Digital transformation in insurance is happening in many ways and affecting everything from the underwriting process to customer retention.
In fact, more than 60% of insurers say that technology already has a major impact on their underwriting processes, and more than 63% “expect technology to have a significant or very significant impact on risk management, distribution, and finance.”
In this post, we’ll highlight five digital transformations in insurance trends that CIOs should know about and provide real-world examples of those transformations in action.
Insurance industries run on data to calculate risk — open ecosystems allow them to share that data while benefiting from external data. These ecosystems leverage open application programming interfaces (APIs) to share data across systems, creating a mutually beneficial relationship.
As Accenture says, “The power of the ecosystem lies in its complementary nature. No single player needs to own or operate all components of the solution. Together, the abilities of all parties in the ecosystem are amplified, allowing the value of the ecosystem to be greater than the combined value of all of the players on their own.”
Many insurers use open ecosystems to expand their offerings by partnering with other businesses to provide a wider range of services.
Global insurance company Generali Group transformed its business by partnering with smart-home technology Nest Labs. Thanks to an open ecosystem, Generali and its customers can access information from the in-home smoke and carbon monoxide detector, Nest Protect.
Generali home-insurance customers get the added value of risk alerts that Nest sends directly to their phones. Meanwhile, Generali can leverage the additional data to better price insurance packages and reduce its overall risk.
Open ecosystems allow insurers to expand service offerings and become more competitive in the market.
Open ecosystems give insurers access to new datasets, pulling information from everything from home security systems to smartwatches.
Many insurance companies lean on machine learning and artificial intelligence (AI) to process data. Machine learning doesn’t just save time, it also helps insurers provide faster and more personalized service.
Machine learning is particularly powerful in digital transformation insurance trends because the insurance industry still heavily relies on paper.
“So much data is locked up in paper and PDF files,” says Andy Cassel, vice president of data and analytics at VertaFore, “it has to be manually extracted by someone. In the process, there are errors and omissions.”
Now, insurers can use machine learning to extract and analyze data automatically, greatly reducing error-prone manual work. With more data comes more personalized insurance plans that specifically cater to the needs of individual customers. Not only is this a major benefit for insurance buyers, but it also helps insurers perform better risk assessments before they design a customer’s plan.
Machine learning reduces effort on the customer side as well. Insurance companies can leverage machine learning to design automated services, like customer service chatbots or mobile apps for filing claims.
State Farm’s Drive Safe and Save program relies on machine learning to calculate the cost of auto insurance plans for participating customers. Through the app, which customers activate while driving, State Farm collects information, such as miles driven, acceleration and braking habits, actual speed compared to the speed limit, phone use while driving, and more.
Customers benefit because they are rewarded for being good drivers with discounted insurance plans. For State Farm, the discounts are well worth it because the company gets to gather driving activity information before designing a plan for the driver.
Machine learning results in larger amounts of data with a lot less time and effort from insurance companies.
Most insurance organizations only process 10-15% of available data — machine learning offers a shortcut for collecting and analyzing data on a much larger scale.
To prevent insurance fraud, some health insurance providers incorporate biometric identification technology into their business models.
Biometric identification uses fingerprints, iris scans, and/or facial recognition technology to verify a patient’s identity. As insurers find more ways to prevent health insurance fraud, companies are relying on biometric verification to keep both doctors and patients accountable.
Medical professionals can defraud health insurance companies by performing unnecessary treatments or tests, billing insurance providers for services they never provided to patients, and prescribing unnecessary medication. Patients are at risk as well — if scammers get ahold of insurance information, they can file claims under another patient’s name to use their medical coverage. Biometric identification ensures that the right patient is authorizing the right charges and treatment.
Philippine Health Insurance Corporation (PhilHealth) plans to implement biometric fingerprint scanning and facial recognition via smartphones in 2020.
PhilHealth plans to use both fingerprints and facial structures to authenticate patients’ identities and to perform “liveness checks.” Fingerprint scans quickly verify a patient’s identity at the time of treatment, and facial scans prevent claims filed on behalf of deceased patients.
Biometric identification technology benefits both insurers and customers by:
As medical clinics and health insurance companies move services like medical record access and claim filing services online, biometric identification is likely to become increasingly important for privacy and security.
What use is data if no one can access it? By shifting tools and information to cloud-based solutions, insurers are able to work more efficiently. In fact, an Accenture study reports that 63% of insurance organizations say that using cloud-based tech to improve operational efficiency has the biggest impact on their company right now.
Cloud computing involves changes such as using SaaS solutions over on-premise options, using cloud databases instead of physical data centers, and embracing mobile apps for customers instead of legacy solutions like paper files.
Real-time data is one of the top benefits of shifting systems to the cloud. Information is accessible to employees and customers at any time and from any location. Plus, cloud storage means companies are not limited to saving only the amount of data their physical servers can hold.
A U.S. insurance and financial service company previously stored information on 3,000 distributed servers. Not only was the upkeep and storage space expensive, it severely limited the company’s ability to scale its business.
The company switched to cloud-based servers running on IBM System Z mainframes, which immediately led to faster information sharing within the organization. And within three years, the company saved approximately $15 million on physical storage and upkeep.
By now, cloud migration is crucial for businesses in many industries, and insurance is no exception.
Cloud computing not only saves insurance companies money; it also improves internal collaboration through instantaneous information sharing.
All of the aforementioned trends have the potential to positively impact how insurance companies function, but only if employees actually embrace the new products. As new tech becomes more important in the insurance industry, many companies are leveraging digital adoption solutions to speed up the transformation process.
Lack of change management expertise is one of the top three obstacles for insurance companies during digital transformations. Without support and guidance, employees struggle to adopt new tools and processes.
For that reason, companies turn to Digital Adoption Platforms (DAPs) to smooth out the transition. DAPs lay on top of software applications, so they can provide contextual, in-app guidance for users. So, if employees need to learn how to use the new cloud database that’s full of data gathered through machine learning, a DAP can teach them.
A major US Insurance company introduced a retirement services portal to help customers manage their plans. Customers struggled to use the application without a bit of handholding, which led to a surge in support requests.
The company now leverages Whatfix’s DAP to provide instructions directly within the portal. Customers can learn about their plans and the retirement portal through self-guided walkthroughs and help sections. Not only does this improve the customer experience, it helps the insurance company save money by reducing support queries. Each time someone uses the self-guided help instead of submitting a support request, the insurance company saves around $7. So, for every 500 support tickets avoided, the company saves about $3,500.
While DAPs may seem like just another tool for employees to use, the self-guided and on-demand training addresses common pain points for employees: lack of training resources and updating technology while still performing daily duties.
When it comes to implementing new tech solutions, a DAP can be your secret weapon for increasing user adoption and decreasing frustration.
Whether you’re shifting to SaaS services, introducing new data gathering/analysis tools, or anything in between, we’re here to help. Our Digital Adoption Platform can provide on-demand, self-guided training to get your team up to speed on new tools quickly and easily. Sign up for a demo to see how we help drive your transformation forward.