According to a recent poll, 54% of CIOs believe that insurance companies are resilient and will continue to remain so if they move quickly and decisively. Although this is not big breaking news, we have all witnessed how insurers have evolved in the last few years, to meet the changing requirements of policyholders. Several new trends have emerged as more insurers adapt to these changes. Leading insurers like Allianz, Munich Re, Nationwide, and Liberty Mutual are pouring in money to find the next best thing in insurance.
3 key pillars defining the insurance industry strategy
As the business dynamic has changed in the last few months, insurance organizations continuously anticipate, adapt to, and manage risks and assess the appropriateness and completeness of their strategy during and post-pandemic. The following three pillars have defined insurers’ core value proposition, go-to-market, and technology adoption:
Redefine purpose: “There’s never been an era where the world was more in need of high-performing insurance industry. But to meet the moment and return to growth, insurers must rationalize and rethink their core strategies — from what products they offer, to how they operate, to which markets they serve”, stated EY in their Global Insurance Outlook 2021.
Agile and customer-centric approach: Everything insurers started doing -product portfolios, organization structures, and technology reflected deep insights into market needs. Right products delivered through the proper channels earn customer loyalty and enhances operational efficiency.
American Family Insurance started by implementing Agile within their digital experience team to aid informed decisions in 3-6 days. Today they use Agile CX Sprints for Marketing and Innovation programs as well.
Value-based services: As the pandemic changed the customer needs, the insurer in the health and auto sector shifted towards ‘usage-based insurance.’ This approach optimized the cost structures, strategically prioritizing investments for insurers.
Key insurance industry trends
Leading carriers worldwide have reimagined their insurance products and offerings to thrive in the new reality with these guidelines. Here are three trends you cannot miss in the insurance sector
Becoming more human with automation: 79% of insurance executives believe collaboration between humans and machines will be critical to innovation in the future. Intelligent process automation helped insurers transform their business, become more human, and better adjust to market volatility.
As per a report by Juniper, “Intelligent automation adoption will boom over the next five years, with more than 65 percent of carriers adopting the technology by 2024. The study found that they’ll do so to cut operational costs and remain competitive as they counter flat premium growth”.
Intelligent Automation helps in delivering significant benefits such as:
- Efficiency, by automating the mundane tasks and minimizing manual data handling.
- Customer satisfaction, by reducing the turn-around time and improving speed and accuracy.
- Scalability, by enabling faster decision-making processes and new business generation.
Tailored solution for the customer: Millennials and Gen Z, who are used to stellar online services by Amazon and Apple, expect every company and industry to offer the same level of personalized services. Your customers want immediate access to payments, claims status, and policy information.
Allianz uses five steps to offer personalized policies:
- Listen to customer
- Figure out their stated needs and latent needs
- Review current scene of system and process
- Re-align them to customer’s requirement and
- Deploy the right technology
Another category of personalized insurance products that are in high demand in 2021 is Switch-on and Switch-off insurance. An excellent example is Usage-based car insurance. It allows car owners to insure their vehicles for kilometers; they tend to drive instead of the run-of-the-mill full year.
Auto-insurer Metromile Insurance Co.‘s revenue grew from $4 million in 2017 to a massive $106.4 million in the last quarter of 2018. Metromile tapered its services by providing personalized suggestions depending on miles driven.
Pro-active fraud and risk management: Insurance frauds are not new but have now been amplified. The Federal Bureau of Investigation (FBI) estimates that the total cost of insurance fraud in the United States alone is more than $40 billion per year. Gartner developed the CARTA approach that goes beyond single-point risk assessments to encompass continuous fraud prevention and detection across a customer’s journey on all channels.
The CARTA strategic approach specifies that effective fraud and risk management require:
- 100% device visibility and automated control
- Continuous monitoring, assessment, and remediation of operational risk
- Micro-segmentation to contain breaches and limit lateral movement/damage
- Technologies and products from several vendors
- Detection, posture assessment, and control of physical and virtual devices as well as cloud infrastructure
Technologies and solutions to boost these trends
While Insurance organizations are tracking these trends, their key enablers are technological innovations to become an agile, customer-centric, and data-driven organization. In 2019, insurers spent nearly $225 billion in InsurTech and the number grew in 2020.
Here are the technologies that are driving transformation in the industry:
Robotic Process Automation (RPA) to overcome operational roadblocks
Insurers adopting process automation in areas ranging from underwriting and claims management to fraud detection and customer service have witnessed significant changes. Early adopters of Robotic Process Automation (RPA) have noticed reduced labor and claims processing costs and increased efficiencies in document and data management.
MetLife conducted a value stream analysis within its U.S. to determine how to minimize the mundane, rote tasks employees need to do, enabling them to focus on more value-added, customer-facing tasks. This exercise picked approximately 60% of processes that could be reengineered, and 40% could be automated. As a result, by the end of 2018, they have used more than 110 robots to optimize customer and employee experiences through simplified, digitized, and automated processes.
Automated data crunch
Data-related automation helps insurers unlock rich insights that range from understanding clients’ needs to make personalized promotions to offer data-backed advice to drive real-time decisions. For example, Planck, an AI-based data platform, reviews online images, text, videos, reviews, and public records and helps the insurer determine premiums, process claims, and give SMEs faster quotes.
Virtual assistants with AI-powered web & mobile chatbots
Another application of cognitive technology is AI-enabled Chatbots and Virtual Assistants. They interact with the customer in natural language processing and add a human-like touch. For example, Juniper Research claims that conversational AI chatbots for insurance will lead to cost savings of almost $1.3 billion by 2023, across motor, life, property, and health insurance. ( up from $300 million in 2019)
Predictive analytics in proactive fraud and risk assessment
The use of predictive analytics in identifying fraud risk indicators allows early flagging and response to any potential incidents. Here are three absolute favorite methods by the insurer to proactively detect fraud:
- Social network analysis: The hybrid method includes statistical methods, network linkage analysis, organizational business rules, fraud-pattern analysis, etc., in identifying fraud clusters to see correlations between clusters and aid fraud detection management.
- Big data, predictive analytics detection: This method is proactive and can handle Big Data sets and make predictive analytics reports.
- Customer relationship management: This method interlinks to social media placing customers in control of their information and enabling customer transparency.
The pandemic has elevated the insurer’s role in envisioning potential future disruptions and strategic opportunities and defining the future customer experience, business models, and capabilities needed to capitalize. Front-runners already see results; many others are following.