Technology’s impact on P&C insurance in 2019

When most people think about cutting-edge innovation, insurance isn’t typically the first industry that comes to mind. But as we’ve seen in recent years, that mindset is changing. Despite public perception of the insurance industry as a late adopter of technology, many large incumbents are now undertaking major digital transformation projects, and the industry in general is rapidly becoming more nimble and innovative. We’re also seeing new InsurTech startups specializing in AI, IoT, and more, identifying openings within the industry and seeking partnerships with carriers to bring new products to market, improve customer experiences, and enable better use of an ever-increasing volume of data.

In 2019, we’ll see these trends continue to take shape and take hold:

Migration to SaaS

The insurance industry is undergoing a seismic shift from on-premises deployments to the cloud. In fact, since 2015, the majority of insurance core systems sold have been cloud-based or hosted rather than implemented on premises, according to Strategy Meets Action, and we expect that to continue into 2019 as insurers increasingly realize the benefits of SaaS (software as a service). These advantages include reduced implementation times, easy upgrades, lower operational costs, and the ability to focus on key business differentiators rather than technology maintenance.

In its “Worldwide Semiannual Public Cloud Services Spending Guide,” IDC predicts that total public cloud services spending will reach $227 billion by 2021, with SaaS maintaining its position as the largest cloud computing category. As the velocity of SaaS adoption increases, carriers who have already kicked off their cloud migration strategies will likely be well positioned for success in 2019 — and the longer those that haven’t started or completed the transition to SaaS continue to hold out, the more pressure they will be under as their competitors make the move.

Artificial Intelligence (AI) adoption

Consumers are always looking for a personalized experience, especially when purchasing something as important as P&C insurance. AI offers insurers the ability to create the experiences people have come to expect while also meeting the high-speed, omnichannel demands of modern consumers.

With AI, insurers can improve claims turnaround cycles and fundamentally change the underwriting process. AI also enables insurers to access data faster, and cutting out the human element can lead to more accurate reporting in shorter periods of time.

A report from PwC forecasted that AI’s initial impact will primarily relate to improving efficiencies and automating existing customer-facing underwriting and claims processes. Over time, its impact will be more profound; identifying, assessing, and underwriting emerging risks and discerning new revenue sources.

The continued rise of chatbots

Some experts now predict that 95% of all online customer interactions will involve chatbots by 2025. Using AI and machine learning, chatbots can interact with customers seamlessly, saving nearly everyone within an organization time — and ultimately saving insurance companies money. A bot can walk a customer through a policy application or claims process, reserving human intervention for more complex cases.

Geico’s “Kate” is a virtual assistant that communicates with customers via text or voice, aiding in policy questions and coverage inquiries 24/7. More insurance companies are investing in technology like this, and chatbot capabilities and adoption are likely to grow in the P&C industry with each passing year.

Continued IoT proliferation

IoT (Internet of Things) first made an appearance in insurance in the personal auto market by way of telematics devices that transmit real-time driving information directly to insurers. Now, in a variety of applications, we’re starting to see IoT devices employed in homeowners and commercial policies, allowing carriers to rate and price risk using data closer to the source — or even prevent losses in the first place.

IoT in insurance has the capacity to drastically change the claims process, letting insurers move quickly and make real-time, data-driven decisions, as opposed to relying on out of date or even fraudulent data that gives little insight into policyholders and their assets. Additionally, as connected devices continue to evolve, insurers will be able to leverage IoT data to develop more personalized policies based on customers’ unique circumstances and actions.

Leveraging social media data

Social media and its role in the insurance industry is evolving beyond marketing strategies and clever advertisements. Mining social media data is improving risk assessment for P&C insurers, bolstering fraud detection capabilities, and enabling entirely new customer experiences.

Take the Dutch insurer Kroodle, for example. Their process of interacting with customers is entirely accomplished via social media. Customers log in to Kroodle using their Facebook credentials, and they file claims, get quotes, and request other services via a dedicated Kroodle Facebook app.

Carriers can also leverage social media to investigate fraud. An insurer can look at the social activity of its insureds and compare it to claims records, looking for discrepancies. A Morgan Stanley report cited a tool used by carriers throughout the claims assessment process that examines the social relationships between parties involved — and monitors their activity on the day of a loss to look for red flags.

Anticipating the once unpredictable

In addition to introducing new technologies to the insurance industry, InsurTechs and incumbents are working together to establish ecosystems that will allow insurers to leverage data from a wide range of sources — using platforms designed to bring it all together seamlessly and generate actionable insights. From companies like Roost, which specializes in smart in-home solutions like smoke detectors, and FRISS, which provides AI-powered predictive fraud analytics for P&C insurers, the offerings available to today’s carriers allow them to proactively prepare for claims — and continue the industry’s evolution from loss resolution to risk mitigation and prevention.

What will these trends mean for carriers — and the insurance industry as a whole — in 2019? Streamlined processes, faster speed to market, smarter use of data, and improved customer experiences. The digital revolution in P&C insurance has truly arrived.

Jeff Wargin is the vice president of product management for Duck Creek Technologies. Contact him at jeffrey.m.wargin@duckcreek.com.