Technology disrupting insurtech
Originally published in Digital Insurance
Though insurtechs are recognized as a disruptive force in a long-established industry, less is known about the actual technologies these companies are using to differentiate themselves from traditional competitors. The application of emerging technologies like artificial intelligence, machine learning, analytics, wearables and more, has enabled insurtechs to be years ahead of traditional insurers in many ways—including the ability to provide automated, digital solutions to end-users, more accurate pricing and underwriting, and even assist in creating healthier people and safer workplaces.
As new technologies are utilized, insurtechs will continue to innovate and create efficiencies within the industry that never existed before. While I’m excited about many of the different technologies insurtechs are working with or beginning to experiment with, these are three key tech trends I believe have potential for incredible disruption in 2022 and in the years to come.
1. Automation - AI and ML
AI and ML are already being applied in the insurtech space. ML laid the groundwork for the industry’s ability to improve algorithms, while AI is enabling faster and more precise pricing and underwriting. The use cases of AI and ML are expected to keep growing—research from Accenture shows that more than 75 percent of insurers plan to use AI to automate tasks in the next three years.
For example, by applying automation through AI to customer service, insurers are able to improve the overall customer experience for policyholders. Insurers can address common questions and requests more quickly and accurately, as well as customize their service to the unique needs of their customers.
An example of successful automation was detailed in an insurtech industry outlook report from Deloitte. Japanese insurance provider, Mitsui Sumitomo Insurance, used an AI-powered ‘agent support system’ to identify customer needs through the analysis of internal and external data. This led to 860,000 individual and 80,000 corporate sales leads per month, with agent productivity increasing between 20 to 130 percent.
By continuing to automate new processes, insurtechs will be able to quickly and cost-effectively add new customers and improve customer retention. Over the next few years, automation will continue to grow and even become a mainstay for some of the traditional insurers.
The use of wearables has had a tremendous impact on insurance. For example, if construction workers wear accelerometers, insurers could detect how they’re moving around construction sites and leverage the technology to create different risk scenarios.
Wearables also have the opportunity to play an important role in health insurance, as the data collected on physical activity and health can inform underwriting and allow providers to develop affordable wellness initiatives that reduce accidents and incidents of chronic diseases.
With the permission of the policyholders, and the use of wearable devices and smartphones, life insurer John Hancock, announced in 2018 that it began incorporating interactive policies to track fitness and health data. According to the company, policyholders have been shown to live 13 to 21 years longer and incurred 30 percent lower costs related to hospitalization.
There’s also an opportunity for wearables powered by augmented reality to make a similar impact—if construction workers wore helmets with AR capabilities built in, it might improve safety and awareness on the job and allow underwriters to make more accurate risk assessments. Ultimately, wearables could lead to more accurate pricing and most importantly, a safer work environment.
3. Behavioral and analytics data
Improved data sources and analytics will allow companies to minimize risk and make sound decisions, based on tracking behavior profiles. As an example, these profiles have been used in the past by HR teams to make hiring decisions and help with risk assessment.
Behavioral analytics is also an increasingly useful tool used to fight insurance fraud. The way an insurance customer interacts with a provider’s online interface, whether they’re using an old account, or opening up a new one, reveals information about the user and their intentions. This information is used to distinguish between authentic customers and fraudulent activity.
Policyholders have expressed their desire for insurers to use behavioral data to better the customer experience. According to DataArt, 77 percent of policyholders surveyed said they would happily exchange behavioral data for lower premiums and quicker settlements.
The implementation of the aforementioned technologies will continue to propel the entire insurance industry forward, and in turn, will result in a more efficient experience for both insurers and policyholders. Though insurtechs are leading the charge in automation, wearables, and behavioral data analytics, traditional insurers will also reap the benefits of innovation, as customers can expect better pricing, service, and safety across the board.