While the insurance sector is increasingly adopting new technologies, there still exists a huge gap in the efficiency of processing different insurance product offerings and customer expectations. For example, it is still very frustrating for customers to wait on phone calls to get through to executives even when they need to file emergency claims. However, disruptive technologies like artificial intelligence have the power to improve such situations. Backed by predictive analytics and data collected through interconnected consumer devices, there is a huge potential for the insurance sector to improve its efficiency and accuracy, and ultimately provide consumers with better plans and potentially cheaper premiums.
Moving from assumptions to concrete results with data analysis
Consumer data is a goldmine waiting to be tapped into, especially for insurance companies. Right from customer behaviour, personal information, shopping patterns, locations, health patterns, driving patterns and lifestyle history, everything is stored in databases somewhere! This can drive artificial intelligence engines to make great advances in decision making for insurance policies and premiums. Interconnected devices keep track of the minutest changes that customers undertake, and even these changes can have a huge impact on the way these customers purchase their insurance. A wearable that is connected to an actuarial database could power an AI engine to calculate a consumer’s personal risk score based on daily activities, their fitness patterns and risk patterns.
This will also work in favour of consumers too, not just insurance companies. The insurance industry too seems to think along these lines. Research states that more than 80 percent of insurance executives believe that technology will disrupt the sector by leaps and bounds. How? Imagine having to not make cold calls anymore, simply because the need will not exist. An AI engine or chatbot will pull out data on its own, and once this data has been processed and analysis results predicted, insurance research executives can spend time personalizing marketing and sales strategies, thus working towards building sustainable client relationships. This will remove the traditional underwriting strategies which are very human centric. Instead the underwriting will not be based on facts and not assumptions as well accurate data. This will in-turn allow addition of a host of new insurance products which are specific towards each customer’s needs than just generic offering to the masses!
Harnessing the power of experiential learning
Being human means having the power to learn from experience. Taking this experience one step further while combining it with technology has given us machine learning abilities. NLP (Natural Language Processing) backed by an AI engine and ML has enabled creating experiences that are intuitive, conversational and real time. A Gartner report predicts that by 2020, 85% of customer interactions will be managed without a human through digital assistants. Customers also prefer interacting with companies through modern technologies rather than outdated processes, because this saves time, is more reliable and most importantly, very convenient. So, while historically, the insurance sector was driven by mathematics and in most cases, human instinct, it will now be driven by concrete data and insights.
Blockchain : The disruptor for InsureTech
One of the biggest technological disruptions of our time has also been the blockchain – the distributed serverless ledger. The first problem area that blockchain can help eradicate is insurance fraud. Enough number of insurance frauds have caused sleepless nights for executives. On a distributed ledger, insurers can record permanent immutable transactions while protecting the data integrity. This would help insurers collaborate and identify suspicious behavior across the ecosystem, for example, the validity of ‘no claim bonus” which reduces the premium. This reduces the margin for fraud, raises margins for companies overall, and helps them come up with better premium plans for customers.
The blockchain could also provide a better means of facilitation of policy issuance! Using smart contracts, the payment for the premium can be triggered only after the underwriting process constraints have been met and the customer requirements are met. The agent commission would be automatically and instantly paid and the policy issuance would also be accurate and immediate! This would drastically change the way the insurance industry works by reducing the policy issuance time and ensuring that it’s accurate and beneficial for both customers and insurance companies.
Another example would be related to renewal of insurance; A customer could budget a certain amount of money for various insurance renewals and set constraints on them – the smart contract would be executed only when these constraints are met and could get consumers a better bargaining chip. For example, a smart contract could have the customer specify the upper bound for ₹ 15,000 for the car insurance subject to specific add-ons and benefits. Similarly, the insurance vendors could “bid” for the insurance based on the condition of the car (age, no claim bonus, add-ons etc.). The contract would be executed instantly when both parties’ constraints are met, and every party gets their dues! This could bring power to the consumer in choosing the right insurance and could help agents setup the right constraints for their customers. On the other hand, the insurance company is satisfied because their criteria also have been met before policy issuance!
These ideas could also be the beginning of insurance companies using Cryptocurrency for insurance. While the idea may seem to be too far-fetched right now, I assure you, it isn’t, because there’s only one rule to follow if you want to succeed as a part of the ever-evolving technological ecosystem.
Break all rules and choose to disrupt!