Today, the buzz around insurtech can be seen across insurance lines. Insurers around the world are increasingly shifting to digital adoption, aiming to optimize overall insurance administration. However, it would be fair to say that while technology provides opportunities, it brings challenges and is not uncommon across the insurance sector. Therefore, without going deep into what and whatnot, let’s read what experts say on this topic.
Experts’ Opinions on Opportunities & Challenges Digital World Brings for Insurance Companies
1 . The Two Main Hurdles for Insurers & Banks
– Edward Mallett, Founder of WikiJob
Using Customer Data
The ability to gather, handle, and store customer data is the first hurdle. While banks and insurers collect personal data from clients, they often encounter challenges analyzing it to provide tailored services and operate more effectively. Overall, complicated artificial intelligence (AI) systems are required to process customer data efficiently. However, banks and insurance businesses have been unable to automate back-end processes that would allow AI systems to interpret user data.
The rise of new internet banks and insurers is another difficulty facing banks and insurers. People today are willing to bank with or buy insurance from these neo-banks and neo-insurers. 31% of consumers would consider a neo-bank or a tech giant like Amazon, Google, or Facebook.
2. The Opportunity to Improve Customer Service & Save Costs
Insurance businesses can use IoT to collect data on clients to safeguard them or estimate their risk levels, as well as give more personalized service. Incorporating AI systems like chatbots or virtual assistants will help banks and insurance businesses better serve customers.
According to Accenture, 71% of bank customers and 74% of insurance customers are open to interacting with chatbots or virtual assistants.
Banks and insurance businesses can also automate procedures to increase efficiency and profit. According to McKinsey & Company, automation can lower claim processing costs by 30%. Automation will perform 10 to 25% of banking functions, freeing up employees for more complex and valuable work.
3. Boosting Cyber-Security & The Need to Improve Customer Experience
– Gerrid Smith, Chief Marketing Officer at Joy Organics
Cybersecurity is a challenge for banks and insurers. Due to the kind and volume of data acquired, banks and insurance firms must be highly cautious in order to safely and ethically protect clients’ data and online platforms. Customers consider cybersecurity while picking a bank or insurance provider. According to Accenture, data security is the most important component of client loyalty.
Banks and insurance businesses must develop user-friendly mobile apps and websites. Also, banks’ and insurers’ digital services must satisfy customers. The testing market is predicted to reach $55.3 billion by 2021. Automation and innovative solutions like chatbots are driving this increase. Similarly, QA testing expenses had grown from 18% in 2012 to 39% in 2018. If not, they risk losing out on cost savings, efficiency gains, and improved customer service.
Bugs or anomalies identified on a website or app can harm a brand’s image, diminish conversion rates, and increase abandonment rates. As a result, organizations in areas like banking and insurance continue to dedicate more of their IT budgets to QA testing.
4. Multiple Systems, Combining the Future and The Past
Unless you’re a start-up, you’ve already set up procedures for establishing rules, resolving claims, and maintaining data. The old systems do not simply vanish only because you start something new. You don’t want to lose customers who are accustomed to a particular company model. You can’t afford to lose the data required for claims and accounting, which may need to be kept for years. Furthermore, even if you’re beginning from scratch, technology isn’t static; it’ll continue to evolve. Your new unit’s present digital approach won’t be cutting-edge indefinitely.
Some changes, such as data from Pay-How-You-Drive schemes, are easier to forecast; others, such as a global pandemic and its influence on systems, are less so. Having a team in charge of these issues — a team that collaborates with people in charge of your company’s business plan — will help you meet and master the constant transformation.
5. The Opportunity to Keep Up with the Fast-paced Industry
As the insurance market evolves and digitization grows, insurance businesses must become more nimble and efficient to keep up with the industry’s rapid pace. It doesn’t just apply to one aspect of your business or to the products, services you offer; it applies to everything. You can’t provide an agile product purchasing experience by establishing a flexible pricing program like pay-per-use without also including digital agility into claim processes or your entire customer experience.
In reality, the most successful digital transformations are those in which digital technology enhances productivity and is integrated into the company’s operations and organization – both internally and externally through customer-facing portals.
6. Technology Delivers Advantages across Processes
– Herman Hibbert, COO at Leaf Gutter Guards
To develop customer loyalty, create outstanding, consistent customer experiences across digital channels. Digital platforms are being used to enhance operations, generate income, and cut expenses. Tracking data to improve analytics and automation, as well as to deliver excellent customer service. Allowing data insights to guide the development of new goods that are more suited to consumer demands.
Using modern technology to enhance old systems and gain a competitive advantage. Developing a forward-thinking approach by anticipating digital developments.
7. Technology Provides Opportunities but Brings Challenges along
– Katherine Brown, Founder & Marketing Director at Spyic
The use of blockchain technology provides opportunities for insurance companies through building trust by enabling a single point of truth. This is achieved by maintaining a distributed data contract that cannot be altered by the insurer or their customers for individual benefit.
Through data mining, insurers can run analytics to establish related variables that can give better-informed decisions on issues such as risk assessment. Digitization enables better file management and record-keeping while a synchronized data repository makes data access easier.
Customer experiences are also personalized to individuals. Digital insurance sales have grown from 11% in 2011 to 29% in 2021.
Insurance companies face the challenge of migrating their existing systems from the old systems to digital platforms. The data they already have is in bulk and requires a lot of time to digitize. Technology keeps evolving, and companies have to keep up with the changes and constantly update systems which will require more expenditure.
8. A Digital World Full of Opportunities & Some Disruptive Challenges
– Digitalization provides new channels for insurance providers to find customers.
– Insurance policies can be customized to suit clients’ needs and target their target audience.
– Digitalization provides a better understanding of customer’s needs so that outstanding businesses can be built.
