Driving the insurance industry forward with technology
Despite the challenges, insurers have a once-in-a-lifetime opportunity to embrace and leverage technology in new ways.
Today’s insurers are dealing with one of our decade’s most challenging economic climates. For the first time in a long time, multiple factors are causing grueling operating environments. Inflation rates and interest rates continue to rise and remain high. This has driven material and operational costs and expenses to increase substantially. A report from Deloitte noted that as of May 2022, average replacement costs were up 16.3%, nearly twice the Consumer Price Index rise.
Skill shortages also continue to plague the industry. According to a recent U.S. Chamber of Commerce report, less than 25% of the insurance industry is under 35 years old, and over the next 15 years, 50% of the current insurance workforce will retire. This is also compounded by new levels of competition for legacy insurance businesses, which with new revenue sources are now competing with an unprecedented number of insurtechs. These insurtechs are fiercely bringing innovation and speed to market.
Despite the challenges, insurers have a once-in-a-lifetime opportunity to embrace and leverage technology in new ways to help catapult the industry forward and drive toward a more connected future. A future that includes a refreshed and more personalized customer experience, an engaged talent pool driving new partnerships, and an autonomous enterprise that’s self-guided and self-optimizing, and governed using artificial intelligence (AI).
Customers now demand personalization
The ability to better understand and get to know customers is paramount when driving their experience as a customer. We now have access to large amounts of data and cannot take that for granted. With rising costs, today’s customers are more inclined to shop around for better rates, and there are certainly ways to offer bundling discounts as one way to retain them. Ultimately, it’s still their experience that will matter most. Nurturing the relationship is not only possible but paramount — whether it’s through preemptive retention methods like understanding their needs and reaching out to them to help or providing real-time information that warns them of a dangerous storm approaching and provides guidance on how to protect themselves and their assets.. Using data to hyper-personalize is no longer a nice to have but a must-have.
The first step is to unify all customer channels, whether inbound, outbound, owned, and create more dynamic customer dialogues with all customers. During each conversation, using AI-powered decisioning, there can be a personalized next-best action to maximize value for both the customer and company alike. By using AI-powered decisioning, and centralizing data and communications, every channel learns from the others and when a customer’s context shifts, it can be immediately recognized and interactions better personalized. For example, if a customer tries to cancel a policy online, they can be prompted to continue the conversation in the call center and an agent can then help guide the next best step, knowing the context of the call.
New connected business models will bring new opportunity
In a more connected world, insurers also have an opportunity to minimize risk while generating new sources of revenue. For example, the advancement of more automated and intelligent homes can create opportunities to help prevent avoidable claims – such as a water or gas sensor that can help avoid potential flooding or gas leaks. The data from the various sensors can be used not only to avoid these issues but also analyzed for greater insights into future occurrences and better prevention efforts.
Open insurance models also bring new revenue opportunities to share data and acquire new customers, including using real-time data to launch new customer offerings and improve customer experience through better personalization and variable pricing. When quoting new customers, the data that open insurance makes more accessible creates more efficient and accurate quoting methods, eliminating manual estimates. This also allows the customer to benefit from quotes that are more tailored and customized to their needs.
Embedded insurance can also drive new revenue streams, which seamlessly integrates insurance needs into a product buying experience. Some examples of embedded insurance are offering travel insurance when booking a flight, an auto dealer offering insurance during a sale, or insurance coverage offered by car rental companies while renting a car.
Moving toward an autonomous enterprise
As intelligence and automation technologies become a reality, we’re entering the era of the autonomous enterprise. Using robotic process automation to automate human-led tasks and AI to learn, adapt, and scale is transforming the industry. The opportunity to use generative AI to accelerate chatbot training or draft claims summaries is now a reality while keeping human governance in the loop. Technologies have matured to allow the application of automation and intelligence that can directly improve business operations and create better and faster customer service experiences, ultimately freeing up time for insurers to focus on the most high-value tasks.
Today’s opportunity to propel the insurance industry forward by leaning into technology has never been stronger. The insurers that embrace and encourage the use of data, new partnerships, and new technologies will not only find their bottom line positively impacted, but they will also discover new talent and secure their customer’s loyalty for the long term.
Manoj Pant is senior director, insurance at Pega.