Technology has changed the way we work, think, communicate and do business. Customer expectations have shifted dramatically as online shopping and omni-channel platforms have made a personalized, streamlined experience the norm. The rise of artificial intelligence, cloud computing and other tools have unlocked data-driven insights unthinkable just a few decades ago.
With so much change occurring so quickly, how can P&C insurers position themselves for a profitable future? Which tools can carriers use to ensure that they stay aware of coming trends and respond mindfully to them?
Insurers have a number of opportunities to future-proof their research and development. Often, these efforts can begin with the tools, values and goals that insurance companies have already embraced.
The future of insurance is being driven by customer preferences more than ever before. Future-proofing research and development will demand closer attention to customer behavior.
Fortunately, technology offers a way to improve customer communication. Not only does the Internet make it possible to stay connected with customers more easily, but tools like artificial intelligence help to answer customer questions anytime, anywhere, says Alyssa Hunt, senior vice president of technical operations for QBE North America.
“We know that speed and convenience of communication is key to delivering the experience of excellence for our customers,” says Hunt. Intelligent communication tools boost both speed and convenience without sacrificing quality.
Another benefit of improving communication with customers: understanding what matters to them on a personal, local scale. For instance, the growth in insurance business surrounding craft breweries is driven by customers’ interest in small, local breweries, explains Paul Martinez, program manager for Brewery PAK Insurance Program. A localized understanding of customer needs and interests will help insurers spot opportunities, such as the rise in breweries and cottage food industries that require liability coverage.
Artificial intelligence promises vast opportunities for insurance companies, from better understanding of customer data to improved underwriting.
Underwriting has a greater effect on insurers’ overall financial performance than capital leverage or investment returns, yet it is responding sluggishly to changes in customer expectations, technological advancement and the development of new risks, say Ari Chester and fellow researchers at McKinsey & Company.
“Underwriting has been historically slow to change, yet clients — and the perils they face — are rapidly changing. Making transformational investments to reinvent the role of underwriting has never been more important,” say Chester and the research team.
One way AI improves underwriting is by improving predictive analytics, says Chris Ganje, CEO and cofounder of AMPLYFI. It does so by allowing for more accurate forecasts to be made on the basis of a much larger and more comprehensive data set.
When combined with strong customer communication, artificial intelligence can gather and analyze a vast set of relevant data points quickly, improving insurers’ ability to weigh risk and price accordingly.
Cloud computing — the management of data on servers located outside an insurance company’s property — is necessary for implementing artificial intelligence. Cloud computing allows for greater processing power to analyze large data sets quickly, as well as for insurance company staff to work anywhere, say Elodie de Fontenay, Kankeyan Murugavel and Richard LeRoy at Accenture.
When combined with the rise of smart devices, like health tracking wearables and smoke or moisture detectors, cloud computing also allows insurance companies to generate and access data on risk and customer behavior, say de Fontenay, Murugavel and LeRoy. This information can be invaluable for both underwriting and marketing.
Blockchains are another option for supporting research and development. It has disrupted insurance along with many other industries, promising a way to secure transactions without the need for third party intervention. The transparency and accountability of blockchains, along with their ability to automatically respond to certain conditions via a smart contract, make it a promising option for insurance companies, says Robert Cummings, global head of IBU insurance at SAP.
Because blockchains were designed with security foremost, they may have a particularly important role to play in reducing insurance fraud. “With insurance claims processed on the blockchain, insurance fraud can be minimized and efficiencies in claims processing can be realized,” says Triinu Murumäe, editor of BlackInsurance.
In the past, insurance policies were created and packaged through a time-consuming, researching-intensive process. Customers have had the option to purchase various packages, but they have not had the option to break apart the elements of those packages in order to create their own insurance coverage.
The same technological tools that make it easier to meet customers’ demands for personalization, however, improve insurers’ ability to offer a more customizable approach to coverage, as well.
This is where a solution like BOLT plugs in. The platform provides one single interface for all channels — whether those are for field agents, call centers or direct-to-consumer sales channels — in which product lines from the entire ecosystem are available. This allows products from multiple carriers to be sold as custom bundles. That way, no customer ever needs to be turned away because their specific coverage needs fall outside the menu of available products.
This is how conventional P&C insurance companies looking to the future of insurance can adopt a custom coverage approach and thus address customers’ demands for personalized coverage. By analyzing which coverages are purchased and why, these insurers can also gain greater insight into customer behavior and risk.
The move to artificial intelligence use in insurance has led to a necessary corollary: structuring data for analysis by AI and machine learning. Structured data is easier to analyze and protect, and it also offers efficiency benefits, says Carol McKenzie, vice president of sales and marketing at Solartis.
“Insurers can capitalize on structured data by reducing the reliance on manual data entry and manipulation which is both time-intensive and inefficient,” says McKenzie.
Property and casualty insurance leaders expect that insurtech will disrupt insurance distribution, with more emphasis placed on direct connections between customers and their insurers rather than the presence of agents and brokers, says Mark Breading, a partner at StrategyMeetsAction. Agents and brokers, as well as insurance company customer service teams, will transition to the role of trusted advisor with the customers they serve.
Bringing your entire customer-facing team onto the same page in terms of technology use and overall customer goals can greatly improve an insurer’s ability to attract and keep new customers, Andrea Wells writes in Insurance Journal. This is particularly true when agents and brokers have cultivated strong, personalized customer relationships that can serve as the basis for better customer communications company-wide.
Regulations are continually changing, not only in insurance itself but in related fields like cybersecurity. In 2019, for instance, major regulatory areas of focus include insurance data analytics and modeling and insurance fraud, Autumn Heisler writes at Risk & Insurance.
Although regulations tend to follow issues rather than precede them, insurance companies that stay aware of regulatory efforts position themselves to comply readily with rules and decisions once they are released. The regulation-making process itself can provide insights and opportunities for insurance companies to embrace best practices in the use of technology.
Remaining mindful of trends in litigation and court decisions can help insurers make better decisions as well. For example, recent changes in Florida law may burden underwriting, but may also lead to more demand for coverage, says Tim Zawacki at S&P Global Market Intelligence.
While customers are interested in sharing data with their insurance companies for a more personalized experience and custom-tailored rates, the acceptance of this data by insurance companies comes with responsibilities, says Varun Dua, founder and CEO of Acko General Insurance. Increasing regulatory demands and consumer fears about data security and privacy are pushing insurers to improve their digital security.
The rise of hacking and similar attacks, along with the patchwork of data security regulations that have yet to provide uniform, adequate standards, have led many insurance companies to embrace responsibility for data security in a proactive way, says Ian Kilpatrick, executive vice president of cyber security at Nuvias Group. While security measures can be complex, they provide both customers and insurers with a sense of safety, protecting their relationship.
Brands with verifiable sustainability practices perform better than competing brands without sustainability practices in every industry, say Michael Houlihan and Bonnie Harvey, founders of Barefoot Wine. For instance, a Nielsen study of retail goods found that sustainable items averaged three percent better growth than brands that didn’t tout sustainable practices.
Because insurance companies don’t sell tangible items like wine or vehicles, it can be more difficult for insurers to see the future of insurance in terms of sustainability. Employing sustainable practices, however, can help save money while also encouraging customer interest in the insurer’s brand. For example, transitioning to paperless communications with customers can save resources and become a talking point that attracts new business.
The future of insurance remains uncertain in many ways, particularly for P&C insurers. Adopting new technological tools thoughtfully and building strong customer relationships can help insurance companies thrive no matter what the future has in store.
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