Usage-based, on-demand, and ‘all-in-one’ insurance lifestyle solutions will become more relevant within the digital economy. Customers will prefer individualised insurance coverage over the present one-size-fits-all options. Today, distribution costs account for more than 80% of the premiums collected by insurers.
Intermediaries in the insurance value chain, which are characterised by an excessive reliance on human effort, will become obsolete as a result of digital models. In the long run, flexible coverage alternatives, microinsurance, and peer-to-peer insurance will become feasible options. Risk capital will be provided directly to digital businesses by reinsurers, and regulatory frameworks will allow for shorter value chains.
Insurer-insured interactions will be reimagined thanks to lifestyle applications. As they integrate data from numerous sources, Application Programming Interfaces (APIs) will enable the creation of insights-driven services. More accurate risk assessments, customised premiums, and value on a long-term basis will result in improved customer experience and brand loyalty, as well as fewer false claims, thanks to a better understanding of client habits.
2. AI & Automation for Faster Claims
Newer data channels, improved processing capabilities, and breakthroughs in AI algorithms will propel RPA and AI to the forefront of the insurance industry. Lemonade, for instance , uses AI and behavioural economics as essential components of its business model. While AI (AI) eliminates brokers and paperwork, its behavioural economics capabilities prevent fraud, saving time, effort, and money.
Tyche, another InsurTech start-up, has implemented an AI-infused claim likelihood model in underwriting to more correctly assess risks and increase profitability. Bots will become commonplace in both the front and back offices to automate policy servicing and claims management in order to provide customers with faster and more personalized service. A virtual assistant for a major American auto insurer, for example, answers consumer questions about policies and payments. Jim, Lemonade’s claims bot, evaluates and settles property claims in under three seconds.
SPIXII, an automated insurance agent, communicates with customers using a mobile app and other messaging platforms to assist in the acquisition of the appropriate policies. Customer experience, cost optimization, operational efficiencies, market competitiveness, and emerging business outcomes will all be substantially impacted and improved by AI and automation. Top The global insurance market, worth USD 5 trillion1, is undergoing a game-changing course correction that will re-define ‘business as usual.’
3. InsurTech Partnerships
The fields of car, home ownership, and cyber insurance have all seen considerable development from insurtech companies. Traditional insurers will be encouraged to either acquire technology capabilities or cooperate with InsurTech companies as a result of this significant growth.
With millennials’ growing need for creative products and services, teamwork will become more important than ever. InsurTech start-ups will gain access to larger customer bases, capital, and subject expertise, and traditional insurers will benefit from faster outcomes in building a tech culture. It will give rise to novel models and revenue sources, resulting in increased profitability and lower operating costs.
4. Mainstreaming Blockchain
The requirement for large volumes of client data to be handled in real time by various insurance operations necessitates easy and safe data transfer across enterprises and their various stakeholders.
The advantage of blockchain technology is that it allows for safe data management across different interfaces and stakeholders while maintaining data integrity. The system reduces operational expenses across the board, from identity management and underwriting to claims processing, fraud management, and reliable data availability. Additional benefits of blockchain in policy administration include Decentralized Autonomous Organizations (DAOs) and smart contracts.
Surprisingly, more than 38 insurance and reinsurance organisations have joined the B3i project to investigate blockchain applications in the insurance industry. In 2018, a beta version of a blockchain-based insurance solution will be released.
5. Advanced Analytics & Proactiveness
New sources of tech-enabled data, such as the Internet of Things, mobile-enabled InsurTech apps, and wearables, will enable highly tailored premiums. Property and Casualty (P&C) insurers will be able to extract real-time and precise data on individual consumers’ loss exposure as the connected devices industry grows rapidly over the next five years. This will enable them to respond more quickly and with highly tailored solutions.
A notable example is a relationship between a European insurance company and Panasonic. Panasonic’s sensors send smartphone notifications to both the insurer and its clients, allowing for swift and informed problem resolution.