insurance technology revolution

How are new technologies revolutionizing the world of insurance?

When traditional business and operating models stop delivering sought-after results, the logical next step is to of course explore alternatives with greater voracity and risk appetite. In other words, the insurance industry should disrupt itself before a newcomer does it for them. 

Hundreds of InsurTechs have appeared on the global insurance scene over the past few years, and many others are on their way. All are using technology and customer-centric approaches borrowed from other industries to address pain points, opening a window onto a transformed customer experience. 

In this blog post, we are going to share with you some new technologies and technological trends that have sparked a revolution in the insurance world. Examples of companies that are already adopting these technologies will also be provided for a clearer picture. 

New business models 

1. Industry 4.0 

Manufacturer processes and systems are being transformed with the introduction of technologies such as AI and augmented reality (AR). This changes the nature of risk in the manufacturing space, with corresponding implications for the commercial insurance markets. 

2. Genomics 

In life sciences, genomics, which is the decoding of a patient’s personal biology, is creating more 

effective ways to identify, predict, treat, and manage diseases. Gene splicing technology such as CRISPR Cas9 creates even more challenge to the future use case for life insurance business lines. All these developments have a significant influence on longevity and ways to underwrite life insurance in the near future. 

genomics insurance

3. Wellness 

Lifestyle factors help to determine risks covered by life- and disability-related insurances and play an increasingly significant role in underwriting versus traditional mortality and morbidly tables. The rise of wearable technologies, along with continued growth and development in wellness, is altering consumer understanding and creating new models for lifestyle-related behaviors. 

All of these examples have implications for insurance, including: 

• Product development opportunities 

• Challenges for pricing and underwriting risks 

• New business models that could further disintermediate the insurer 

• The chance to deepen relationships with consumers 

• Uncertainty around competitive dynamics in the not-too-distant future 

The Digital Transformation 

The same technological shifts affecting the frontend of the insurance value chain. In other words, customer engagement and acquisition are cascading through the operating model.  

This points to digital transformation as a way to provide sustainable, scalable outcomes along with the flexibility and adaptiveness needed to achieve them. 

Advanced technologies such as blockchain, cognitive intelligence, and next-generation robotic process automation among them provide ample tools to transform the back and middle offices.  

For example, Japanese insurer Fukoku Mutual implemented an IBM Watson-based system that can read unstructured data such as medical records and interpreting it to calculate insurance claims.  

In the meantime, Paris-based Shift Technology’s machine learning algorithms surface suspicious claims from large datasets, improving their own accuracy over time. 

Another important aspect of the InsurTech movement is the degree of cooperation between insurer and startup. Incumbents continue to have a hand in the solutions technologists have sought to provide.  

Bought by Many, for instance, is backed by reinsurance giant Munich Re. Vantis Life is a subsidiary  

Traditional insurers offer capital, market reach, brand recognition, regulatory support and access, and infrastructure. In return, InsurTechs provide fast, innovative responses to market dynamics.  

The result is a restructuring of the traditional insurance value chain into an interconnected community that’s more modular, more flexible, and more attuned to the customers’ specific needs. 

Possible Futures 

1. Changing the channel 

InsurTechs (with the support of insurers and reinsurers) win more of the insurance market by focusing on benefits to their customers, including superior processes for onboarding and claims.  

Incumbent insurers respond with simpler purchase processes and more customizable products. Partnerships with product makers and distributors become more popular as insurance providers seek to capture customers at the point of sale.  

Many insurances are built into goods and services or embedded into an overall end-to-end proposition enabling customers to focus on selecting the products that best fit their work and lifestyle.  

This prompts insurers to rethink the importance of brand, advertising, and agents (particularly captive agents) in their go-to-market strategies. 

2. Underwriting by machine 

Insurance becomes more dependent on sophisticated algorithms, relying on new source forms of data, in order to compete. Risk selection is more individualized, with products becoming available at a wider range of price points thanks to new data and greater pricing sophistication.  

In a bid to keep up with fast-developing AI innovations, firms outsource their underwriting to specialist technology vendors. And with underwriting no longer a differentiator, some firms focus on customer service and scale while others pursue niches such as affinity products. 

3. Rise of the flexible product 

As more customers hire out their personal property and earn wages from multiple sources, insurers must connect their business and personal lines.  

Meanwhile, insurers get better at measuring and tracking usage of the products that customers want insured. The result? Time-flexible, event-driven coverage that can be turned on or off at will.  

At the same time, a truly modular and adjustable product evolves to accommodate life stage, lifestyle, and wellness changes among consumers.  

The result? Frictionless insurance in a land of utility, centered on the customer and their needs at different times in their life rather than on traditional insurance product silos. 

4. Life insurance 

Life insurance firms see growth in emerging markets with a younger, lower-income customer base. Leading insurers match the needs of these customers with short-term, flexible term products.  

Given the shopping patterns in many emerging markets, firms that can master digital distribution without compromising underwriting break away from those that remain dependent on field sales agents.  

Because of these shifts, life insurers end up looking more like general insurers, fostering industry consolidation. 

However, the disruptive forces of innovation play out. This means a few things can be relied on: 

• New technology is modularizing the insurance value chain 

• Customers are seeking complex, highly personalized products 

• Fintech companies are raising expectations for a frictionless customer experience 

• Growing connectivity points to a foundational shift from risk assessment to risk prevention. 

Takeaway 

The insurers who embrace this technological disruption and reorient themselves to a newly-assertive customer will be the ones finding routes to long-term profitability and growth. 

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