Over the last two decades, insurers have adopted new technologies to provide differentiation to their businesses. Conventionally, underwriters found themselves buried under heaps of paperwork; customers used to spend considerable effort in identifying the best policies for their use and even more effort to make and collect insurance claims.
Modern insurance experience is different. Underwriters have access to individual accounts and scores for quickly and correctly evaluating asset risk and taking informed business calls. Customers access mobile apps to find and compare various insurance products. The web interface applications act as a marketing channel educating the customers and helping them take informed decisions. Insurers are connected with the customers, and periodic notifications avoid defaults in premium payments. Similarly, online platforms have ensured rapid claim registrations and processing, to delight customers.
Today, most retail general insurance products are heavily commoditized. Most can be bought with minimal to no human intervention, within a matter of minutes. In this commoditized market, insurance companies leverage technology to improve user buying and claim experience, and help optimize operational costs.
The digital framework encompasses technologies around IoT, artificial intelligence, machine learning, blockchain, cloud, analytics, mobility and many more. They influence layers across user experience, operational optimization, process streamlining, exploring new arenas, etc.
In this article, we will focus on digital impact on general insurance – automobile insurance, home insurance and commercial insurance.
Technology can do more in Insurance
Risk assessment by an underwriter is traditionally based on historical data related to segment and client, and physical verification of assets before underwriting.
New digital technologies can be leveraged across industries for better insights on asset performance and history and real time performance of same. This applies to hosts of use cases – predicting machinery failure based on actual usage, monitoring patient vitals remotely, etc. Similarly, using digital means, non-linear disruptive value can be created in the insurance value chain.
Reduce damage/damage severity – Emergency response can break the link of damages chain reaction and prevent the severity and scale of damage due to causals. E,g.: The sooner fire tenders respond to a fire, the lesser damage to the property.
Differentiated offerings - With technology today being able to monitor assets and policyholders alike, underwriters can profile customer behavior and segment it to offer differentiated offerings and customized insurance premiums.
Vertical expansion – Improved visibility to citizens (owners, residents, occupants or drivers) and their behavior would open up opportunities to venture into hitherto high-risk businesses.
Digital strategy adding value to insurance
Insurers aspire to provide differentiated offerings and reduce payouts in terms of indemnity loss to policyholders. One of the routes is to enable reduction of causal severity or reduce extent of impacted damage. Generally, this aligns with the property owner and facility manager interest to preserve property. Consequently, digital initiatives can be engaged to drive down cost, across the stage gates. Primary objective is to monitor the risk factors in the environment.
Internet-of-things provides a connected ecosystem with ability to provide continuous and remote monitoring of the assets or modules. Mobile apps and mobility features enable stakeholders to have status, reporting and alerts in real-time and trigger a call-to-action. Machine learning would help in managing the incidents, define thresholds of risks, and establish a mutating baseline.
Artificial Intelligence enables policyholders to profile and segment based on clustering and grouping mechanism. Cloud-based platform solutions ensure consumer behavior is referenced against claims for quick turnaround to the closure. This enables variable premium pricing model based on insights, and customers with good asset health and asset handling / management can be provided with additional services or discounts instead of average pricing for the segment.
Let’s see how digital interventions are affecting Commercial Insurance and Home Insurance markets.
Insuring property damage on the business premises or business operations is usually under the ownership of the property user or a facilities manager (FM) – responsible for maintenance and operations of the facilities in the building or campus. FMs running operations at the property have definite objectives – better utilization of equipment, reduce utility consumption, minimize downtimes and damages – water damage, fire damage, electrical equipment failure, UPS failures, etc., quick turnaround time to address incidents.
Insurers’ objectives for facilities operations have a different perspective – improve asset health, avoid incidents, close monitoring of risk elements, identify usage patterns for accurate premium and policy design. Effectively, both insurer and the FM prefer to have the property with well-maintained equipment, minimal incidents and quick response to incidents.
‘Connected Properties’ allow the insurers to hedge these risks very effectively. Facilities operations, HVAC management, resource management, equipment monitoring, etc. are readily available for the insurers to manage the property manager risk profile and adjust the premiums effectively to pass the benefits to the users.
Distribution of indemnity loss causals vary with the region and the locality. In colder countries, 80% of indemnity loss due to claims in home environment are result of either of just three types of incidents – water leakage, fire, theft or accidental damage. Insurance claim payouts vary between 30:1 and 50:1 compared to premiums. Insurers aim to minimize the indemnity and residents intend to protect their homes from damages.
‘Connected Homes’ ecosystem not only eliminates or reduces the damage due to risks, it also minimizes utility consumption and improves asset utilization.
Digital ecosystem is bringing the tectonic shift in the core principles of doing insurance. While some opportunities in the insurance ecosystem have been successfully explored, there are many more ready for disruptive change.
As Insurers, you realize the relevance of going digital in the new normal. Wipro Smart i-Connect™ is a ready to deploy solution that allows insurers to rapidly create new revenue streams and right shift end-customer experience while reducing cost of operations. To know more about how you can harness digital opportunities to thrive, Click Here