Anyone working in technology or innovation has heard of it- disruption, the most pressing recent phenomenon facing businesses in any industry today. Wikipedia defines disruptive innovation as “an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.” While disruptive technologies have changed business landscapes since the industrial revolution, only recently has technology begun to advance so rapidly that disruption must be accounted for on a continuous basis. Today, most companies, especially large enterprises, must have individuals in their organization constantly monitoring what new technology-driven developments could be the next source of disruption in their industry.
The insurance industry is an industry right on the cusp of experiencing major disruption. Much like the transportation industry right before mobile applications, the technologies on the horizon are poised to rapidly change how insurance companies do business, and potential to widely impact the bottom line. From an article by management consultants Bain & Company, “An analysis by Bain and Google shows that a prototypical P&C insurer in Germany that implemented these technologies could increase its revenues by up to 28% within five years, reduce claims payouts by as much 19% and cut policy administration costs by as much as 72%.” Here are the five technologies we believe are going to disrupt the insurance landscape in the near future:
1. Machine Learning and AI
AI and machine learning are new technologies that are creating widespread disruption in almost all industries. They are capable of continuous improvement and learning, and because of this are poised to create the most change in business operations.
For insurance companies, automated technology can touch all aspects of the business. The information systems that form the backbone of an insurance company are going to become far more efficient using AI. When new data is added to the information system’s database, AI will allow the system to automatically update it’s predictions and outputs in accordance with the new information. Insights into customer needs and demographics will be constantly adapting with the business in real time, allowing the company to make quick, accurate assessments at all times.
Automation will also impact the client side of operations. Smart contracts operating using AI assistance will adapt instantly to the client’s unique profile, greatly improving the client’s experience and giving them better service at the same time.
2. Internet of Things
The “Internet of Things” refers to more and more physical products including integrated computer technology that allows for product customization and data collection. As one can imagine, this has major implications for the personal insurance industry. An object with integrated technology can gather data on how the consumer uses the object, making assessments of use more accurate than ever.
This technology will also improve the handling of claims, right at the point of incident. Consider a vehicle that has smart technology built into it. If that vehicle is in an accident, the integrated technology can report instantly all collectable data involving the accident, including driving speed, damaged areas, time of day, and more. This means underwriting for accidents is made far more efficient and accurate than under traditional methods. After gathering this information, the insurer can have an easy-to-use claim form emailed to them within minutes that they can fill out right on their mobile device. The internet of things will increase efficiency and make claims processes easier for both insurers and customers.
3. Insurtech Companies
Insurtech companies are small, often startup tech companies that have found traction because they’re able to adopt new insurance technologies far faster than large, established insurance companies. Insurtech companies can make quick adjustments to their operations to accommodate and test new technologies in insurance without the long delays and risk that large insurers face when adopting new tech.
Insurtech companies are an interesting source of disruption in insurance because they can either assist a large company in keeping up with disruption, or be the reason for disruption. Fortunately the majority of insurtech companies have focused on the former. These companies partner with large companies to quickly bring digital solutions to them without the need for the training and investment that goes with bringing the technology in organically. These companies directly benefit the bottom line via reducing administrative costs, especially in underwriting.
Insurers need to be aware however that some insurtech companies have set very high goals and are starting to take away entire components of business from incumbent providers.
4. Updated IT Architectures
The architecture the IT system a company uses can have a large impact on how well technology is handled internally. Many insurers have begun experimenting with integrating new technologies into their IT systems like blockchain and advanced analytics enabled by AI.
Perhaps most influential has been cloud processing. Cloud technology is commonly regarded as the most efficient for storage and processing, oftentimes at a fraction of the cost of in-house computing. While cloud has some security concerns, it will continue to grow as a preferred IT architecture because of its ease, versatility, and ever-expanding capabilities.
Many companies are also beginning to integrate productivity and communication tools right into their architecture, making videoconferencing, file sharing, and other modern productivity solutions more accessible to employees than ever.
5. Online Sales Technology
Online sales tech is a highly relevant disruptor because it has already been adopted, at least partially, by the majority of insurers on the market. If an insurer hasn’t already started the process of bringing their sales process online, they’re already behind.
Online sales for insurance is dynamic in capabilities, and continually expanding. Online sales provides customers with value as they’re able to get instant quotes online with little hassle, and compare and contrast different policies. Online assistance in the form of chat bots, interactive help sections of websites, and other help solutions make the customer’s experience more enjoyable. Insurers can also conduct policy management through their website and customer’s email.
If you’re in the insurance industry, it’s key that you stay aware of these technologies and search for ways to incorporate them into your business model or find partners who already have. In our next installment of this blog series, we’ll be covering how to use corporate innovation as a strategy to adapt and involve these disruptive technologies.