Role of Emerging Technologies in Insurance Sector
Emerging technologies are revolutionising the insurance industry,
by transforming the
conventional insurance value chain. It entails leveraging digital tools to increase
operational
efficiency, enhance the customer experience, and develop new business models.
Digital reimagination enables the insurers to adapt to changing
market conditions and stay
competitive in the digital age. The various technologies being adopted and their
potential applications
in the insurance industry are as follows:k
⦁ Blockchain
Blockchain technology has the potential to disrupt the
insurance industry through its
implementation in streamlining processes, increasing transparency and enhancing
the efficiency
within the industry. Some of the potential use cases for blockchain are as
follow:
⦁ Claims Processing: claims processing can be
streamlined using
blockchain, making the entire process faster and more convenient for the
policyholders.
⦁ Smart contracts: smart contracts are
self-executing contracts with the
terms of the agreement between buyer and seller directly written into lines of
code. They are highly
effective in automating claims processing with improved speed and accuracy.
⦁ Fraud Prevention: a shared database of
policyholder information can be
created which helps in preventing fraud and reducing administrative costs
associated with verifying
customer data.
⦁ Reinsurance: blockchain helps in effectively
managing the reinsurance
process as the information is shared with multiple parties.
⦁ Artificial Intelligence
Artificial Intelligence is increasingly being leveraged to
develop personalized
customer support, automate processes, and improve accuracy within the industry.
Some of the key
use cases leveraging AI are:
⦁ Risk prediction in Underwriting: by analysing
data from multiple
sources, including credit scores, social media, and driving records, automation
can help
insurers assess risk more accurately and in making more informed underwriting
decisions and
reduce the likelihood of fraud.
⦁ Personalized pricing: AI algorithms to analyse
a range of data
points, such as customer behaviour, credit history, and medical records, helping
the insurers to
provide personalized pricing catering to the customer’s needs.
⦁ Risk Management: analysing historical data to
predict future trends
and behaviours, helps the insurers to accurately assess the risks involved based
on multiple
factors and reduces the risk of losses.
⦁ Automation of claims processing: AI can
automate the claims
processing, making it faster and error-free.
⦁ Customer Service: chatbots and AI-powered
assistants provide instant
customer service and support, reducing the need for the human agents. Hence, it
helps in enhancing
the customer experience and reducing the cost.
⦁ Fraud Detection: AI algorithms can analyse
large amount of data to
detect fraudulent claims, saving money by identifying and preventing false
claims.
⦁ IoT
As the world is becoming more connected and smarter with the
implementation of IoT
across various walks of life with smart homes, connected cars, wearables etc.,
the insurance
industry is looking to utilize IoT to develop unique and personalized use cases
for their customers.
Some of the use cases leveraging IoT are:
⦁ Vehicle Telematics for UBI: using IoT, data
collected through
telematics devices is transferred between the vehicle and insurer’s remote
server in real-time. This
data is analysed by insurers for providing Usage Based Insurance
⦁ Home Automation for risk assessment: IoT
sensors provide information on
safety and security of the property, hence improving the customer engagement.
⦁ Customer Health Monitoring: IoT devices like
sensors and wearables help
in real-time monitoring of customer health and provide alerts on their health
and fitness.
⦁ Real-time Asset monitoring: IoT devices
provide real-time monitoring of
the assets like real-estate property, vehicles, etc which leads to better
maintenance, personalized
policies, reduce the risks of claims and improve customer retention.
⦁ Wearable data-based personalization: wearable
IoT devices provide
insurers with real-time data on the behaviour and health of policyholders,
helping in accurate risk
assessment enabling insurers to develop more personalized policies.
⦁ Cloud computing
Cloud computing allows organizations to store, manage, and
process data and applications
over the internet rather than on local servers or personal computers. Migrating
to cloud can benefit
the insurance industry in numerous ways:
⦁ Data Storage: by migrating to the cloud,
insurance companies can reduce
their hardware and infrastructure expenses, eliminate the need for on-premises
data centres, and
take advantage of pay-as-you-go pricing models.
