Technology Innovations in the Insurance Industry

Innovation is present across many industries; as businesses and consumers adopt new technologies, only those skilled at quick adaptation rise to the top. Insurance companies are among those modern organizations that incorporate the latest technological innovations to improve their efficiency and customer experience.
2/07/20
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By Peter Rakowsky
Global Innovation Manager
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Technology Innovations in the Insurance Industry

Despite massive efforts to adopt innovative approaches in insurance, many companies still have a long way to go before catching up with consumers' expectations. According to the research by Deloitte, the following factors are impeding the growth of insurance companies:

  • lack of expansion resources
  • silo structure that blocks the flow of ideas
  • failure to outsource innovative skills from other industries
  • lack of incentives
  • absence of architecture that fosters extensive collaboration on sustainable innovation
  • inability to attract and maintain top talent.
Learn How to Deal with Challenges at Your Insurance Company

With these negative factors in mind, let's focus on the hottest technology trends in insurance and see how modern companies adopt them to reshape the current landscape.

Insurance Innovation: Micro-Insurance

Micro-insurance is the practice of providing coverage to low-income households or people with meager savings. The policy compensates for death, injury, fire, illness, earthquakes, and other calamities.

This low-income insurance is one of the best risk-mitigation tools available for what has traditionally been a neglected part of the population. Addressing the needs of a large group that has previously been overlooked by some insurance companies, micro-insurance becomes an innovative and profitable product.

However, insurance companies only succeed with micro-insurance by taking it seriously, rather than considering it as a mere necessity in meeting regulator policies. Take Etherisc, a Munich-based firm. The company partnered with Oxfam to provide micro-insurance through a blockchain platform, intending to make claim processing practical, fast, and straightforward.

What is exciting about this insurance trend is that practically every area of micro-insurance can be technologically enhanced. For instance, following modern tech trends in insurance, your solution may be developed platform-agnostic (web and mobile) to make client onboarding, pricing, behavior tracking, marketing, and data mining more accessible. Offering micro-insurance services can help to minimize your expenditure since your client base blossoms.

The critical point to remember in this market sector is that micro-insurance can get complicated and risky when dealing with large volumes. If your business chooses to invest in micro-insurance, consider partnering with an experienced company like DataArt to create scalable technology that will streamline and expand your processes.

Insurance Innovation: Blockchain

Although Bitcoin is still not widely accepted as a worldwide currency for daily use, its native technology, blockchain, is widely utilized by various industries. Blockchain technology relies on a decentralized platform, with the best security in the world.

Utilizing blockchain tech is a crucial, innovative strategy that can put insurance companies on the map. Thanks to its tenet of decentralization, all departments (IT, claims processing, and underwriting) can access records simultaneously. This saves a significant amount of time and effort in record keeping and information processing.

By relying on this relatively new technology in the insurance sector, smart contracts can also improve underwriting efficiency. Remember that blockchains share data with all departments, including third parties providing valuable data, such as meteorological agencies and field agents. With this accurate data so easily accessible, insurance companies can evaluate risk with minimal effort. Besides, as data accuracy is more reliable, fraudulent claims are less likely.

Some insurance companies are already using blockchain to streamline their processes. Etherisc (Germany), Beenest (San Francisco, CA), and Guardtime (Irvine, CA) are just a few. Blockchain is one of the technology trends in the insurance industry that can single-handedly streamline company operations.

Learn Blockchain Success Stories by DataArt’s Clients

While the process of using blockchain is quite simple, implementing this technology for real business processes remains challenging. Partnering with an experienced IT solutions provider with solid blockchain experience is the smart solution to becoming a modern insurance organization. DataArt is a global engineering firm with over 4,000 completed projects and a prestigious client roster, including the likes of NASDAQ, Zesty, and a diverse portfolio of insurance organizations. When partnering with us, you can rest assured that the latest innovation in insurance will be masterly applied for your company’s needs.

