9 Insurance Industry Technology Trends in 2020 [Updated]
In the second decade of the 21st century, we witnessed rapid technological advancement at unparalleled speed. In just 10 years, a huge portion of human life was digitized. This cataclysm of a sort changed pretty much every industry on the planet.
The insurance industry is no exception. Insurers traditionally are not on the leading edge of new technology. As a risk-averse group, they have historically been slow adopters of new tools and technologies. Yet, insuretech became a buzzword with nearly 20 000 monthly searches on Google worldwide.
This is clear proof that the insurance industry is evolving and both vendors and consumers are looking to take advantage of the available advancements. Today, we are on the verge of a new decade that we foresee as even more disruptive when it comes to insurance technologies.
In the following paragraphs, I will introduce you to 9 emerging insurance industry technology trends, which are expected to engulf the domain. They will help those vendors who follow them stay on top of the competition and satisfy both their and their customers’ needs.
1. Ridesharing and Autonomous Vehicles Revolution
There are a few key insurance industry trends driving major changes in automobile insurance, which is the top consumer product for most retail companies in the insurance domain.
Ridesharing (fewer people owning cars), semi-autonomous cars in the short term/autonomous cars in the long term, are transforming the whole landscape for the insurance industry, eroding premiums and in some cases reducing the size of the market.
One of the biggest insurance industry trends is the recently emerged ride-sharing service. Companies, which employ a gig economy, have exploded in the last few years, to say the least.
Businesses such as Lyft and Uber could have a big and lasting impact on the insurance industry because of the emerging requirements for ride-sharing insurance. At the moment, not too many freelance drivers have ride-share insurance.
The results from a recent study show that only about 20% of them are insured. However, more than half of the interviewed drivers have stated that they plan on getting additional coverage at some point in time.
Uber alone has an estimated 400,000 drivers around the globe, which means there are several hundred thousand drivers involved in ridesharing who are not insured.
Getting the insurance however is not as easy for the drivers as it may sound. Since rideshare drivers are considered independent contractors by the insurance industry. Their vehicles are used both for personal driving and for business.
That makes insuring them in a somewhat of a gray area. This is because personal insurance offers no protection for the driver if he uses his vehicle for business, and a commercial insurance plan is only for vehicles used strictly for business.
The conclusion for companies in the insurance domain is that ridesharing is a new, previously unexplored market. Insurance agents should research rideshare policies, so they can bridge the gaps in their policies and adjust SAID policies since insurance varies from country to country.
The rise of the Autonomous Vehicles
More and more car manufacturers incorporate self-driving systems in their vehicles. In case of an accident in which the human driver was not involved, the fault seems to fall onto the manufacturer.
In cases where the car’s self-driving system was the reason for the crash companies like Google, Volvo and Mercedes-Benz have already accepted liability. Meanwhile, with great confidence in their own product, Tesla extends an insurance plan to all owners of their newer vehicles.
The whole process of standardizing insurance for autonomous cars, however, is certainly going to take some time. Vehicles would need at the least a way of detecting whether the fault lies with the driver or with the systems itself.
2. Higher Efficiency in the Insurance Industry due to Machine Learning & Automation
Machine learning and automation will drive towards higher efficiency in the insurance industry. In the context of a fast-changing competitive landscape, insurance companies like Colonnade are focusing on marketing, distributing and issuing policies more efficiently. They also need to provide high-quality multi-channel customer service at maximally optimized cost.
Companies in the insurance domain are exploring and investing in machine learning and automation during the whole product lifecycle: from marketing, through underwriting and customer service to claims processing, fraud management, and reimbursement.
While automation and machine learning have been present in the insurance industry for years, only simple processes that require low decision-making skills such as data entry, compliance checks, standard customer communications, and managing rule-based decisions, used to be a subject of automation.
Thanks to the capabilities of the intelligent systems, the insurance industry is beginning to explore the automation perspectives of much more complex processes such as property assessment, receiving customer insights, personalized customer interactions, fraud detection, and claims verification and processing. This is why I believe that automation is going to become among the primary insurance industry trends.
Some insurers have even started employing drones for automated property and claims assessment.
3. Cyber Security Coverage
Another one of the major emerging insurance industry trends is cyber security. It is an issue that insurers should look at from both the perspectives of a security provider and a client, since it affects them just as much, if not more, as their clients.
While risk management is something that insurers deal with daily, they seem to be a bit behind in terms of cyber precautions, when compared to other financial sectors. Insurance agencies haven’t been the targets of hackers all that much, however, as other targets become more secure and inaccessible, attackers are moving on to more unprepared targets. Since insurance companies hold enormous amounts of sensitive personal information such as personal properties, health, etc.
The other way cybersecurity could influence the insurance industry is through its inclusion in various policies. Because of the time and age, we live in, many businesses and individuals alike are under the risk of their virtual information being breached and the expectation for coverage arises.
Whether it is included as an entirely standalone service or as an endorsement to an existing policy, companies would look to their current provider and definitely won’t be happy with those who refuse to offer cyber security coverage.
General liability providers offer cyber security coverage because of two specific reasons:
- First, general liability is a large, profitable business for many insurers. If clients are not satisfied with the coverage provided by their current insurer, they can test the markets.
- Second, cyber risk is an emerging trend and line of business that keeps growing, with the potential to generate future revenue growth.