⦁ Disaster Recovery Systems: safety of data can
be ensured by migrating
to cloud, contrary to the case of traditional data storage infrastructure.
⦁ Cloud-based tools for Customer Service Management
(CRM): by providing
quicker access to information, more personalised services, and greater
transparency, cloud-based
systems can enhance the customer experience. This can lead to higher customer
satisfaction and
loyalty.
⦁ Accurate and fast advanced analytics:
insurance companies and their
partners, such as brokers and reinsurers, can collaborate more efficiently with
cloud-based systems.
This can assist in accelerating processes and increasing efficiency.
⦁ Advanced Data Analytics
Data analytics is being used to track the usage of insured
assets, such as cars or
homes, and offer personalized insurance rates based on usage patterns. There are
numerous use cases
for using data analytics to enhance the processes in the insurance sector:
⦁ Predictive models for claims management: large
set of historical data
is analysed to provide predictions for trends and improve the claims management.
⦁ Advanced pricing models for risk assessment:
analysing a range of data
from multiple sources leads to enhanced risk assessment. Based on these
insights, better pricing
models can be offered.
⦁ Accurate underwriting insights: by analysing
data from multiple
sources, including credit scores, social media, and driving records, insurers
can make more accurate
underwriting decisions.
⦁ Personalization of products and services for
customers;
⦁ Identify patterns for fraud detection:
analysing huge range of data can
assist insurers in reducing the likelihood of fraud.
⦁ AR/VR
AR (Augmented Reality) and VR (Virtual Reality) are promising
technologies that the
insurers are increasingly adopting to take advantage of the real-world
simulations made possible by
the AR/VR. Some of the use cases leveraging AR/VR are:
⦁ Risk Assessment through real-world simulation:
AR/VR are being used by
insurers for risk assessment. For example: VR is used to simulate a virtual
environment where
policyholders can demonstrate their driving skills, enabling insurers to assess
the risk more
accurately.
⦁ Risk management: AR/VR can make the
underwriting process more accurate,
leading to better risk management.
⦁ Employee Trainings: Insurers can use VR to
simulate real-life
scenarios, enabling employees to practice and refine their skills in a safe and
controlled
environment.
⦁ Robotic Process Automation (RPA)
RPA facilitates the creation, deployment, and management of
software robots that mimic
human actions when interacting with digital systems and software. RPA can be
used to automate
multiple processes of the insurance industry:
⦁ Automation of Claims processing;
⦁ Automation of Policy administration;
⦁ Automation of Underwriting;
⦁ Automation of Risk assessment;
⦁ Cybersecurity
Cybersecurity is helping the insurers to address the challenges
of data privacy,
consumer protection and security of their own operations, as the risks of
cyber-attacks are
increasing. Some of the use cases leveraging cybersecurity are:
⦁ Cyber Attack Risk Assessment: Cyber security
is being used for better
risk assessment against the cyber-attack.
⦁ Fraudulent Claims Prevention;
⦁ Protecting Customer Data: Safety of customer
data is ensured by
implementing security measures such as multi-factor authentication, encryption,
and intrusion
detection systems.
⦁ Ensuring Business Continuity: Cyber security
measures like backing up
data, creating disaster recovery plans, and conducting regular cyber security
audits are essential
to ensure business continuity in the event of cyber-attack.
⦁ Digitalization of sales and distribution
Social media, digital advertising, and other online channels
can be used to market and
sell insurance products to a broader audience. It reduces the cost as well as
increases the volume
of policies sold to enhance the revenue.
The introduction of numerous new-age technologies to the insurance industry has led
to the
reimagination
of the entire insurance value chain. Digital transformation is a critical step to
stay relevant and
competitive in today's rapidly evolving marketplace. Insurers must also address
organisational
barriers,
invest in talent and skills development, and collaborate with partners and
stakeholders to create an
ecosystem that supports innovation and growth. By embracing digital transformation
and driving
change
throughout the insurance value chain, insurers can unlock new opportunities for
growth,
differentiation,
and customer value, as well as increase their resilience and agility in the face of
emerging risks
and
uncertainties.