Traditional forms of insurance have started to face a lot competition from niche and nimble competitors who are better able to cater towards the 'Millennial' crowd. For the insurance sector, digital transformation and innovation has been long due task. However, the industry is weighed down by legacy technology and a culturally steeped resistance to change.
There’s a reason for such resistance - insurance is meant as a protection against perceived risks. They play an important role in safeguarding diverse assets and portfolios. With rise in population, megacities, and increasing economic activities, the risk quotient also rises exponentially.
At the same time, insurance industry has to act in accordance to stringent regulations, low-yield assets, and penalties. It also cannot provide a one-size-fits-all policy to businesses and individuals as each coverage is dependent on the assumed risk it carries. Therefore, there is a need for a holistic digital transformation approach which can aid in offering innovative solutions, keep apace with changing social, technological, economic and environmental change and identify new opportunities in real time.
According to McKinsey, 25% of the insurance industry will be automated by 2025 with help of AI and machine learning. AI can assist this industry in automation of claims processing, claim fraud detection, risk predictions along with providing smart contracts and providing predictive data that can improve underwriting and reduce overall cost to companies.
1. Customer Experience Is Central To All Digital Transformation
The one common denominator of new-age insurance companies and their impact on this industry is due to one thing they get right - they put customer experience at the centre of everything they do. From engagement, retention, selling, and servicing. Digital transformation has the ability to bring a customer in direct correspondence with an insurance company.
According to Salesforce’s 'State of the Connected Customer' report, 68% consumers believe technological advancements would positively impact their relationships with insurance companies, with 53% customers expecting offers to be personalised - up from 49% in 2019.
In today's uncertain times, it is harder for brands to build customer confidence, increase customer satisfaction and drive customer loyalty. According to Gartner, top marketers need to understand key customer personas and design and optimize interactions to deliver innovation and drive customer experience.
Automation ensures direct service to customers, shifting the responsibility of brand building and marketing to the insurance carriers. The online product offerings should address the broad spectrum of insurance needs, engage customers who 'search' for particular products, share comprehensive information, and enable equitable comparison to close a new policy.
If for any reason customers prefer interactions with agents, enterprises should enhance the independent agency model with a digital sales ecosystem for real-time collaboration.
2. Automating Claims Process & Risk Prediction
According to McKinsey, digital claims transformations generate impact across all of claims’ foundational key performance indicators. Successful digital claims transformations integrate 5 elements:
- Customer experience excellence
- Analytics-driven claims handling and automation
- Claims prevention services
- Value-added services
- Continuous improvement from customer feedback
Claims - be it genuine or fraudulent - can be processed faster by automation tools thereby raising the bar in customer experience. Such digital transformation in the insurance industry will also save time and costs by eliminating the middlemen - a disruption for brokers and agents. Significantly, digital intermediaries reduce turnaround time and boost efficiency across the entire matrix from underwriting, premium collection, and claims settlement processes.
Risk mitigation is a significant aspect of insurance whenever any policy issued to the insured. Risk managers and insurance professionals need visibility into potential and type of risks, forecast claims possibilities, and insure any emerging threats, in order to accurately underwrite policies, and effectively manage claims. Agile digital integration can assess such risks and improve underwriting by processing historical data and taking real-time data from existing digital ecosystems.
3. Reduce Risk With Predictive Analytics
When it comes to underwriting, an insurance company has to be very precise for issuing a policy and be able to factor a myriad of risks. Predictive analytics can connect these dots between diverse data sources and anticipate risks. It can not only factor in fraudulent claim but also detect it.
Such digital tools can simulate models to facilitate risk evaluation while minimizing dependence on old claims records, thereby helping insurers provide adequate coverage and deal with high-risk segments better. Advanced modelling helps forecast diverse risk scenarios, while preventing overselling. Brokers often pitch wrong plans or oversell coverage. Insight-driven pricing models make use of an applicant’s data and consolidated statistics to rationalize the cost of personalized plans.
Big data analytics helps configure products with benefits that transcend policyholders and financial criteria. Insurance solutions that align premium rates with a customer's driving history, lifestyle, well-being, and energy efficiency help achieve socio-economic goals through investments in wellness products, hybrid vehicles, green buildings, energy efficient industrial equipment, and renewable energy.
The world is changing and so too the competitive insurance sector. Digital transformation offers an added layer of protection and benefits, predict emerging risks and orient towards enhanced customer experience.
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There is a need for a holistic digital transformation in the insurance sector to offer innovative solutions, keep pace with changing social, technological, economic and environmental change and identify new opportunities in real time. From engagement, retention, selling, and servicing, digital transformation has the ability to bring a customer in direct correspondence with an insurance company