Insurance Innovation: P2P Approach

In the peer-to-peer (P2P) model, a group of individuals, friends, or relatives create a pool of resources to cushion themselves against the unexpected. P2P insurance arrangements help to bolster transparency because, when an incident occurs, claims are processed immediately. And if the coverage is insufficient, the reinsurer will cover the difference to ensure damages are met.

In a P2P environment, the core element is trust. This means the chances of fraudulent claims arising are negligible, and each individual is motivated to keep a low-risk profile because it directly affects the entire group's combined risk. Towards the end of a policy, unused arrears return to the owners. This does not happen with traditional insurance firms as reserved premiums are not paid out. Many people believe that modern-day insurers rely on bureaucratic intricacies to avoid paying claims or returning premiums.

This challenge — and many more — has made P2P one of the emerging digital innovations in insurance as financially savvy consumers prioritize the assurance that they will be fully compensated. However, to set up an effective P2P insurance strategy, businesses need technological tools to ensure client onboarding and payment processing are trouble-free. Blockchain technology and its underlying currencies (like Bitcoin) can be used to enable straightforward deposits and faster smart contract execution. Since the whole idea of a P2P model is to simplify processes, online payment methods and online forms are a must.

There are many compelling reasons to add P2P insurance to your company's services, including lower operational costs translating into lower premiums, and, therefore, more customers. The online peer-to-peer insurer, Lemonade, is a perfect example of this strategy realized in action. Others include Tong JuBao (China), Friendsurance (Germany), and Guevara (UK). Talk to a technology consulting firm, like DataArt, to understand how your business can develop this lucrative innovation in the insurance industry.

Insurance Innovation: Robo-Advisors

Meeting clients' needs at any time of the day, and without delay, is a priority for most companies. But this is an almost impossible task for a human workforce. Artificially intelligent tech, like robo-advisors, step into the breach. Properly deployed robo-advisors can handle routine or repetitive insurance operations that do not need human intervention, like collecting customer data, processing queries, and even underwriting new policies. This technology could eventually replace brokers and automate most duties, while still offering customer support similar or better than that provided by humans.

Though a relatively new innovation in insurance, robo-advisors are already standard practice in wealth management and financial services. Once trained, they run according to a set script. Lemonade is a great example of a fully digitalized insurance company that deploys its services almost entirely through virtual assistants. Initially, it used AI assistants – Jim and Maya – to perform simple operations. In 2017, Jim successfully executed a theft claim in just 3 seconds. More recently, Lemonade has used Maya to sign up new customers, assign premiums, cancel policies, file claims, and resolve customer issues.

Such technology innovation in the insurance industry as a robo-advisor can help cut costs while improving customer experience. With our vast experience in AI and ML, DataArt will help you get this tech up and running smoothly.

Insurance Innovation: Gamification

Gamification is an insurance industry innovation that is rapidly gaining traction. It is a powerful tool to activate massive growth in areas with historically low performance. Though gamification is not a new technology, many insurers have recently started to adopt it and are already reaping the benefits. New players also choose gamification as a way of creating more customer-centric digital solutions. Because of its relatively low implementation cost, gamification is currently one of the prevailing IT trends in insurance.

Gamified elements foster closer relationships with clients, and, once you have a loyal base, your business becomes sustainable. For example, gaming tactics can work on advertising life insurance to millennials on known, popular interactive digital platforms.

Company employees are a valuable asset that should not be ignored. Through gamified elements, employee behavior can be positively influenced, so workers produce more, learn more, and become more resourceful. American Family Insurance, Lawley Insurance, United Healthcare, SunLife Financial, and Direct Insurance are just a few of the companies that have used gaming tools to drive engagement.

This path, however, does pose risks. Not every game will fit strictly regulated business processes in the insurance domain. Gamification requires an understanding of human psychology and the proper deployment of the technology. The game must have both intrinsic and extrinsic rewards. Only a skilled technology provider, like DataArt, will help you to wisely introduce gamification elements that really trigger users to play into your insurance digital solution.

