Emerging technologies dominate insurance headlines and conferences today, offering digital strategies to enhance multi-channel customer engagement, automation, and operational efficiency. The overwhelming buzz requires companies to distinguish practical, cutting-edge strategies from bleeding-edge red herrings.
This article presents an overview of current trends coupled with realistic use cases in insurance. Learn which technologies are helping insurers modernize, improve customer experience, and advance digital data collection, and which are low-return distractors.
Insurers seeking to anticipate evolving needs, connect with customers, and achieve operational excellence must create and maintain modern internal structures. Here are some of the buzzwords powering these changes:
1. InsureTech-Powered Solutions
As discussed in a previously published article, “InsureTechs: Pioneering New Practices in Insurance,” InsureTechs are challenger companies spearheading modernization in insurance with a “technology-first” mentality. They are rapidly replacing traditional processes and products with technology-powered and customer-centric programs. Established players are engaging InsureTech disruptions by competing with, underwriting for, or investing in InsureTech-powered solutions.
2. Modern Insurance Processing Systems
Insurers have spent the better part of a decade transitioning from inflexible legacy systems to modern core systems. From 2013–2017, core system replacement was the top priority for carriers, focusing on operational efficiency for policy administration, claims, billing, and more. Today, companies are engaging with technology providers whose products extend beyond core to support noncore, data, and digital capabilities.
Carriers select their core systems from an array of platforms:
Monolithic platforms offer all features and functionality in a single suite. Components of the suite work together to form one, self-contained application. Any alterations to the system are made at the platform level.
Modular platforms can be deployed either as an entire integrated platform or made available as stand-alone elements. For example, a claims management module that is part of a broader core platform may be deployed on a stand-alone basis if the system is modular in nature.
Microservice architecture is an alternative way to develop and deploy software applications. Applications are created as a suite of independently deployable, component services. Microservices run distinct, separate processes and are built with extensive communication capabilities for seamless interaction with other microservices. For example, an insurer could use a rating microservice to instantaneously provide quotes to an agent, underwriter, and customer frontend portals.
- Application Programming Interface (API)
API is the process through which software servers send requests for information and receive information. APIs create frictionless microservice, vendor, and system integrations for accurate information transfer. A policyholder app may send user-submitted risk information to a backend processing system, receive a quote based on the submitted information, and provide the policyholder with a quote in a matter of seconds, all through API calls.
3. Cloud-Hosted Services
The cloud is a network of connected services that manage, distribute, and connect computers. Insurers increasingly use cloud-hosted services to enhance storage capacity, security, and accessibility. Many cloud deployment options are available:
- Public Cloud
Public cloud refers to cloud hosting offered by a third-party vendor, such as Amazon Web Services or Microsoft Azure. By removing expensive barriers to hosting, maintenance, and upgrading, insurers have complete control over their information. Public cloud hosting can be multi-tenant or single-tenant:
- Multi-Tenant Hosting
In multi-tenant hosting, multiple clients work from the same cloud instance and database. Though generally cheaper, overuse can slow the instance and database. Software as a Service (SaaS) platforms, like Adobe Creative Cloud or Netflix, use multi-tenant hosting to provide access to services from a third-party cloud.
- Single-Tenant Hosting
Under single-tenant hosting, each client is hosted on its own instance, meaning each client has its own website and database. Single-tenant hosting offers increased flexibility, scalability, and security.
- On-Premises or Private Cloud
Private cloud, on-premises (hosted by the insurer), and vendor-hosted deployment use virtualization tools and dedicated IT resources rather than cloud technology to maintain administration processes. This deployment model is almost obsolete, as 94% of companies use or are actively planning to use cloud services.
- Hybrid Cloud
Hybrid cloud strategies blend traditional on-premises and cloud hosting strategies. Some carriers adopt a hybrid strategy when migrating from on-premises hosting to cloud hosting. Insurers interested in integrating a digital cloud strategy can use Amazon Web Services hybrid tools during implementation.
For more information on how insurance companies are using cloud technology to increase agility, enhance accessibility, lower IT costs, and automatically scale their business, read our previously published article Cloud Technology Still a Bit Cloudy?
Customer Experience Enhancement
Insurers are applying new technologies to enhance customer experience, focusing on efficient, connected, easy-to-use, self-service processes for insureds. Customer experience technologies include direct distribution, chatbots, apps, augmented and virtual reality, and gamification.
4. Direct Distribution
Insurers use self-service technology to anticipate and meet digital consumer expectations. These initiatives build insurance products from the inside out, starting with customer experience and adapting products to fit ideal experiences. Examples include websites, portals, and apps from which insureds can purchase and maintain insurance products directly.
Chatbots (through programmed rules or artificial intelligence) interact with users within a chat interface. Insurers can use chatbots to automate customer service and enhance direct distribution processes. There are four major use cases for insurance chatbots:
- User-initiated insurance processes, such as FNOL submission or policy application
- Customer information retrieval directly from your website or insured portal
- Agent or staff information retrieval from staff portals
- Product integrations with digital assistants, such as Alexa, Siri, and Google
Apps provide support for well-rounded, multi-channel engagement. Apps improve customer experience by increasing usability, accessibility, and data sharing. Insurers are launching policyholder, agent, and adjust apps to allow users to self-manage accounts, policies, payments, and claims from their preferred devices.
