The global insurance market is experiencing a technological shift. Digital-first business models are the product of traditional insurance companies and insurtech companies collaborating more than ever, testing new business models and revenue streams fueled by new technology. Most importantly, emerging technology trends can reduce operational costs by preventing fraud and automating services, thereby freeing up insurance agents to acquire and maintain business.
It is a brave new world, but it’s not as scary as you may have thought it would be. Below are five of the top technology trends disrupting the insurance industry — for the better.
The Rise Of Insurtech
Insurtech has a bad reputation in some corners of the insurance industry because it has shaken things up quite a bit in an otherwise stable industry. However, insurtech can also help traditional insurers to modernize.
A broad umbrella term, insurtech is the use of innovative technology to bring insurance shoppers savings and efficiency while disrupting the current model used by most carriers. Often, insurtech companies tackle complex data so that people are not rated based on the basic level of data carriers use to group people based on risk.
Not only do insurtech companies sometimes offer better pricing models, but they also use artificial intelligence (AI) to customize packages and complete the coverage process without the need for a broker. As I’ve written about before, many insurtech startups are already working with traditional insurers as dedicated partners, not rivals.
One way that consumers are using technology to bust out of their risk groups and save money is by installing telematics devices. Telematics devices are installed in a car’s on-board diagnostics port (OBD II Port), which is located beneath the steering wheel of the car. Many newer cars already have telematics devices built-in. After installing the monitor, the telematics device begins tracking driving habits and passes them onto the insurer. Companies can also provide consumers with a copy of the report to help them improve their driving skills with a savings incentive.
While some people may be unpleasantly surprised by how poorly they rate and that their rates have gone up after installing a device in their car, other people may see a decrease in premiums. Progressive offers Snapshot, State Farm offers Drive Safe & Save and Nationwide offers SmartRide.
There’s no way of working around social media, which has become a hot place for insurance agents and carriers to connect with consumers. Agencies big and small, including Geico, have already taken to LinkedIn, Facebook and Instagram. Some insurance professionals get creative using video apps without spending a dime or create highly stylistic videos intended to grab people’s attention.
Most agents I work with see the value in using social media to connect with prospects while educating and better serving their existing clients. Carriers can even leverage social media to offer insurance quotes online by using Facebook forms and Facebook messenger to ask questions.
Robotic Process Automation (RPA)
Who doesn’t get freaked out when they hear that robots will soon be able to perform tasks normally reserved for humans? At least in the insurance industry, it’s a lot less dramatic than a fleet of metal drones taking over our jobs. I expect that RPA will simply automate transactions and processes like claims processing and document verification. Consumers could see more options for self-service, and over time, this will create less of a need for back-office jobs. On the flip-side, there could be a greater demand for agents with skills in data analytics and machine learning. Robotics and Cognitive Automation (R&CA) will basically foster collaboration between humans and machines by automating repetitive tasks and enhancing the quality of jobs, according to Deloitte.
Artificial Intelligence (AI)
AI stands to disrupt the insurance industry more than any other because carriers rely on data, which is the foundation for AI as well. The more successful a carrier is at mastering this new technology, the higher the chance of its survival could be in the future. However, the insurance industry is lagging behind with only 1.33% (download required) of the industry investing in AI in 2017, according to Deloitte. In fact, it’s likely the insurance industry’s slowness in catching up with the AI movement that has made insurtech startups so successful.
Insurtech is simply filling the void in a culture that has already acclimated to automation and fast, accurate service. For example, Deloitte covered one property and casualty peer-to-peer insurance company that uses AI-powered claims analysis. Eighteen anti-fraud algorithms are reportedly processed using image and video claims information from the consumer. Hippo is another company that has already implemented AI. Used properly, AI is and will be giving insurers a competitive edge well into the future.
Many people are still confused and frightened by the concept of blockchain, which one paper explains is really a record of digital events that is shared among parties and can only be updated by consensus of the majority of participants. Information on it can reportedly never be erased. This is important because blockchain could disrupt the business model that extracts value when there is a transfer in value between parties. Also, blockchain could create a shift in consumer expectations for faster service. Blockchain technology could help improve risk assessment and fraud prevention, and, best of all, I believe this new technology promises to lower costs while keeping clients happy.
The future of insurtech will likely be more individually priced based on personal data, instead of being based on average statistics based on demographics. For health insurance, for instance, there will probably be monitors like Fitbits designed to predict risk.