Technology has had a significant impact on the insurance industry; in recent years, new technology has completely transfigured the way that insurance companies operate and interact with their customers. As technology continues to develop, the insurance industry will only be even further revolutionised. So, which technologies are changing the insurance industry today? Well, some of the ways that technology has changed and is changing the insurance industry include the following:
How Has Technology Changed The Insurance Industry
1. Improved Data Collection and Analysis:
Advances in data analytics and artificial intelligence (AI) have enabled insurance companies to collect and analyse vast amounts of data more quickly and accurately than ever before. So this has allowed insurers to assess risk better and make more informed underwriting decisions.
2. Online insurance:
The rise of the internet has enabled insurance companies to offer online insurance policies, allowing customers to purchase insurance quickly and easily from the comfort of their homes. This feature makes things much easier for customers who live in rural areas, have mobility issues, or struggle to get to an insurance branch for any other reason.
3. Digitalisation of processes:
Many insurance companies have digitised their processes, allowing customers to purchase policies, file claims, and communicate online with insurers. Gone are the days of endless phone calls and confusing paperwork! This has made insurance more convenient and accessible for customers and streamlined back-end operations for insurers. No more never-ending back and forth.
4. Personalised products and services:
Technology has enabled insurers to create more personalised products and services based on individual customer needs and behaviours. For example, usage-based car insurance policies use data from vehicle sensors or smartphone apps to offer customised pricing based on how often and far a customer drives or how well they drive.
Therefore, this is excellent news for young drivers and other people who would otherwise find it impossible to get car insurance!
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5. Better detection of fraud:
Data analytics and machine learning have also helped insurance companies to detect better and prevent fraud. By analysing large data sets, insurers can identify patterns of fraudulent behaviour and take action to avoid losses. So this frees up insurers to work on other things.
6. Better engagement with customers:
Technology has made it easier for insurers to engage with their customers and provide them with more personalised and relevant information. Social media and other digital channels have allowed insurers to communicate more effectively and build stronger relationships with customers, whether through ads or just spreading advice.
7. Automation of tasks
Yes, AI is changing everything these days! Insurers have begun using AI to automate various tasks associated with insuring. For example, AI can analyse a variety of data - for example, credit scores, publicly available records, and social media activity - to underwrite a policy. Thus, AI can produce a more accurate and impartial pricing decision and risk assessment.
But it doesn’t stop there! Insurers also use AI in the claims processing process. For example, AI parses videos, photos, and other data to make quick and accurate decisions in this scenario.
Insurers even automate the customer service role with artificial intelligence chatbots. For example, chatbots can file claims, produce policy information, and answer customer questions.
What about the challenges of technology?
Technology has enabled the insurance industry to become more efficient, customer-centric, and responsive to changing market conditions. As technology evolves, we expect to see further innovations and changes in the insurance industry.
However, while new technologies offer many benefits to insurance companies, there are also several challenges they may face in adopting them. Some of these challenges include:
1. Cost
Implementing new technologies can be expensive, especially if existing systems need to be upgraded or replaced. This cost can be a barrier for smaller insurance companies with limited budgets. Think about it - there’s loads of expensive new hardware to fork out for and plenty of software that needs to be professionally installed. Then there’s the cost of getting everyone up to speed on how to use this new technology and potentially hiring IT professionals to keep the technology in order.
If all this isn’t expensive enough, think about what you’ll have to do if the technology breaks down! Maintenance and upgrade costs are other things you have to consider as an insurer. Maybe you don’t have too much new hardware yet. However, ongoing software updates and subscriptions can come with just as hefty a price tag as any hardware upgrades.
If you’re a big insurer, you might be investing in AI or big data analytics on top of this. These don’t sound too bad, right? They’re pretty much just software investments. However, analytics and AI require a lot of processing power, not to mention data storage. In addition, even if you don’t do this on-site, these services use a lot of electricity. Thus, big data analytics and AI are equally expensive!
2. Security and Privacy Concerns
Insurance companies handle sensitive customer data, and adopting new technologies can increase the risk of data breaches or cyber-attacks. As insurers collect and use more customer data, there is a risk that customers will lose trust in the industry. Insurers must be transparent about collecting, using, and protecting customer data to maintain customer trust. When using new technologies, insurers must ensure that they have robust cybersecurity measures to protect against these threats.
3. Integration with existing technology
Many insurance companies already have complex legacy systems that can be difficult to integrate with new technologies. This complexity can make it challenging to implement new tools and may require significant investment in IT infrastructure.
Ever installed expansion packs for a videogame, only to discover that you have to uninstall one, then put all the discs in a particular order every time you want to play the game? This is what maintaining backwards compatibility in insurance technology is like. New insurance technology is only sometimes compatible with your existing systems. This is different from implementing workarounds for different programming languages. And is all this really secure?
