The Future of Insurance: How Digitalisation is Shaping the Industry

Share on linkedin
Share on twitter

Imagine a world where your insurance needs are met with ease, convenience and speed. Where you can purchase coverage, file claims and have them processed in mere minutes, all from the comfort of your own home. A world where insurance policies are tailored specifically to your unique needs and preferences. 

With the rise of digital collaboration tools, customers can now access insurance products and services remotely and receive support and assistance through digital channels. Additionally, the industry is seeing growth in innovative digital products, which are tailored to meet the evolving needs of customers. 

Let’s explore how these advancements are shaping the future of insurance.

A Seismic Shift

The insurance industry is undergoing a significant transformation as a result of digitalisation. With the advent of new technologies, such as artificial intelligence and the Internet of Things (IOT), the industry is becoming more data-driven and customer-centric. 

The Internet of Things (IoT) plays a critical role in the insurance industry by providing accurate and real-time data, which improves the accuracy of risk assessments. This, in turn, allows policyholders to have a better understanding of their policy pricing. Despite challenges posed by IoT, its growing demand in the market is likely to drive innovation in analytics, as companies strive to keep up with the increasing need for real-time insights.

One of the key ways in which digitalisation is shaping the future of insurance is through the use of data and analytics. The industry is experiencing exponential growth in the volume of customer data generated. This presents both a challenge and an opportunity for insurers. While managing and storing this vast amount of data can be a challenge, those who effectively leverage this data through advanced analytics will gain a significant competitive advantage. 

UBI – UsageBased Insurance model

The UsageBased Insurance model (UBI) is an example of an insurance model that utilises technological innovations. With the aid of smart technology, the insurance model has the possibility, by using real-time data, to price premiums more accurately and efficiently, as well as enables a more proactive approach. The utilisation of personal data has revolutionised the underwriting process in the insurance industry, providing insurers with the means to offer more customised coverage and premium pricing to policyholders. Telematics, in the case of usage-based car insurance, and wearable technology, in the case of health activity-based insurance, provide a rich source of data for insurers to gain insight into policyholders’ habits and lifestyles. This information is then utilized to create a more accurate risk assessment, leading to fairer premium pricing for policyholders. The result is a win-win scenario, with insurers able to reduce their risk exposure, and policyholders benefiting from more personalised coverage and premium pricing that better reflects their needs. This development represents a major advancement in the industry, and insurers are encouraged to fully embrace the opportunities that this technology provides.

Disrupting the Norm: Automation and AI

The insurance industry is facing significant disruption from changing customer expectations, new and redefined risks, and competition from insurtech companies. The COVID-19 crisis has further accelerated the need for digital transformation in the industry. Customers are increasingly seeking online interactions with insurance agencies and brokers, while requests for policy changes and claims have risen. Additionally, insurers’ workforces have needed to adapt to working remotely. While some incumbents have embraced digital transformation, others have only applied digital solutions to the front-end without fully considering the benefits of digitisation. 

Another key aspect of digitalisation is the use of automation and artificial intelligence. Insurance companies are now able to automate many of the manual processes that were previously required, such as underwriting and claims processing. This is helping to reduce costs and improve efficiency, while also allowing companies to offer new and innovative products. The use of automation and other digital technologies to streamline the sales process too, has significantly improved the sales closure time, resulting in increased revenue and improved performance.

The Future is Now!

 Distribution partners play a crucial role in this transformation by utilizing digital tools and platforms to increase customer acquisition and growth. They offer a seamless and user-friendly insurance experience, allowing customers to easily compare quotes and purchase policies online. By leveraging data and analytics, distribution partners can provide valuable insights into customer preferences and behaviour, enabling insurance companies to tailor their products and services to meet the specific needs of their target audience. This results in a more personalised and relevant customer experience, ultimately leading to increased customer satisfaction and loyalty. Additionally, digitalization allows for real-time monitoring and reporting, enabling distribution partners to quickly respond to market trends and customer needs. The use of chatbots and AI-powered virtual assistants can also provide customers with instant support and advice, improving overall customer experience. Empowerment of insurance companies and distribution partners to better serve and meet the evolving needs of their customers is a direct result of digitalization.

The increase in the number of insurers has led to an increased depth of product offerings for customers, providing them with more options and greater choice. This is also beneficial for brokers, as it allows them to focus solely on unique cases that require better attention.

Insurtech: Changing the Game

The digital transformation trends will shape the insurance sector in the next few years in many ways. API technology is being utilized by insurance companies to create new digital products and services. As digital channels become more popular, it is anticipated that more insurers will implement API technology to capitalize on the growing demand for digital insurance products.

Insurers are utilizing APIs to offer real-time quotes to customers and to facilitate chatbots and other digital customer service tools. These tools empower customers to easily access the information they need, without having to wait on hold or navigate through complex processes. This improves customer experience, and allows insurance companies to focus on more complex issues. Furthermore, the shift towards digital tools is not just limited to insurers, but also agents and brokers, as customer demand for digital self-service options continues to rise. 

A recent survey of European insurance executives revealed that an overwhelming majority (89%) anticipate a significant acceleration in digitization and a shift in channel mix.

Headless Technology 

Headless technology is a way of building websites and digital experiences where the front-end (what the customer sees) is separate from the back-end (where the data is stored and processed). It allows insurers to create custom digital experiences for customers without being held back by legacy technology problems in the back-end. More and more insurance products and applications using this approach in the future are foreseen. 

Telematics Technology 

Telematics technology refers to the use of on-board sensors, GPS, and communication systems to monitor and collect data related to a vehicle’s operations and usage. This technology is increasingly being adopted by insurance companies as it enables them to gain a more accurate understanding of their customers’ driving behaviours. The data collected through telematics technology includes information such as the number of miles driven, speed, braking patterns, and other driving-related activities.

For example, usage-based car insurance (UBI) is a type of insurance policy that utilizes telematics technology. UBI policies require customers to install a small device in their vehicle which collects driving data. This data is then transmitted to the insurance company, allowing them to assess the customer’s driving behaviour and adjust the policy’s premium pricing accordingly.

Another example of telematics technology being used in the insurance industry is GPS tracking for commercial vehicles. This technology allows insurance companies to monitor the movement of commercial vehicles and ensure that they are being operated safely and efficiently. This information can also be used to assess the level of risk associated with a commercial vehicle and adjust the policy’s pricing accordingly.

Digitalisation – A Non-negotiable Imperative 

In view of the above, it is apposite to say that digitalisation is resulting in a number of positive outcomes, including improved operational efficiency, higher revenues, and increased customer retention. However, all these changes come with a warning, with the increase of data and automation, it is important for companies to maintain the highest levels of data security and comply with regulatory requirements.

Summing up, digitalisation is unquestionably the key to unlocking the full potential of the insurance industry. For insurers, digital transformation is no longer a luxury, it is a survival tactic. And for those companies that fail to adapt, they risk being left in the past.

Contact Us

We'll get back to you in 1-2 business days.