InsurTech is the latest buzzword making the rounds within the CXO quarters of the insurance industry.
Unlike banking, insurance has never been known for its romantic pursuit of technology. Never has technology created so much buzz in the insurance industry as it has with this latest term.
InsurTech, a moniker adapted from FinTech, its more famous cousin, is not merely an apparent combination of the words insurance and technology. Rather, it aptly symbolizes the disruption that technology is creating in the insurance business. While FinTech is disrupting banking industry processes by enabling newer ways of doing business, InsurTech goes one step further in the industry industry by disrupting its very business model and products.
Let’s examine the “famous five” disruptive technologies of InsurTech.
No. 5: Artificial intelligence
AI-driven cognitive robotic automation has tremendous potential to elevate the traditional, intricately-human, process-dependent insurance industry. Be it quote (and illustration), KYC, or claims processing, insurance processes have traditionaally been tardy, complicated, and documentation-heavy. To add to these woes, human errors make the processes inefficient and expensive, leading to money leakage.
AI can take process automation to the next level thereby reducing operating costs. Another area where AI is going to make a significant impact is “service” and “engagement” through on-demand robo-advisors or chatbots. With payment of premiums and claims being the most likely and infrequent customer touch points, Insurance has much to do in terms of customer engagement. AI can help tremendously in these areas.
No. 4: API and microservices
This is another area of technology that can help insurers up their game. With core platforms and technology ecosystems still heavily leaning towards legacy, and associated sunk costs, insurers should aggressively leverage API and microservices to decouple modular processes and expose them to customers, agents and other partners to use only the required services as and when they need it.
Exposing processes such as financial need analysis or changing of premium payment frequency can only help sell more and service better by putting power in the hands of customers, leveraging a partner ecosystem.
A blockchain is a distributed database that is used to maintain a continuously growing list of records. (Photo: iStock)
No. 3: Blockchain
Distributed databases are the new kid on the block. After creating waves in banking and financial services, the blockchain system holds significant promise for the insurance industry. Several blockchain features including immutability, disintermediation and smart contracts relate so much to insurance and its needs, that it is only a matter of innovative thinking and time before it finds value-added usage and major adoption in the insurance industry.
Insurance, essentially being a contract, has significant opportunity to adopt blockchain reincarnating into smart contracts. Placement, negotiation and binding of risk in a commercial insurance broker market place, or automating claims settlement for simple claims, or sharing customer KYC data on blockchain, and managing reinsurance treaties are just some of the possible use cases.
No. 2: The Internet of Things (IoT)
This technology is perhaps the biggest potential to impact the insurance industry. An increasing number of devices, used in various quarters of human lives, are getting connected to the Internet and the data collected from inbuilt sensors are becoming available for consumption. While being “in touch” with our devices is a new way of life, it has its own ramifications for business, particularly Insurance.
IoT is impacting the very core of the insurance business which is risk assessment and product. Be it a connected car or the Fitbit band worn on the person, they are telling a story about the “risk” covered, which helps insurers better understand risk, allowing for increased granularity in pricing and embodyinga paradigm shift from risk classification to risk personalization. The sensor data may also be analyzed to expose failure symptoms, thereby bringing ability to preempt claims and reduce loss costs.
No. 1: Data and analyticals
Data-driven insights (also known as actuarial science) have been the cornerstone of Insurance. Hence, underlying the above technologies, big data and machine learning are the keys to unlock the full potential of insurance at its best in the current century.
Be it sensor data from IoT, or the process data or customer interaction data generated from cognitive automation. Considering we live in an age when we are continually generating data, in both structured and unstructured fashion, across business, devices (IoT), customer interactions (contact center, social media, chatbots, et al) the insurance industry is being exposed to a variety of potentially useful data. Soon big data will not remain a choice but a key component of business operations. Machine learning is a willing partner to bring automation in the use of such volcanic eruption of data.
InsurTech gives the industry an unprecedented opportunity to explore new dimensions of the business and morph itself from the age old traditional set of processes and products to something befitting of this age. This should make for exciting times ahead!
Subhobroto Ghosh is vice president of Insurance Solutions at VirtusaPolaris. He can be reached by sending email to firstname.lastname@example.org.