Though not one of the early adaptors of technology, the insurance industry today is paving a path towards disruptive innovation after being technologically stagnant for the longest time. Insurance companies are evolving to become more competent and undergoing massive digital transformation, thanks to the pandemic that accelerated the pace of it due to the rising need for digitization.
The disruptive technologies are allowing insurance companies to explore more possibilities, increase efficiency, and give them a leg up on the competition in an already crowded field. New technological developments are beneficial for insurance companies in several ways:
From increasing their efficiency to effective fraud detection, it can also help them in process improvements, faster claims processing, and new insurance models like peer-to-peer and pay-as-you-go. The right insurance technologies ensure customer satisfaction as the number of consumers demanding high-speed digital services is growing.
So why is Insurtech disrupting the insurance industry?
- Low Costs
- Wider Distribution
- Better Products
- Increased transparency
- Better claims
- Increased operational efficiency
Let’s have a look at some of the top insurance technologies that are predicted to create phenomenal waves in the insurance sector.
Telematics offers the insurance industry yet another avenue for data collection and usage. Telematics car insurance is already a popular concept among consumers and insurance players equally. Telematics allows insurers to tap into driving insights that help them better understand their customers’ risk levels. In turn, carriers can price all types of drivers more accurately, leading to loss ratio improvements. With telematics, it is now simpler to draw insights from and deliver services and its usage can be a great way to reward safer drivers by providing them with reduced premiums and in turn results in lower claims for insurers as well. The usage of telematics technology in the auto insurance industry enables insurers as well as the insureds to monitor the driving performance.
An emerging trend among tech giants, the industry is buzzing about the need for companies to build a “digital twin” for simulation and analyze the results before the implementation in the real world. Digital twins are a virtual replication or mirror of a physical system that can help to visualize and contextualize data from physical and virtual assets, they bridge physical operations and digital capabilities, and enable easy information sharing with ecosystem partners. They act as simulations to help predict the future more accurately. Hence, with digital twins today, it is possible to predict the damage of situations that have not yet occurred, but might. In the insurance industry, it translates to events like car accidents or disasters like earthquakes, etc.
Deep learning (DL)
After Artificial Intelligence and Machine Learning transformed the insurance industry radically, it is now the turn of ‘deep learning’. A subset of ML, deep learning can analyze and draw conclusions from data, and solve problems without being trained or given explicit instructions or frameworks. It can more closely mimic the human knowledge acquisition process. The neural networks of deep learning improve the analysis capacity compared to ML.
Natural language processing
NLP helps to infer the meaning of texts and respond logically to them when needed. It is also a subset of artificial intelligence, providing the ability to automatically read, understand and derive meaning from text in a variety of contexts. It is a useful technique in the insurance sector, as there is a large amount of contextual data to be analyzed. NLP is highly useful for claim processing and fraud detection in the insurance industry.
Yet another technology that has been key in the digital transformation journey of insurers, blockchain has the potential to bring about substantial gains, reduce costs, enhance transparency, comply with regulatory requirements, and address many other industry issues. Offering innumerable benefits, the technology is ideal for efficient claims management, higher data security and better fraud detection.
Internet of Things (IoT)
IoT is the perfect tool that can help insurance companies to monitor and track the condition of insured assets, gather data on usage habits, predict when devices may fail and more. This provides many benefits for both the insurer and customers by reducing claims costs that result from accidents or poor handling of devices.
Drones are another technology that is now being used by insurance companies to assess safety and property damage claims such as floods, fires and landslides. They can provide accurate information about the location of events, identify damage and help determine insurance payouts faster than ever before. The importance of aerial data is becoming increasingly important in the insurance sector.
With the boom in insurtech and its wide adoption by insurance players, they are now able to cater to the niche requirements of customers and create small insurance products that fulfil a specific need or context, thus resulting in many more innovative insurance coverages like pet insurance, short-term rental insurance and more, thus resulting in better customer satisfaction levels by recognizing the shifts in their requirements.
Moreover, with insurance ecosystems also coming into play, big data analytics is helping insurers understand their customers at a more granular level and is enabling them to create highly customized products and solutions. They are also able to leverage analytics to add value across several streams ranging from customer acquisition and service to pricing and claims assessment, and even fraud detection.
According to a study by PWC, “Insurance is indeed heading down the path of disruptive innovation, whether it is the effect of an external factor, such as the rise of the sharing economy, or the ability to improve operations using artificial intelligence.”