Then you have to think about migrating your existing data, too. It’s not just as simple as sending the database to the new computers - migrating data can be time-consuming and expensive, especially if you have a lot of it!
You also have to factor in all the disruption it can cause by having your current business processes interrupted by new technology. For example, there could be a lot of downtime as you upgrade your existing systems, where you cannot carry out the usual business tasks.
Suppose you’re worried about how a new system will collaborate with your existing business processes. In that case, you might carry out a test run to validate how well your technology will work together. Though this is undoubtedly far less expensive than just winging it and breaking all the technology, validation also means even more downtime, which can cost an insurance business even more.
4. Bias and discrimination
AI and other advanced technologies can sometimes perpetuate bias and discrimination, particularly in areas like underwriting and claims processing. Those who train the AI systems used in insurance work to ensure that the data they use to teach these systems are free from gender, racial and other biases. Nonetheless, bias is still a big problem in insurance technology. Insurers must be vigilant to ensure their technology solutions do not perpetuate unfair practices.
The bias may even come from the humans behind the decision-making. So, for example, if the underwriter themselves has a bias, whether or not they are conscious of it, this can lead to human bias in the AI system.
5. Skills gap
Advanced technology, such as AI and big data analytics, requires specialised skills and expertise. As a result, insurers may need help finding and retaining employees with the necessary technical skills to implement and manage these systems.
Sure, there are necessary business skills you need to have in insurance—an insurance professional needs to know how to underwrite and have good customer service and customer-needs knowledge.
But then there are all the increasing technical skills. These include basic programming, machine learning and data analysis, and more advanced skills like big data analytics and AI. Unfortunately, though you can find plenty of people with good insurance business skills and many professionals with great technical skills, it’s challenging to come across anyone with both!
6. Regulatory compliance
What if you invest in all sorts of new technology and devices, only to discover that using any of them is illegal? New technology can sometimes be at odds with existing regulatory frameworks, creating compliance challenges for insurers. So insurers must ensure that their technology solutions comply with all applicable regulations. These regulations include data privacy laws like the General Data Protection Regulation and the California Consumer Privacy Act, as well as cyber security regulations around the world. Plus, as we mentioned, the technology used in insurance must never discriminate or hold bias.
Overall, insurance companies must carefully consider these challenges when adopting new technologies and develop strategies for overcoming them. Therefore, this means plenty of investment in new IT infrastructure, enhancing cybersecurity, and selling customers on the benefits of new technologies.
What are some advantages of technology for insurance?
This being said it’s clear there are also plenty of advantages to insurers using technology. After all, why else would the industry use it? Technology has already provided insurers with countless new tools and skills, allowing them to provide better customer service and boost their operations. So, what are these advantages?
Let’s take a look at some:
1. Faster and more efficient processing
Insurance has undoubtedly made many insurances processes more efficient and way faster already. For example, as we mentioned, technology has dramatically reduced the time customers take to get a quote and the speed of insurers filing claims and receiving any payouts.
2. Makes things cheaper
Yes, the initial implementation of new technology is a hefty investment for insurers. However, in the not-so-long-run, these new technologies do pay for themselves with reduced overhead costs and more efficient insurance processes. These savings can then be passed on to the customers, increasing loyalty and business popularity.
3. Better meeting of customer needs
Insurance can be so one-size-fits-all. How often have you heard of people trying to use their policy only to discover that it didn’t entirely cover what they needed it to? But no more. Technology already greatly helps insurers to create bespoke insurance services and products formed for the specific needs of a particular customer. For example, data analytics and AI help insurers take note of customer preferences while the convenience of mobile insurance apps and online insurance portals.
4. More accurate
Though there are still concerns about bias, as we mentioned, cutting-edge technology like big data analytics and AI have significantly boosted the accuracy of risk assessment. This means insurers can price their policies far more accurately and decrease the likelihood of losses.
Machine learning, for example, makes claims handling much faster and decreases the likelihood of errors, thereby increasing accuracy.
5. Better fraud detection
Technology is now making it easier for insurers to spot fraudulent claims faster and more accurately. This saves money by reducing losses, and of course, by preventing most insurance fraud.
How does technology help insurers do this? Well, one way in which technology decreases fraud is through data analytics. Insurers can now spot unusual claims through the patterns data analytics gives them. Machine learning is another valuable tool for spotting fraudulent claims. By using historical data, a machine learning algorithm can flag suspicious claims.
Then there’s social media monitoring. By simply searching a claimant’s social media activity, an insurer can corroborate the timeline of a claimant’s injury or spot discrepancies. These are just a few of the many fraud prevention tools modern technology gives insurers!
Yes, technology has transformed insurance in many ways, giving insurers countless new tools to improve how they operate and serve their customers. Though there are still a few concerns and risks, new technology will only continue to keep changing the face of insurance for the better.
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