The insurance sector can trace is heritage over hundreds of years with the first known insurance contracts being recorded in Italy in 1347. Fast forward to 2017 and with Lloyds underwriters still grappling their trademark slipcases, the flimsy leather sheaths that bulge with bundles of papers, some would argue that the sector has change very little since 1347.
In today’s highly connected world, customers’ expectations have dramatically changed, but the insurance sector is falling short of meeting those expectations. For many customers, interaction with their insurance company typically happens once a year, far less than any other industry.
Previously, insurance processes have been determined by the limitations of technology with many back office processes designed around legacy systems that are creaking at the seams. Many of the procedures are paper based, impacting efficiency which dramatically increases the cost base of the organisation.
As an example, current processes to purchase car insurance from an aggregator site are fragmented and far from streamlined. After being presented with a quick view of the premium from each provider on the portal, the customer is redirected and forced to login with the selected provider in order to complete the transaction. When compared to the process of buying a book on Amazon, with the option of single click fulfilment, the process of purchasing insurance mirrors how business was conducted 20 years ago.
With fast changing consumer expectations, new technology has introduced the expectation of ease of use, personalised pricing and immediate fulfilment. This new way of working, putting the consumer in control, has not translated to the insurance sector which now realises that it has been caught snoozing and now needs to change.
With the insurance sector now waking up to its own industrial revolution, there are 3 exciting trends emerging to improve customer engagement and optimise the insurance industry:
1. AI (Artificial Intelligence)
The introduction of Artificial intelligence could revolutionise the industry, automating routine tasks that are methodical, repetitive, and rules-base, such as form processing and onboarding new customers. It is particularly valuable in automating “swivel chair” tasks, where data needs to be transferred from one software system to another.
These processing tasks are traditionally undertaken by an army of back office staff and by creating a virtual workforce of software robots, companies can streamline processes, as well as increase the quality and cost-effectiveness of the service being provided.
2. Data Is The New Golden Thread
With the advancement of new techniques such as AI and cloud computing, there is a significant opportunity for insurance companies to exploit the amount of data that can be analysed and the way that it can be used.
Leading insurers are actively using data to empower underwriters to drive continuous improvement in the customer journey, identifying the most common causes of referral (to an underwriter) and automating their underwriting decisions. This improves the customer experience, and in many cases gives the customer the peace of mind that their cover is in place immediately.
The combination of AI and big data sets is enabling insurance companies to free up valuable and scare underwriting resource and to develop new valued added propositions. Smart data analytics provides reliable data on user behaviour from developing enhanced analytic tools to spot fraud patterns quickly through to developing new chatbot agents to take customers through the application process. In addition, the development of new risk pricing models can be used to provide alternative insurance decisions such as “sell to budget” function or “upsell” to the maximum allowable sum for a family heirloom.
3. IoT (Internet of Things)
The internet of things, where everyday objects are connected to the internet, means insurance companies will have access to more data about the sort of risks they face.
By measuring how people drive through telematics or monitoring physical wellness via wearable devices, the industry hopes that it can persuade its customers to change behaviour, to cut out risks and so push down the cost of claims.
With the use of big data and IoT, Insurance companies are discovering that they are able to use new techniques to manage the risk portfolio in real time. By utilising techniques of gamification, insurance companies are able to offer game like features to manage driver behaviour, from a free Frappuccino to reward careful driving, through to notifying poor drivers of the potential impact to renewal premiums or the policy being suspended.
Insurance companies hope that by leveraging new technology they can influence user behaviour to avoid accidents and reduce the number of claims, moving from being a source of claim payments to become a trusted and informed advisor.
The insurance industry has to take a different view of how it operates and is at last embracing its very own industrial revolution.
How we purchase insurance in the future will be enormously different as companies move from an annual “disgruntled” purchase to embracing AI, smart data analytics and IoT.
New Technology will sharpen up the insurance sector and improve the way it works, enabling risk to be assessed in new ways, presenting a significant opportunity for the industry to transform and reposition itself to become a trusted and informed risk partner.
Email : ian@IanAlderton.com