With the insurance industry experiencing a rapid adoption of innovative trends and technology, predictably there are growing pains and barriers. Interviews with insurers highlight collaboration, workflow and documentation as the industry’s biggest challenges. With challenges existing, insurance carriers have invested plenty in digital capabilities in recent years. Understandably, no company wants to be behind the competition in implementing new tactics, but simultaneously industry leaders are skeptical for major change.
This then poses the questions:
“What’s the risk? Why are carriers hesitant to adopt innovative technology to fix these problems? How can tech really help my business?
Significant growth won’t occur without integrating new strategies and technologies, but here are 4 common insurance innovation challenges – and opportunities — insurers face:
Rising Costs and Inefficient Operations
Rapidly Evolving Tech
Rising Costs and Inefficient Operations
The eternal dilemma for all businesses is how to reduce administrative, IT, and sales costs. For years, insurers have been striving for increased efficiency; often with limited success. Increased legislation and consumer awareness coupled with new distribution models and aggressive competitors have required refocusing efforts on cost reduction. Large insurance companies have considered a range of measures from outsourcing, process re-engineering, and replacing legacy technology infrastructures to new low-cost distribution channels. In the insurance environment with low investment returns and immense pressure on margins, finding cost-savings are imperative.
Solution: Automating standard operational processes can reduce redundancies and manual input allowing employees to focus on solving complex problems and saving time. For example, claims processing can be assisted by RPA (Robotic Process Automation) to instantly extract relevant information from scanned documents and enter them into systems.
Rapidly Evolving Technology
The increased desire for fancy, trendy tech innovations act as a double-edged sword. One perspective is that although devices like Smart watches and remote-controlled drones increase productivity and fun, they are at risk of violating privacy laws. In contrast, the use of data and IoT connected sensors have made predicting and preventing losses more accurate. For instance, moisture detection systems help construction companies identify leaks and weak points before the issue elevates, avoiding an insurance claim. Data from connected devices allows insurers to know their customers more precisely, allowing for the claims process to move faster and smoother. Many companies have already begun offering discounts to customers who link their devices to their insurance coverage due to the increased accuracy and decreased risk. In concept, using customer data for more definite insurance policies are mutually beneficial, however insurers need to be transparent and communicate terms and conditions to their customers.
Canadian insurance and financial services regulators have keenly followed Fintech/Insurtech developments to ensure that both insurers and their clients are protected. In particular, aggregator sites, activity-based health insurance products, auto insurance telematics and usage-based insurance offerings are trending favorably for insurers, albeit at increased scrutiny by regulators. The Canadian Securities Administrators (the umbrella organisation of the country’s 13 securities regulators) has established a “regulatory sandbox” focused on analysing Fintech innovations and anticipating regulatory and consumer protection issues. Two of the key focuses of the current federal financial sector review exercise are (i) Fintech powers of financial institutions and (ii) Fintech collaboration. For the firms looking to implement tech into their insurance policies, keeping informed with legislation and compliance is necessary for sustained growth.
With the amount of choice consumers now have in selecting insurance providers, consumers have become expectant of personalized support in making their decision. According to Google, 53% of shoppers always do research before they buy to ensure they are making the best possible choice. With consumers becoming more informed about their decisions, this means that insurance firms must be specific in their sales approach. To take advantage of this opportunity, insurers have looked to AI and chatbots to provide a tailored experience. Using AI consists of compiling customer data to feed algorithms, and displaying certain products based on which website pages they visit or which articles they read. Chatbots provide the opportunity for 24/7 support with the chatbot handling common FAQ to redirect customers to certain answers. The major motives for delivering personalization are to “deliver better experiences,” increase loyalty, and generate measurable ROI. Adopting certain targeting strategies promotes engagement and increases the likelihood of conversion.
What will be the most interesting for the insurance industry is to see which providers are the most open and adaptable to changes in technology. IoT embedded devices relating to personal healthcare, automobiles and infrastructure have the potential to be revolutionary. However, with any new system there will always be challenges. The common denominator is that organizations will need to be aware of technological changes, while having the appropriate systems to educate staff and inform their clients. The companies that embrace tech and find creative ways to integrate it into current policies will establish themselves away from the pack and experience the most success.