In a world where various industries are digitized, it is high time that the Insurance sector revamps its traditional models. It should immediately undergo a digital transformation!
The introduction of innovative technology in the insurance sector can help realize higher revenues, lower costs and strengthen customer relations. Digitization presents immense potential for growth of insurance companies. They should remodel all their operations, like underwriting, customer service, claims management and compliance.
An analysis by Bain and Google shows that a prototypical P&C insurer in Germany, that introduced these technologies could increase its revenues by up to 28% within five years, reduce claims payout by as much as 19% and cut policy administration costs by as much as 72%. (As shown in Figure 1)
Highly digitized companies like Google and Amazon, which are constantly adapting to provide greater consumer convenience and experience have risen consumer expectations. It would benefit the Insurance sector to follow a similar path of technological transformation.
Digitization will simultaneously benefit both the company and the customers. They will reach places with the help of technologies like machine learning, IoT , virtual reality etc.
Buying insurance online will be less cumbersome for customers as it will involve less paperwork. Thus, customers will be able to choose the most appropriate policy by making comparisons across different companies. They can critically examine their requirements where no salesperson can manipulate them.
The procedure of reporting and settlement of claims will accelerate and become more efficient. The policyholder won’t have to make numerous phone calls and fill never ending forms. After digitization, just a few clicks and uploading of some images will serve the purpose. Tools like big data analytics and machine learning will ensure that the claim amount received by the customer is appropriate. Moreover, customers details will be stored in the company’s database so that they don’t have to fill in all the details every time they purchase a policy, hence making the system faster, more efficient and more convenient.
Virtual reality is presently used in android games like Pokemon Go but it has a wide scope to expand into the insurance industry. This tool can be used in underwriting education and adjuster training. Thus, creating virtual scenarios of real life situations will coach the agents and underwriters better. Information from social media, GPS systems, big data and machine learning will replace complex actuarial calculations, improving the insurer’s ability to assess risk and manage claims.
Internet of Things
The Internet of Things, a huge network of physical devices like vehicles, buildings and electronics facilitates proactive preventive maintenance, reducing the risk of accidents and hence the number of claims. Entities can avoid the fires & floods claims by installing simple leak detectors. They can sense both temperature and water, thus, provide an early warning of the leak.
Sensors embedded in these equipment enables the insurer to understand the behavior of different customers; assessing how negligent or callous a policyholder is. Also, organizations can use this this information to follow a price discrimination strategy. For instance, an auto insurance company can charge a higher premium rate to a policyholder who holds the record of rash driving as compared to the ones who are comparatively more prudent. The Boston Consultancy Group has estimated that U.S. insurers could reduce annual claims industry by 40 to 60 percent, in their nearly $10 Bn-a-year, just with the real-time data that smart devices could provide.
Online shopping portals like Flipkart and travel agencies like MakeMyTrip use digital marketing techniques to target and expand customer base by studying their consumption patterns and preferences. For instance, if a person purchases a bicycle or smartphone online, he or she will receive notifications of suitable insurance policies of the same.
There also exists a growing need for Digitization of Insurance Companies Governance Risk and Compliance (GRC). Hence, it will bring about accountability in the organization, help assess risks and manage all compliance, thereby ensuring smooth internal functioning. V-Comply is an application on the cloud which caters to the GRC needs of all companies.
‘Trov’ is an Australian Insurance application, which has moved all its operations online, from policy underwriting to claim settlement.
Innovation in the form of more updated applications is the need of the hour. It carries the potential of amplifying the insurer’s profits and enhancing the consumer’s experience. Thus, breach of privacy and security issues related to growing Digitization remains a matter of concern. However, suitable rules and regulations can help monitor the insurer’s freedom to data.Add to favorites