- Proper planning is necessary before implementing new technology, especially when it comes to data safety and security.
- With the introduction of digital technology, physical location becomes less important than it used to be as people now have more options when it comes to where they get their services from.
9. Utilization of Inoperable Systems
– Daniel Carter, Debt Advisor at IVA Advice
One of the most significant obstacles is the inability to adapt to new operating models. Because of dysfunctional legacy systems, insurers have a difficult time including or deploying new technologies and solutions into their technology stack as they become available. The main barrier to digital transformation, according to 68% of insurance companies, is outdated systems. This lack of integration limits further tool and system integration, preventing future success.
Most insurers are hesitant to move away from their legacy systems because they risk losing vital information and perhaps disrupting critical business activities. However, doing nothing will limit an organization’s capacity to compete, raise security concerns, and increase long-term maintenance costs. If insurers want to be a successful digital business, they’ll need to find out how to overcome aged legacy technologies.
10. Technology Improves Efficiency & Provides Convenience
One great opportunity for insurance companies in the digital world is the changing customers’ preferences. Because of the pandemic, most people now have the freedom to conduct business almost entirely online or over the phone.
People are now more likely to compare policy and pricing options online than ever before without ever meeting an insurance agent. The insurance companies are also optimizing and adjusting their marketing and sales processes to be more consumer and technology-friendly.
For example, most insurance companies are now offering 100% online or phone-approved insurance applications in response to the pandemic. This trend is convenient to both insurance agents and insurance agencies because of its convenience and efficiency.
11. Redefining Traditional Ways of Claims and Policy Management
A greater range of software solutions has an impact on claims management. Any insurance company’s claims management procedure, which begins with claim registration and continues with payments to the covered party, is crucial. Manual processes and a lot of human-to-human interactions are reduced using claims management software. Clients require less time to apply and go seamlessly through the claim handling process. Automation, in the eyes of the insurance firm, saves money by reducing labor costs.
Here’s a modern industry standard in action:
- Assume you’re an insurance business in the healthcare industry.
- Information interchange between insurer and healthcare provider systems is automated with claim management software.
- If the organization works with several small private practices that still use paper documents, image recognition algorithms that digitize the papers make the import process move faster.
- According to established policies, the system assesses coverage and payment for each claim.
- The system examines claims before sending them to a fraud detection module.
- Insurants receive their compensation once their claims are granted.
- To give business users instruments to handle reconciliations, change business logic, manage policy rights, and so on, policy management software must be an integral component of the system.
- SAP, Oracle, Patra Corp, GuideWire, Claim Kit, and Insly software for the insurance business meets standardized needs in claim and policy management systems. Insurtech startups and technology consulting firms, on the other hand, are at the forefront of innovation, utilizing AI, Blockchain, and IoT technologies.
12. Cyber Security is a Big Challenge
In my opinion, data security is at great risk in the digital transformation of the insurance industry. We all know how much information insurance companies like ours are gathering from our clients. With digital transformation, there is a higher possibility of cyber-attacks, which might cause an information leak.
If an insurance company doesn’t have a strong network, hackers can easily penetrate their system, which may cause massive data breaches or, worst, damage the whole system.
13. Improved Customer Service & Overall Buying Experience
– Kristopher Marsh, Insurance and Risk Management Professional
The insurance process, both with respect to direct-to-consumer and intermediary businesses, is changing rapidly. Many insurers, who have been historically anchored to old incumbent systems, are moving forward to detail quote and bind platforms. As this move occurs, insurers are able to move away from labour intensive underwriting practices, to those using data, machine learning, and automation.
This transition is proving to be very powerful; policies are underwritten using a portfolio approach, whereby rates and conditions can be set and adjusted by a centralized team in charge of strategy. This favors fewer better-qualified underwriters in senior positions and reliance on more cost-effective labor in customer service positions adhering to strict guidelines on what decisions can be made at the local level.
Over time, this should lead to lower rates, improved customer service, and a better buying experience overall.
14. Opportunity to Streamline Processes & CX but Data Privacy is a Major Concern
– Sarah George, Personal Finance Expert and Insurance Writer at Finder
Opportunity: Insurance companies are adopting technology to offer online tools for customers as well as to streamline quotes and applications. For example, insurtech companies are using AI to assess a customer’s risk, and car insurers are developing telematics apps that track customers’ driving and offer rewards for safety. And both big and small companies are offering digital tools like mobile apps, online chat, or virtual assistants.
Data privacy should be a major concern for insurance companies as customers are asked to give up more sensitive information, like their health or driving habits. While customers are interested in personalized insurance offerings, they don’t necessarily trust companies to take proper care of their data privacy, according to Accenture’s global Insurance Consumer Study.
15. The Opportunistic Aspects of Automation
One of the big issues with insurance is the complexity and amount of information a customer needs to provide. A big opportunity to address this is to automate the information on their behalf.
We’ve recently added automation into our journey, which pulls through data to assist in completing the client’s application.
The use of automation can be seen as a challenge to the traditional broker model as there is a perception that it takes away the need for people in the industry, however, we see this as quite the opposite. By adding auto-population of certain details to our journey, the broker has more time to get to know their client and form a stronger relationship.
With the rise of digital adoption, there are many opportunities and challenges for insurance companies. Some of these opportunities are in the digital world, and some challenges are related to disruption and improving operations, CX, revenue, etc.
However, apart from these, many insurance companies and agencies also face staff shortage issues, while others deal with budget constraints and face challenges in hiring new staff. As an insurance business owner, if you are also facing any of such issues, technology implementation problems, or back-office administration challenges, we at Insurance Support World have solutions for you.
We are one of the leading insurance back-office service providers providing a wide range of insurance services; from policy issuance and policy management to insurance administration services. When in trouble, look no further than ISW.