and present it in an easy-to-understand format.
They can also use AR for customer onboarding, training and support.
Although this technology is still very new to the insurance field, by leveraging AR and VR tools, insurers will ultimately be able to reduce costs, improve customer experience and create more immersive customer interactions.
When it comes to social media, insurance companies need to embrace a more customer-centric approach that works hand-in-hand with their traditional in-person business development efforts.
For example, policy providers and agents use social media to engage with customers, proactively resolving their queries and responding to feedback – rather than simply using it as a platform for marketing and advertising.
By leveraging the power of social media, insurers can create more meaningful conversations with customers and build trust.
That’s why so many insurance companies have invested resources in setting up dedicated customer service accounts on social media.
And although social media is a mature technology relative to some of the other trends on this list, there is still a lot of room for improvement (and refinement) in how smaller insurance companies use social media to bring value to their business and customers.
AI & Machine Learning
AI and machine learning are transforming the way insurers do business, from automating mundane tasks to developing personalized products and services that meet consumer needs.
For example, insurers can use AI-powered chatbots to answer customer queries quickly and accurately. This, in turn, can help insurers deliver a better customer experience.
Insurers are also using AI and machine learning to analyze large amounts of data quickly and accurately. This helps them get insights into consumer trends, identify risky customers and develop personalized products.
For example, CCC has developed AI technology that can quickly and automatically identify accident types, repairability, claim routing and more, so insurers can personalize decisions at scale, reduce risk, and improve efficiency.
Internet of Things (IoT)
The internet of things is having a huge impact on the insurance industry.
From connected cars to smart home devices, insurers are leveraging IoT technology to offer innovative products and services that can provide customers with real-time data about their risks and help them manage them more effectively.
For instance, some insurers offer usage-based policies where customers only pay for what they need.
Similarly, insurers can use connected cars to analyze driving data and determine if a customer is a safe driver.
For example, gone are the days of relying on basic data such as age, gender, car make and model, and mileage to determine premiums.
Instead, car insurers are now able to use IoT to evaluate a deeper level of data such as average driving speed, driving time, how often a driver uses his or her brakes, amount of cell phone usage while driving, and more.
As an immutable public ledger, blockchain has immense potential for the insurance industry. Insurers are using it to streamline processes such as claim payments, policy issuance and monitoring of fraud cases.
In addition, by leveraging blockchain, insurers can reduce costs, increase security and gain better insights into customer behavior.
For example, with smart contracts as part of a blockchain platform, insurers can automate claims processing and payment, eliminating the need for manual intervention.
At the same time, blockchain also provides consumers with more control over their data as they are able to determine who can access it and how it is used.
Insurers are collecting large amounts of data from various sources such as social media, IoT devices and mobile apps. With modern, serverless cloud platforms, the scale of data analysis is increasing exponentially.
Insurers are now able to harness this data to gain key insights into their customers, which can help them design more tailored products and services.
They can use this data to better understand their customers’ needs and develop personalized products that meet those needs.
Data analytics can also help insurers better manage risk, optimize claims and improve their overall efficiency.
This level of insight leads to better decision-making, which ultimately results in increased profitability and sustainability.
Robotic Process Automation (RPA)
Robotic process automation is revolutionizing the way insurers do business by automating tedious tasks such as claims processing and policy administration.
By leveraging RPA, insurers can reduce costs and improve accuracy. They can also use RPA to identify potential fraud cases and process claims much faster than before, delivering a better customer experience in the process.
In fact, RPA is already seeing widespread use in the insurance sector, with several examples where automation technology is used for claims processing, underwriting, regulatory compliance, policy administration, data entry, and customer service.
The need for enhanced cybersecurity measures applies to just about every industry undergoing digital transformation, and insurance is no exception. Insurers, both carriers and agents, need to ensure that their networks, systems and data are protected from cyber threats.
They should use technologies such as encryption, access control, analytics and artificial intelligence to detect and prevent threats. They should also be sure to create a culture of security and privacy within their organization.
The additional opportunity for insurance, when it comes to digital transformation, lies in the cyber insurance policies that protect against losses due to data breaches, hacking and other cyber-security threats.
How Will Insurance Evolve as a Result of Digital Transformation?
As we’ve seen, there are numerous ways new technologies and insurtech solutions are changing the way insurers interact with their customers, manage risks and optimize processes.
In the future, these technologies will become even more pervasive as insurers continue to embrace digital transformation. As a result, insurance products and services will become increasingly personalized and interactive.
Insurers will be able to leverage data analytics and machine learning to better understand consumer needs, design more tailored products and services, optimize operations and manage risk.
At the same time, customers will enjoy a higher level of transparency and control over their data as well as easier access to insurance products and services.
Ultimately, the hope is that digital transformation will lead to a more efficient, secure and customer-centric insurance industry.