The five pillars of digital insurance
Only recently has the insurance industry begun transitioning to a digital environment, and it started with these fundamental pillars.
The insurance industry is notorious for its delays in adopting the latest cutting-edge technologies and applications. Bogged down by regulations and archaic systems, insurance has historically been slow on the uptake — until now. In just the last few years, it has become evident that the total transition to being a digital insurance industry is underway.
But what does that look like? Features such as live chat, customer self-service portals and online claims filing are all made possible by digital insurance applications and technologies, which grow and expand at an ever-increasing rate. To start, however, insurance carriers should implement some of the technological pillars of digital insurance.
1. Artificial intelligence. Artificial intelligence (AI) is arguably the backbone of digital insurance capabilities. Digital insurance was developed with speed and scalability in mind, and AI makes instantaneous calculations, processing and communication possible for insurance carriers. In its application, AI in insurance will impact some of the primary functions of the industry, including:
- Underwriting claims
- New business
- Marketing
- Retention
What makes AI unique in the insurance space is the balance it strikes between mechanical insurance functions and personalized service. Today’s consumers want speed, but they also want to feel valued. AI allows insurers to provide lightning-fast service to customers in a way that doesn’t make them feel like just a number.
2. Machine learning. Machine learning is technically a subset of AI, but it is its own unique part of a digital insurance operation. As insurers move to self-service applications and portals for customers, machine learning is what makes those not only possible but leverages them into key data collection and analysis tools for insurers. Machine learning automates traditionally sluggish insurance functions — like claims processing — by utilizing preprogrammed data, algorithms and data shared by customers to service them in their greatest time of need automatically.
3. Internet of Things. In the insurance industry, data is king; it helps drive underwriting, pricing, policies and more. With the Internet of Things (IoT), carriers can collect troves of actual customer data in real-time and use it to better inform profiles and coverage — and even discover potential instances of fraud.
So, which connected technologies are fueling the digital insurance data boom? Telematics, for one, is a new tool insurance companies are using to monitor assets like trucks, cars or heavy equipment, and improve the accuracy of their coverage and automate the collection of data. Customers have to opt-in, of course, but people are willing to share this type of data to save money on monthly premiums. The proliferation of IoT-enabled devices is expected to grow, with the Connected Insurance Report by Insurance Nexus estimating that there will be 30 to 50 billion devices connecting nearly facet of daily life in 2020. The widespread use of smart devices in the home, car, or even in medicine is another opportunity for carriers to leverage the capabilities of digital insurance.
4. Big data & analytics. The single biggest benefit of digital insurance capabilities, aside from speed and customer satisfaction, is the data generation, analyzation and utilization that results. All of these digital technologies generate Big Data— data that contains greater variety, arriving in increasing volume, and with ever-higher velocity — essential giant data sets that contain more actionable information. All of this data is giving insurers greater insights into customer behavior and risk than ever before.
When applied, data is every insurer’s biggest asset. To properly utilize this data, insurers need robust analytics systems that paint a complete picture of their business and their customers by pulling data from many disparate systems and consolidating it into actionable insights. Insurers that can be agile with the data they have, to either improve their existing offerings or increase their speed to market with new products, will reap the biggest benefits from digital insurance.
5. SaaS capabilities. Speaking of speed, digital insurance capabilities are just that, digital, so it doesn’t make much sense to host these new solutions on-premises. To maximize the potential of all of the aforementioned tools, most digital insurers (where they can) use a SaaS-based solution that provides the hosting, support and resources for all digital insurance tools and applications.
Understanding the options available and implementing technology that meets their customers’ expectations and needs will allow insurers to make the transition to digital insurance.
Jeff Wargin is the chief product officer for Duck Creek Technologies. Contact him at jeffrey.m.wargin@duckcreek.com. Opinions expressed here are the author’s own.
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