TL;DR: Known for its complexity and structure, insurance companies have struggled to implement cutting-edge technologies in their processes. By 2030, we’re expecting an industry that fully embraces automation, chatbots, IoT implementations, P2P and DLT services, and much more.
Insurance is a complex age-old business. Typically, insurers sort people into different groups, defined by all sorts of risk factors. Calculating a client’s premium and other benefit amounts has traditionally been a complicated process as it considers a wide range of factors. Even simple tasks may take a company a considerable amount of time.
Yet, insurtech is slowly trying to change the face of the insurance industry. This novel concept, a portmanteau of “insurance” and “technology”, has prompted disruption using the latest technological innovations. From artificial intelligence to telematics, insurtech companies are shaking up the industry and changing their cumbersome models for more efficient ones.
Here are three (very important) clues to understanding the future of insurtech.
Transforming insurance companies with data
Many insurers have noted that companies don’t use a lot of data to create their products. Paul Ford, CEO of insurtech start-up Traffk, notes that these companies are missing huge financial opportunities because they rely on 40-year-old information.
According to the World Economic Forum, an estimated one trillion devices will be connected by 2025. We’re talking about a lot of data coming from smartphones and smartwatches, cars, and even medical devices. The vast amount of data available has the ability to transform traditional insurance models into data-driven ones. Data offers a unique selling value proposition for more forward-thinking insurance companies, so they can provide more efficient and precise services.
But, how? Data is looking to transform every single aspect of the insurance industry, from distribution to pricing and claims. Sufficient data allows developers to use AI algorithms to create risk profiles, making the experience of purchasing insurance a lot faster.
In ten years, machine learning-based models will become fundamental for underwriters. This means that defining the underwriting or the liability that ensures payment in case of loss will take seconds to determine. As data sources become centralized and easily accessible, insurers will be able to process and understand far more data, helping them make faster decisions regarding a buyer’s profile.
Automating the future of insurance companies
Artificial intelligence is making incredible changes in areas such as claims, where systems are starting to handle more tedious processes. Carriers get the more challenging claims. Claim automation also allows customers to control their insurance information from virtually anywhere. Non-complex claims, for example, can be handled from a smartphone.
However, it’s expected for more than half of claim activities to be automated by 2030. Automation will also make use of IoT sensors and data-capture technologies to document events that would typically require manual methods. In a car crash, for example, the policyholder could take a streaming video of the damage and radically reduce a claim’s turnaround.
Another benefit of claim automation and automation in the insurance industry, in general, is fraud reduction. Insurance Europe once reported that fraud represents 10% of all claims. Automation helps prevent fraud by easily providing more information to detect it, thus giving more time for the claims department to analyze results.
Finding new ways to communicate
One way of making insurance products more effective is to incorporate chatbots in customer interaction. As we mentioned in a previous blog, chatbots are more than an answering channel. They can provide perks and benefits, including details of promotions, and, in the case of insurtechs, they can handle basic processes
This doesn’t mean that the role of insurance agents is reduced or eliminated at all. On the contrary, over the next decade, the number of insurance agents is said to change into process facilitators and process educators. The idea is to leave the most inane processes to machines, and help agents provide tailored client interactions. In a nutshell, technology is making the entire insurance process more personal and human.
What more to expect
All sorts of artificial intelligence applications, as we mentioned in the previous sections, can transform insurance companies. However, those aren’t the only shifts we’ll be witnessing. Aside from data, many companies are learning how to incorporate Internet of Things and distributed ledger technologies (DLT).
Without a doubt, implementing these technologies will lead to ground-breaking changes within the next ten years. However, businesses and developers should also take into consideration many factors, including security, developing a strategic plan, and understanding thoroughly AI-related technologies.
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