Digital disruption is touching every aspect of the consumer market, including the insurance industry. Traditionally, the insurance industry has lagged behind other sectors in the shift into digital technologies, its business model proving to be remarkably resilient. But it too is beginning to feel the effect of digital, as its slow-to-adapt mentality puts it at risk in three areas:
- Low customer retention
- Inability to attract new customers
- Lack of innovation
So with customers expecting more personalized, agile, and on-demand delivery, insurers are now racing to keep pace and deliver more relevant solutions for a changing user landscape. What’s more, the digital revolution is demanding internal changes to drive digital transformation within the organization and operate in more cost-effective ways.
Insurance companies face added pressure, because it’s not just about disruption in their own backyards. Industries such as travel, automotive, health and financial services, all of which are deeply tied to the insurance industry, have undergone significant disruptions of their own. Even more concerning is the possibility of losing market share to outsiders who believe they can approach common insurance concerns in better ways. Companies such as Amazon are making the ability to deliver better insurance options to their employees and customers a top priority.
Consequently, savvy insurers are preparing for a future in which they deliver more relevant solutions to their customers. Emerging technologies will spur a transformation of the insurance industry and offer a solution for many of the concerns today’s insurers face. The variety of breakthrough technologies – specifically artificial intelligence (AI), blockchain and cloud – must be front and center in every insurance company’s strategic initiatives.
Artificial Intelligence
AI serves two distinct purposes in the insurance landscape – data analytics and automation. Information derived from machine learning and predictive analytics enables insurance companies to not only better understand the customers they serve, but to anticipate their needs and provide valuable advice to keep customers protected. This speed and agility allows the insurance industry to match stride with would be disruptors in the digital age.
Between massive flooding and raging wildfires, reinsurers and insurers report that 2017 was a devastating year worldwide, putting them under pressure to keep pace with a deluge of claims (insured catastrophe losses reached an all-time high of $135 billion and total losses, including uninsured ones, reached $330 billion). When such disasters arise, AI offers access to relevant data that can help insurers process claims faster and get customers the help they need in the moment they need it. Rather than suffering while an insurer imposes requirements of an endless supply of forms, victims of these tragedies can be better served in the times that matter most.
Using Chatbot and voice technology, AI can help automate labor-intensive areas of the insurance process such as claims and underwriting. According to research conducted by Accenture, “82% of insurers agree AI-driven automation will be seamlessly embedded into every aspect of the business over the next five years.” This will not only make customer transactions more seamless, but will also help reduce costs for insurers, as these simple but time-consuming tasks can be managed by machines.
The good news is that customers are on board. According to Accenture’s 2017 Global Distribution and Marketing Survey, 74% of consumers say they’d be happy to get computer-generated insurance advice, and 78% would take investment advice from a virtual assistant. AI not only serves insurers, but the modern consumer as well.
Case Studies
Case Study 1: New market entrant Lemonade is already making waves in the home insurance sector with its Chatbot AI called Jim. Though the company says most claims are still routed to a human, AI Jim has processed claims completely on his (its?) own, some in mere seconds. As of June 2017, AI Jim has settled 27% of Lemonade’s claims instantly, and the company’s long-term goal is to settle 90% of claims instantly. This is just a glimpse into the very near future of what insurance carriers will provide their customers.
Case Study 2: Another great example of the use of AI is Generali, one of the largest auto insurance companies in Italy. The company was among the first in the industry to create a pay-as-you-drive policy option that takes data from the vehicle, including how often it is driven, how fast a driver goes, how quick that person is to brake, etc. Using AI, Generali predicts the insurance risk for the driver, and drivers have seen as much as 40% decreases in insurance premiums as a result of these more targeted policies. Generali is also using that data for wider purposes. Thanks to sensors in the cars, it can intelligently assess potential medical concerns following an accident and dispatch appropriate help. In addition, Generali is able to cull collective data and share the most dangerous intersections in a particular region.
Examples like these demonstrate how AI is transforming customer interactions with insurers and that instant, personalized gratification will soon become the expectation and not the differentiation.
Jason Oh is a management consulting enthusiast with past experience in helping F500 financial services clients with product management, go-to-market and distribution channel strategy.
Image: Pexels
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