Insurance Innovation: IoT

If an insurance provider takes weeks to process a claim, they will fall behind the competitors and begin to lose customers. The growth of the Internet of Things (IoT) has been a game-changer for businesses and consumers alike, and customers now expect rapid results as the norm. If your company does not utilize IoT as one of the technology trends in the insurance industry in 2020, you are likely losing out to your competitors.

IoT is primarily a connected chain of devices: mobile phones, printers, computers, cloud services, and so on. This technology does away with paperwork and the tedious delays caused by the physical exchange of documents. With IoT tech, a customer can quickly upload images of their damaged property; agents can review the data immediately, and process the claim in minutes. The same is true for underwriting. With interconnected devices, all departments can access data simultaneously, adjust premiums, and onboard new clients in minutes.

The immense wealth of data that is readily available because of widespread IoT use also means that you learn more about your clients. This allows you to provide them with custom, personalized offers, which are likely to bring higher conversion and customer satisfaction rates. You can also detect frauds and create a more accurate business system.

Progressive, a US-based car insurer, is a company that uses telematics dongles and machine learning to observe driver's behavior so that they can tailor insurance premiums. To date, the company has used this tech to monitor over 1.7 trillion drives. Other insurance companies using IoT are Liberty Mutual, John Hancock, and Metromile. DataArt has offerings in the IoT domain that would help your insurance company generate data-driven insights and outperform the competitors.

Insurance Innovation: Usage-Based Insurance

Even if a company adopts every available bit of digital technology, there is still the risk of a flawed pricing model. The right way to circumvent this issue is by offering more personalized data, such as in the auto insurance industry, gathering data about driver habits.

With usage-based insurance (UBI), aka telematics, companies can quote a price based on customer driving habits: the more dangerously they drive, the higher the premium, and vice versa. This process is made possible by event trackers installed on users' cars. The device notes down mileage, acceleration, airbag deployment, hard cornering, driving location, and other metrics. This way, the pricing model becomes uniquely tailored based on an individual's behavior, making it fairer across the board.

Deploying UBI means into a digital solution helps insurance companies to attract low-risk drivers, reduce claim costs, enhance customer loyalty, and even help customers become more responsible drivers.

Insurance Innovation: Big Data and Machine Learning

Big Data is changing insurance in significant ways. With so many pools of data available internally and externally, companies can now use AI-enhanced predictive models to reveal profitable trends and patterns.

Many insurance firms are leveraging big data and machine learning in pricing and underwriting operations. For instance, Greater Than (Sweden), IBM, and LexisNexis Risk Solutions use AI-trained tools to perform complex risk assessments and write policies based on individual consumer's behavior.

Life and health insurance companies, on the other hand, utilize the power of wearable IoT devices to monitor a person's behavior before drafting a personalized insurance policy. Claim processing, fraud detection, and customer service are other areas that can benefit from trained AI bots to process multiple data streams in seconds and offer reliable feedback.

Without big data and machine learning for process automation and technological tools that make marketing and customer interaction more productive, you will lose out to your competitors who are proactively investing in this trend. You can consult DataArt experts in data, BI, and analytics on how your insurance company would benefit from big data and AI/ML.

Top Insurance Innovation Trends by the Industries — A Quick Look

A number of IT trends are insurance industry-wide; yet, certain innovation approaches gain momentum in specific sectors only - because of social, geopolitical, and economic circumstances they depend on.

Life Insurance Industry Trends

The COVID-19 pandemic has recently re-shaped the life insurance industry, with the demand for these insurance services rising exponentially and simultaneously with the disease contamination rates across the globe. According to McKinsey, public pension replacement rates have recently been declining and healthcare expenditures have been rising—trends also accelerated by the COVID-19 crisis. Life insurance technology trends in 2021 are expected to deal with artificial intelligence and advanced analytical means for a) more personalized customer experience and b) flexible solutions adapted per regulatory demands.

