The insurance industry has been slow to adapt to the benefits of technological change. Many insurance companies still rely on inefficient paper processes, processes that require multiple programs, and even outdated equipment. In today's fast-paced and increasingly digital business climate, this presents a challenge both in terms of success and frustration.
While there are several reasons the insurance industry has lagged in adopting new technology, one has been the prioritization of cost reduction primarily as a means of profit growth. However, over the long term, this approach is mostly unsustainable given the growing demands from customers seeking high quality insurance technology software products and services that can better serve their business needs and provide scalable business advantages.
Perhaps the best option for increasing profits is to embrace the time- and cost-saving efficiencies that technological innovation can provide. If you’re still not convinced, consider this: innovation within the insurance sector is not only necessary to continue to compete, but inevitable. Early adopters will be poised to get ahead of the competition and grow their market as well as their profits.
Innovative technology is what will create significant change within the insurance landscape. However, knowing which technologies are making the most impact and how that impact is driving change within the industry can be a daunting task.
To help you understand the technologies and how they will affect your business, here are five ways technology is changing the insurance industry.
Artificial intelligence (AI) is a branch of computer science concerned with building smart machines capable of performing tasks that typically require human intelligence.
Machine learning (ML) is a type of AI that uses data in order to self-learn by analyzing data and then applies that learning without the need for human intervention. This subset of AI continues to gain prominence within a multitude of organizations.
AI and ML are being employed in the insurance industry by automating processes, reading and issuing documents, communicating, performing back-room operations and other typically time-consuming administrative activities.
A report by McKinsey Analytics estimates that across functions and use cases AI investments can produce $1.1 trillion dollars in potential annual value for the insurance industry. When AI is applied to insurance functions such as risk assessment, claims management, customer onboarding, and other core activities fundamentally premised on data, AI/ML not only increases the efficiency in processing that data but also makes analyzing that data in near real-time, and at scale, possible.
As the Internet of Things (IoT) becomes more prevalent and the scope of insurance projects increases in size and logistical granularity, the amount of data will only increase exponentially. Machine Learning can utilize this data to provide greater insight into current and potential customers, as well as illustrate clearer connections between current insurance services being offered and their financial outcomes. AI can help a company gain a more strategic view of how to not only respond to the data provided, but in turn better strategically position themselves.
AI essentially serves in many ways as a proxy organization that works tirelessly and with extreme efficiency to better understand the current conditions of your business, then presents options to constantly improve upon them.
ML is constantly increasing in its scope, breadth and depth to better understand and assist in the utilization–and even monetization–of data. This is a profound advantage for an industry that operates on an ever-expanding ocean of multi-faceted data.
When it comes to fraud prevention and data integrity, the stakes have never been higher–especially within the insurance industry. In March of 2021, CNA Financial, one of the largest insurance companies, was hacked. They ended up paying $40 million dollars in order to regain control of their network.
Insurance companies rank high on the target list of hackers due to the type of data that is being transmitted across networks. This has driven the application of blockchain technology within the insurance industry, and is quickly becoming a staple technology to ensure data integrity and security.
Blockchain is an immutable digital ledger that records and tracks transactions. Since it is distributed over a network, it is considered impenetrable and secure.
Because communication between applicants, policy holders, underwriters and other stakeholders is a necessity within the insurance eco-system, blockchain provides a means of communication that can almost entirely obviate data security risk and reassure participants that their data will remain uncompromised. A company that can back up transactions with blockchain technology has a distinct advantage in the market.
When considering insurance activities such as claims processing, policy management, regulatory compliance, underwriting and administrative reviews, as well quotes and other necessary processes, the act of manually performing such tasks is not only burdensome but also time inefficient and prone to greater instances of human error.
Automation of these tasks is where the insurance industry at large is headed. In Gartner's “Forecast Analysis: Hyperautomation Enablement Software, Worldwide” they assert that the worldwide market for technology that enables hyper-automation will reach $596.6 billion in 2022. This serves as a very bold indicator that the demand for automation is increasing rapidly and that the insurance industry is a business vertical that is a major contributor to that demand. As the speed of business increases, critical insurance tasks and processes will need to keep pace. Automation technology is the key to keeping up with demand and establishing a profitable response.
Object detection is a computer technology related to computer vision and image processing that deals with detecting instances of semantic objects of a certain class such as humans, buildings, or cars in digital images and videos.
The main purpose of object detection is to identify and locate one or more effective targets from still image or video data. It comprehensively includes a variety of important techniques, such as image processing, pattern recognition, artificial intelligence and machine learning.
According to the Federal Highway Administration each year over 20,000 workers are injured in road construction work zones. Over 35% of those injuries are due to contact with objects or equipment. Now when we consider the insurance implications related to this statistic it becomes very evident just how valuable object detection technology can be to the holder of an Owner Controlled Insurance Program.
The utilization of such technology makes it possible to mitigate injuries by identifying and correcting potential problems before they happen, resulting in fewer claims and greater insurance profitability. Object detection technology provides the ability to more efficiently assess job progress and can assist with site inspections. These on-site capabilities can have a massive net positive impact on the overall project.
Peter Sondergaard, Senior Vice President and Global Head of Research at Gartner, Inc. is quoted as stating “Information is the oil of the 21st century, and analytics is the combustion engine.” The ability to understand and leverage information is an absolute necessity for businesses to thrive and compete. Given the ever-growing complexity of data, identifying and implementing the appropriate analytic technology is paramount to success.
Risk assessment is one of the core areas within the insurance landscape whereby data analysis is used to make critical business decisions. An insurer can provide more customized premium offerings to customers if in fact they have a holistic view of the pertinent data.
Pricing strategies, claim fraud mitigation, lead generation, and customer satisfaction are a few of the areas where data analytics can provide competitive advantages. Analytics systems that are tuned to or customized to specific data, that are flexible in how they present it, and that provide a depth of analysis that delivers actionable insight, is a core technology that is perhaps the greatest force transforming the insurance industry.
Business is in a constant state of evolution which means that there are only two modes an organization can be in: catching up or leading the way. Innovation as a core business orientation ensures the path to being a leader. While many companies are known as true disruptors, few are authentically committed to innovation as a standard mode of operation.
Injala is an insurance software technology organization that views the insurance industry as having the greatest potential for innovation and is committed to providing solutions that deliver.
The insurance industry is entering a time of remarkable technological change. Those who embrace this revolution and understand how the changes will affect their business will be poised to reap the greatest benefits. It’s never too early to adapt to a change that will change the insurance industry forever.