Overview
Digital transformation is a commonplace term used widely among various sectors in the world today. It has impacted countless commercial industries from retail and manufacturing to healthcare and hospitality. Although the insurance industry has traditionally been sluggish to modernize, it is finally starting to show signs of change as insurers are beginning to embrace digital transformation. Insurers today have had to digitize various aspects of their operations to follow through with the demands of the insured.
This development is only to be expected as any business that wishes to stay competitive in today’s marketplace must meet customers where and when they need something, which in most cases requires technological assistance. The digital transformation of insurance powered by artificial intelligence, machine learning, predictive analytics, mobile service, and live chat, to mention a few, is empowering insurers to improve their product offerings and continue to revolutionize the industry for years to come.
Given the increasing demands of customers and the competitive landscape, it has become imperative for insurance companies to leverage digital technologies to stay ahead of competitors. With the implementation of digital technologies, insurance companies expect to enhance customer experience and improve operational efficiency. Though market participants claim that the insurance industry is not an early adopter of digital transformation, new players, business models, and demanding customers are forcing the industry to adopt digital technologies.
How digital transformation is changing insurance
- Efficiency: The principal and most prominent effect of digital transformation on insurance is the efficiencies it enables. Primarily powered by artificial intelligence and its related technologies of predictive analytics and machine learning, almost all facets of insurance operations have been optimized for speed. Claims can be processed through applications instantly, and policy writing carried out in little time with machine learning capabilities. Digital transformation is also accelerating customer service, where digital assistants and live chat are helping clients in their times of need.
- Agility: Digital transformation is also helping insurers “future-proof,” as these technologies will assuredly continue to evolve and generate more advanced opportunities for years to come. The foundation laid by artificial intelligence, blockchain data, machine learning, predictive analytics, and data analytics will help insurers develop and adjust with new insurance capabilities and technologies.
- Personalization: Clients today expect service and attention where and when they want it. They also expect it to be suited to their needs, and personalization is now the status quo across all industries. Digital transformation is empowering insurers with the instruments they need to give clients excellent service without overextending their resources. Machine learning and AI create a seamless personalized experience for clients and brokers alike. Customers can pay bills, view policies, and file claims via an app, and brokers can receive and process all information on their end under one system. Digital transformation in insurance is also helping to personalize marketing efforts. Robust AI and data analytics systems can tailor and target marketing efforts for insurers, utilizing the power of social media to reach audiences they can truly impact.
- Scalability: The digital transformation of the insurance industry is also helping to make it more scalable and nimbler at both the front end and back end of operations. Technology today has made insurance more flexible to current demands despite a poor history. On the customer-facing front, insurers today offer service everywhere and anywhere through self-service dashboards and applications and can collect valuable data from customers via IoT-enabled devices and even wearables. On the back end, this technology is collected and helps brokers and insurers make more accurate decisions on underwriting, policies, new product offerings, and more.
Digital transformation use cases in insurance
Automation
According to information gathered from Mckinsey, 25% of the insurance industry will be automated by 2025 owing to AI and machine learning capabilities, since the industry is full of bottlenecks and manual processes such as claims processing, underwriting, policy administration, and customer service.
Process mining tools are beneficial for insurers who wish to identify processes that can be handled autonomously. Some tangible automation use cases include:
Claims processing
Claims processing has various layers such as investigation, review, modification, remittance, or denial of the claim. For each layer, insurers need to process a large volume of documents that can be automated. With document automation, insurers can automatically extract data from documents, recognize fraudulent claims, and verify claims that are in line with policies.
Risk prediction
Insurers can collect data about individuals’ historical health records to assess a risk point for each individual based on lab testing, claims data, biometric data, patient-generated health data, and then ask for the price according to the risk evaluation.
Claim fraud detection
Insurers feed predictive analytics instruments with data captured from the claimant’s story and use text analytics to identify fraudulent claims based on business rules.
Smart contracts
Blockchain-driven InsurTech startups build better risk-sharing models while giving people more affordable and custom insurance options. By allowing people to share risk across larger populations, their purpose is to reduce insurance costs and replace the need for bigger insurance companies.
Omnichannel
Creating a self-service portal where clients and insurers can get answers to questions, check on status, conduct business operations, submit support tickets and download resources is an effective approach to improve customer experience.
Some emerging and notable InsurTech startups
Quantemplate
Quantemplate is a fast-rising Insurtech startup that enables business users to take raw data sources, cleanse and harmonize them with devices powered by machine learning, then perform analysis to develop competitive advantage through proprietary insights. Leading insurance businesses use Quantemplate to grow their business, minimize their costs and enable digital transformation. The company was recently named a European FinTech Top 50 company and a Global InsurTech Top 21.
Founded in 2013 by Adrian Rands and Marek Nelken, Quantemplate has its headquarters in London, England.
Slice Labs
Slice Labs is the insurance engine behind tomorrow’s cloud-based, on-demand digital services ecosystems for the new economy. Through its Insurance Cloud Services (ICS) platform, Slice is enabling insurers, technology companies, and other service providers to build truly intelligent and intuitive, pay-as-you-go digital insurance products protecting the insured anytime and anywhere. Slice is licensed in the US and the UK and recently launched in the Asia Pacific.
Founded in 2015 by Ernest Hursh, Stuart Baserman, and Tim Attia, Slice Labs has its headquarters in New York, United States.
Surround Insurance
Surround Insurance is an InsurTech company that offers property and casualty insurance products. Their first offering is a subscription-based insurance starter pack coverage for young, urban professionals who rent, share, borrow, and freelance.
Founded in 2018 by Jonathon Grayson and Kate Terry, Surround Insurance has its headquarters in Cambridge, Massachusetts, United States.
Spot
Spot provides on-demand accident insurance for individuals. The startup also offers coverage for high-risk sports such as mountaineering, jet-skiing, cycling, and more. Spot offers subscription-based insurance coverage as well as claims settlement services.
Founded in 2017 by Matt Randall and Maria Miller, Spot has its headquarters in Austin, United States.
Conclusion
Digital transformation for the insurance industry is not necessarily disruptive (as is perceived by most). New technologies lead to significant changes, but change has always been a part of the industry, and insurers and their core business model have always survived. This shows a growing need for managers in the insurance industry to think of digital transformation less as a threat and more as an opportunity to grow.
The current level of technology and the potential for growth of the industry reveals that insurance is still in its infancy and will most likely experience significant developments in the times to come. To prepare for a digital future, insurers today must adopt the instruments of digital transformation and find innovative ways to optimize all areas of their operations.
For more extensive analysis and Market Intelligence reports feel free to approach us or visit our website: Venture Capital Market Intelligence Reports | VCBay.
We try our best to fact check and bring the best, well-researched and non-plagiarized content to you. Please let us know
-if there are any discrepancies in any of our published stories,
-how we can improve,
-what stories you would like us to cover and what information you are looking for, in the comments section below or through our contact form! We look forward to your feedback and thank you for stopping by!
Next Article