4. Diversification of Insurance Distribution Channels
Companies in the insurance industry are starting to leverage multiple parallel channels, often working hard to minimize channel conflicts. Some of the fastest-growing channels are bancassurance, affinity and retail partners. Web and mobile channels are also growing in importance, although in most countries mostly for comparison shopping/information gathering.
In Europe, insurance products are starting to get bundled and sold with banking products. Therefore, pure-play European insurance companies are at a disadvantage from a distribution perspective. In addition, direct-to-consumer online channels are also becoming more important as the internet pervades the daily lives of most consumers.
5. Blockchain Insurance Technology
Yes! The blockchain is one of the most powerful technology trends to revolutionize the insurance industry in the next couple of years.
Even if Bitcoin, Ethereum and Ripple don’t become the standard currencies of the future, the groundbreaking technology behind them is what the focus is on for the insurance companies. They have already started employing blockchain insurance technology in their existing workflow to avoid huge losses because of false claims and scams that happen daily in the industry.
The first area in the insurance industry, which the blockchain technology could have a lasting effect on, is underwriting. Since this is the department responsible for whether a claim is trustworthy or not and how much of it can be covered, it could use a trustworthy repository of data.
Exactly that central repository of truth is what blockchain offers to be. By using it, data from external sources can be sourced by the underwriters to automate some aspects of their jobs.
Another aspect of the insurance industry that can be positively affected by blockchain technology is the processing of claims. Considering the number of data points that need to be verified and the manual effort required, it’s no surprise that the users find the process too long and tedious.
By using blockchain all the necessary information needed for claims verification can quickly be processed. Companies from the insurance domain can track the usage of an asset by using the data available in the blockchain without tampering any information.
Get familiar with how Blockchain help insurance companies build trustworthy customer relationships. IBM Distinguished Engineer, Bertrand Portier, leads a panel discussing how blockchain is bringing trust and security to the insurance industry. He’s joined by Salesforce Global Head of Insurance, Jeff To, Marsh Chief Digital Officer, Sastry Durvasula, and AAIS VP, Solutions & Partnerships, Truman Esmond.
6. High Personalization of Insurance Premiums
Higher personalization levels in premiums is an emerging trend that is scheduled for a long stay in the insurance industry. Because of all the products customers are exposed to, they are used to a certain level of customization.
It doesn’t matter if it regards the insurance industry or not, they expect to be treated as individuals with their own needs and to be communicated to accordingly.
More than 80% of insurance consumers look for some form of personalization, be it an offer, pricing, recommendation or a message from their provider.
To be able to supply their customers with the personalization they want, companies in the insurance domain would need a foundation of solid data insights. In addition to this data, they would also need behavioral insight to develop a deeper view of their customers.
According to a study made by Accenture 77% of insurance, customers are willing to provide data about their usage and behavior in exchange for insurance coverage recommendations, quicker claims settlement or lower premiums.
The insurance domain is evidently taking advantage of this because only 20% of all customers say their insurance provider has no customer-tailored experience whatsoever.
7. Self-service and Improved Customer Experience in Insurance Claim Settlement
When handling an insurance claim, a large amount of the customer’s premium is spent on the process itself.
This is due to many reasons such as everything being manual, the carrier wanting to double-check the claim and customers not always telling the truth. The solution is to have the customer manage the claims process. While taking a self-service approach may sound counter-intuitive, the customer provides video and images at First Notice of Loss (FNOL) and is in control of the claims process.
When a good portion of the minor cases are handled and reviewed autonomously instant payouts can easily be achieved and only in a matter of hours the customer can have his money. By cutting the time needed for a reply, customer satisfaction should also rise. Only after someone fails an autonomous review would human interference be needed.
An example of something similar to this is the Web Portal that we developed on behalf of DZI.
8. All-in-One Insurance Policy
The All-In-One form of insurance is steadily turning itself in an emerging trend. From a customer’s point of view, it makes perfect sense and provides great convenience to something that is usually a hassle.
By using such policies, consumers have one relationship with their insurer and let them cover “everything” at once.
When companies in the insurance industry have all details about their customers (cars, home, health, travel, pets, and possessions), they are able to provide a single overarching policy, a fair price and a flexible adjustment of the cover as needed. Since for the most part, this is AI territory, it would be fairly easy to be automated.
9. Insurance Industry Value Chain Automation
While the emerging trend of automation is not unique to the insurance industry, it will certainly have lasting effects on it, because much of it still operates via pre-Internet methods, which are wildly outdated in today’s world.
Another reason is the fact that many personal lines are being automated. Small parcels of insurance protection cannot be packaged and sold using only human effort and remain cost-effective.
The customer demand for automated solutions is a considerable factor in favor of the decision. They want a purely digital experience that does not require human contact for the sake of effectiveness and simplicity.
Like all the other members of the financial sector, the insurance industry is ever-changing. Because of the plethora of competitors who offer similar services, companies in the insurance domain need to follow the emerging trends in order to stay on top.
On the one hand, you have trends such as automation and blockchain, that drive your company towards higher efficiency, and on the other hand, you have trends such as the demand for more personalized premiums and cyber security policies, which can lead to the loss of both current and potential clients.
If you’ve already got ideas on how to ride these trends but are not sure about their execution, just drop us a message. We are here to help!
Author: Ivaylo Guenov, Manager of North America Operations