Property and Casualty Insurance Industry Trends

Global climate changes and – as a direct result of these – uninsured natural catastrophes offer large new market opportunities for the property and casualty (P&C) insurance sector. P&C insurtechs, just like their colleagues in adjacent insurance sectors, invest in sophisticated data analytics and trends and price prediction capabilities, leveraging such innovative techs as IoT and AI/ML. They also keep abreast of distributed ledger technology (DLT) as blockchains share data with such third parties as meteorological agencies. Besides, many repetitive tasks in the P&C sector are bound to automation – in a recent report by McKinsey, around a quarter of jobs are predicted to be displaced by automation by 2030.

Auto Insurance Industry Trends

As the automobile manufacturing industry reaches new technological levels, auto insurance providers struggle to keep a high-tech pace with it. Connected devices drivers use are a relatively new data source for auto insurtechs. No wonder, IoT, which allows usage-based insurance, is named one of the major auto insurance technology trends in 2021 and years to come. Auto insurers actively work on P2P offerings, digitalize their micro-insurance services, and . However, it is worth noting that the sector was majorly hit by the COVID-crisis in recent months, with work-from-home mode prevailing and significantly fewer people using autos on the daily basis. This poses a serious threat to auto insurance providers, making them leverage innovative technologies, like AI and ML, to focus on a digital customer and reorganizing existing offerings.

Travel Insurance Industry Trends

In 2020, the world’s travel industry was literally brought to a standstill in the first months of the pandemic. The crisis had a particularly strong negative impact on the financial planning priorities of travel insurance providers. Now it is still too early to predict an uptick of travels and growing demand for travel insurance as some parts of the globe remain locked down, while others expect the second and third waves of coronavirus soon. Those travel insurtechs who remained afloat after the crisis are now advancing their algorithms to target potential users with more personalized offerings; some of them implement gamification elements in legacy systems to liven UX up. They invest in big data analytics and automation: AI-driven chatbots and 24/7 available robo-advisors.

DataArt's Approach to Insurance Industry Innovation

The path to becoming a technologically advanced insurance organization and establishing a foothold in your market is not easy. You need to transform operations using the best and most innovative strategies. When building and implementing new technologies, a seasoned technology provider like DataArt will help you save costs while becoming an industry leader.

DataArt can create custom solutions that promote usage-based insurance, personalization, and better use of available data. We can help with smart contracts to improve transparency, blockchain platforms to distribute data, or review your current technology base and advise on how to enhance it.

Explore More Insurance Use Cases and Solutions

Conclusion

The insurance industry has been stuck in the past for too long, and continued disregard of technological improvements and evolving customer expectations will stymie its growth. Customers are now prioritizing insurers who process claims and address their specific issues as quickly and conveniently as possible.

There are numerous insurance industry trends and technological innovations that you can adopt to prevent customer churn and improve the experience for the existing user base. The options are boundless: a blockchain pilot program, IoT, micro-insurance, robo-advisors, or gamification. Talk to DataArt experts to learn more about extensive and budget-friendly software solutions for your insurance company.

FAQ About Innovation Approaches in Insurance

How Is Technology Changing the Insurance Industry?

Technological innovations help companies in the insurance domain achieve operational excellence and offer a more customer-centric experience. With big data, AI, and ML, among other emerging technologies, insurers custom-tailor offers to individual users, thus gaining higher ROI and growing their user base.

What Are Current Industry Trends in Insurance?

The major insurance technology trends in 2021 remain almost the same as in 2020: streamlining business with AI and ML, blockchain, and IoT tech; offering optimal personalized policies to segmented user groups; automating repetitive manual tasks; leveraging analytics for more business-driving insights.

What Are the Biggest Challenges Facing the Insurance Industry?

Most insurance companies fail to meet the high market demands as they lack knowledge and resources to adapt existing digital solutions in accordance with the rapidly changing customer expectations. Some insurtechs also suffer from changing economic conditions and governmental regulations.

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