7. Augmented and Virtual Reality
In augmented reality, users superimpose digital elements onto the world around them, much like stickers offered on social media platforms allow you to add digital layers to a picture taken from a smartphone camera. In contrast, virtual reality refers to immersion into a virtual world simulating the real world. Primary insurance use cases are limited, generally focusing on developing interactive courses for underwriters, claims staff, and even insureds.
Gamification is the process of applying gaming qualities to everyday business processes. Fitbit provides a prime example of gamification to engage users with its downloadable app. From the app, users can view their progress toward daily walking goals, log eating and exercise habits, view a leaderboard of walking statistics, and challenge friends. Insurers can offer similar social engagement opportunities and incentives for wearables, telematics, and Internet of Things (IoT) data, rewarding safe and healthy habits that lower risk. Insurers are also investigating gamification (sometimes in combination with augmented or virtual reality) to enhance insured and employee education.
Advances in data collection (drones, IoT devices, telematics) and data processing tools (big data, artificial intelligence, robotic process automation) create more comprehensive data than ever before, offering precise, groundbreaking insights.
9. Internet of Things (IoT)
IoT devices are increasingly popular among consumers. More than 20.35 billion connected devices are installed today worldwide, and the number is projected to grow to more than 30.73 billion connected devices by 2020. Connected IoT devices, such as smart thermostats and smart locks, enable constant user monitoring and remote access for everyday processes. These devices also provide carriers with detailed data about property safety and insured lifestyle. IoT data has potential to boost claim processing and risk analysis efficiency.
10. Automobile Telematics
Like IoT devices, automobile telematics offers new data sources to insurers. Through device installation in policyholder vehicles, insurers track highly detailed vehicle data, such as speed, location, and sudden stops. Insurers can process data to enhance risk assessment precision. Additionally, many carriers (including Allstate, Liberty Mutual, Progressive, and State Farm) offer premium discounts for telematic installation and safe driving habits, improving customer experience.
11. Big Data
Big data is infrastructure that stores carrier data and tools used to query and build visualizations on top of the data. Big data also relates to predictive analytics. By inputting IoT, social media, demographic, and website analytics, carriers can create profiles for their customers. Through profile comparison, carriers can predict behaviors such as cancellation and renewal likelihood. Carriers can even use big data for fraud detection, comparing a claim submission with an insured’s previous claims to check for similar language.
12. Artificial Intelligence (AI)
AI is defined as using a computer to learn and make decisions. AI has a variety of insurance use cases, including data processing, driverless cars, and advanced image, voice, and text recognition for chatbots. Most promising of these use cases involves data processing. Carriers implement AI to search extensive databases for patterns, leading to new insights. AI works hand-in-hand with big data, IoT, and telematics: IoT and telematics provide massive amounts of data, big data provides an interface for manipulating data, and AI analyzes data to draw new insights, such as risk factors or buyer patterns.
13. Digital Twin
Digital twin refers to a virtual model of real-world processes. Working in tandem with data collected from telematics, IoT devices, and AI machine learning, a digital twin builds virtual models of real-world risks. These models can enhance predictive analytics, risk prediction, and underwriting efficiency.
14. Robotic Process Automation (RPA)
Eighty percent of executives state insurers are already investing or planning to invest in RPA and AI within the next three years. RPA and AI are similar in their use of computers to process vast stores of data. While AI uses machine learning to learn and improve decisions over time, RPA machines process and make decisions through programming only; RPAs do not make insights on their own, but rather operate by using long, complex algorithms quickly over large sets of data. RPAs automate repetitive processes, such as time-consuming duplicate entry. Carriers investigated RPA as a way to work around malfunctioning core systems, but these attempts were found unfavorable.
Drone and satellite use is rapidly expanding among insurers. Adjusters and inspectors use drones to automate site inspection processes further. Through visual and thermal imaging, drones provide precise data allowing carriers to assess risk and damage more accurately. Drone usage can increase underwriting and claim information efficiency by as much as 40%.
Insurers use blockchain to manage policies and payments. Created with the intention of eliminating unnecessary third-parties in transactions, blockchain offers secure digital record management. Using cryptocurrencies, like Bitcoin, carriers create smart contracts automatically to process transactions when publicly recorded events occur (such as a flight cancellation for travel insurance). Records cannot be changed or updated, providing a reliable record system. However, difficulties arise if an error occurred in the original transaction but cannot be undone. Blockchain is also permissionless, meaning everyone has complete access to read and write transactions, increasing transparency but decreasing privacy.
While 89% of executives believe digital technologies will disrupt their business in the next year, only one in four companies has a digital strategy in place, with almost half of those companies having only a limited strategy in place. At the same time, innovative technologies are beginning to mature, creating perfect opportunities to implement new use cases into your product offerings. Consider your business and IT strategies today. Investing in technology now will help provide digital, connected, optimized experiences for your insureds and employees in the near future.
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