The next stage in insurance industry innovation
The insurance industry has historically innovated around notable events. From the Great Fire of London sparking the idea for fire insurance in Britain in the 1660s and Japan’s swift industrialisation post-World War II popularising life insurance, to asbestos-related claims nearly bringing Lloyds of London to its knees in the 1990s, the industry has adapted to significant events and grown stronger.
Now, against the backdrop of a worldwide pandemic, the insurance industry must once again adapt its business models and successfully innovate to thrive.
Overnight digital transformation
Insurance businesses aren’t the only ones facing a sudden – and potentially painful – digital transformation. The overnight shift to working from home is bringing opportunities but also many challenges, from the inclusion of childcare in the working day to employing the technology necessary to connect businesses.
For insurance company brokers and underwriters, the change from daily in-person interactions and negotiations to laborious email chains has added a new dimension to a relationship-building process that was established with the first insurance deal and refined ever since. Their IT teams are working overtime to set up video conference call services and provide remote software access. Once successfully connected, remote working has forced an increase in the electronic placement of insurance business, as without the option of face-to-face interaction between brokers and underwriters there is simply no choice. On the claims side, digital business processes are somewhat less painful as gathering information this way has been the norm for many years.
This transition may be a bumpy road for traditional insurance businesses, but it offers a wealth of opportunity to successfully innovate utilise technologies that increase accuracy while saving time and money. Whether it’s an instant messaging technology that creates a digital forum for brokers and underwriters to conduct business, or an InsurTech product that revolutionises the approach to writing insurance business, let’s take a look at some of the exciting opportunities digital transformation brings for the insurance industry.
Big data and better relationships
The process of insurance is inherently relationship-based, with fruitful connections providing better rates and successful business for all parties. The accuracy and fairness of this human-only approach has been questioned, however. The solution? A balance of big data and human experience.
Access to big data for loss runs – a history of losses for those less familiar with insurance lingo – allows underwriters to make a more accurate assessment of the potential policy. The more data the better when it comes to risk management. In automotive insurance, for example, evidence of a driver’s history will reinforce an underwriter’s rating metric as they can see driving patterns relevant to the type of vehicle used. This information is invaluable when insuring fleets. For property policies, a clear data set showing building specifics such as height, access, and type of cladding or materials provides reliable insight at a speed and scale that enables accurate assessment.
The addition of big data doesn’t deter from the current structure of insuring based around fair representation and best judgement, it enhances this philosophy. Big data adds a layer of accuracy to this approach and its worth will increase as tech providers refine how the data is presented. An underwriter has a finite amount of time for each policy, so accessible data that helps brokers represent clients better will improve the overall precision and efficiency of this workflow.
Tech transforming the insurance industry
In addition to big data, a variety of technologies are transforming the insurance industry and helping it to adapt, such as blockchain, telematics, artificial intelligence and the Internet of Things. Requiring underwriters to employ human thought and judgement to a more precise source of information, while also using that technology to track an underwriter’s experience, provides a valuable source of data that is useful to brokers to ensure a fair, well-researched policy deal is agreed for their client. Blockchain’s ability to create a digital ledger of these instances offers a unique opportunity to increase accuracy alongside big data from the client and is driving the innovation process.
While the use of the Internet of Things and telematics are becoming more widely accepted, especially on the claims side of automotive and home insurance, there is still a need for information collected via these routes to pass securely from the client to the underwriter – potentially bypassing the broker – to ensure reliable data is received. This will not only reduce time spent fact checking, but will speed up the process of paying or denying a claim.
Once technologies are implemented, it remains to be seen whether all brokers can translate data sets, or whether every practising underwriter can utilise insights efficiently. As with all innovation, there is a period of education needed to ensure traditional insurance businesses can utilise technologies to their full potential. As the annual insurance policy travels thorough a lifecycle so does the approach to insurance business. InsurTech provides a clear opportunity to combine historical human judgement with accurate data insight from a range of technologies and it will help the insurance industry adapt and thrive in these challenging times.
To find out more about the services we offer to the InsurTech industry, feel free to get in touch at firstname.lastname@example.org