Estimated reading time 4 minutes.
Incumbent insurance players increasingly face a dilemma. With many insurtech players being present in multiple areas of the industry, P&C incumbents need to figure out if they need to address a specific consumer need or compete just because it’s a novel way to use technology.
In this post, we review five technology trends in the P&C industry and how they can add significant value for P&C insurers.
The day when consumers buy insurance directly from insurtech companies is still quite some time away. However, they actively engage with them in one form or another. Consumers’ needs are changing and, while incumbents are responding, they are slow. However, they understand these consumers far better than most and have decades of data on them. This data can potentially unlock long-term value if they can figure out how to access it.
Unstructured data can power customer success dreams
Insurtechs certainly know how to work technology to their advantage, but they seldom have the data that powers the analytics models and algorithms. The opposite is true of the incumbent P&C insurers sitting on mountains of data that can unlock massive long-term value for them and their clients.
Data is the new oil. However, analytics models and algorithms need data in a structured format. This format ensures accurate results and predictions. For example, several P&C insurers have loads of data locked away on papers in a warehouse. Their immediate concerns are about tools that can help them translate this data to the online world.
Telematics drives hyper-personalization and usage-based pricing
The rise of IoT created vast amounts of data about assets that P&C insurers often insure. E.g., there is data about how machines operate, their wear and tear, servicing schedules, preventive maintenance, etc. For example, today, most cars in the US come with sensors that read and create data about the vehicle condition, maintenance schedule, driving habits, accidents, etc.
Often this data is available in real-time. For example, P&C insurers can use this data to adjust premiums according to driving habits (usage-based pricing). Or reward customers if they’ve been regularly maintaining their vehicles.
On the commercial side, this data can aid preventive maintenance, which reduces cost for the company and builds a more accurate picture for the insurer about the asset they are insuring. Insurers can also settle claims faster and prevent fraud. This data also lets them partner with other niche players to offer value-added services such as breakdown services, towing, etc.
In the home, cloud-connected cameras can make a detailed list of assets when paired with image recognition algorithms. When a customer files a claim, this helps the insurer process the claim rapidly with an accurate list of assets.
New channels can drive differentiated customer service
Customers increasingly interact with insurers through digital channels such as WhatsApp and other messengers and services such as Alexa, Siri, and Google Home.
P&C insurers can use novel technology such as chatbots to frontend the first line of support for customers. Chatbots can perform basic tasks very efficiently. E.g., they can answer queries about premium due dates, check on the status of a claim, or give more information about products and services. This automation frees valuable human cognition for more high touch and value-adding services.
Blockchain can prevent fraud and provide increased trust
The P&C industry is fraught with fraudulent claims, and insurers often must dig into old data to verify authenticity. With a bit of help from algorithms, insurers continue to address this challenge in encouraging ways. However, blockchain can drive significant value for insurers.
Because of its distributed, immutable, and almost hack-proof nature, insurers can use blockchain platforms for several use cases. For instance, smart contracts based on blockchain platforms can help insurers enter into enforceable agreements with customers. These agreements prevent fraud and benefit both the insurer and the customer when the terms of the agreement come to fruition.
Blockchain can also provide a platform for insurers to store customer records free from identity spoofing, thefts, and fraud. In addition, automated verification mechanisms reduce hugely administrative overheads for insurers, helping them be cost-effective and agile.
Distributed infrastructure can aid in reducing technical debt
Fragmented technology efforts have saddled P&C insurers with rising technical debt and extensive on-premises technology that is expensive to maintain. However, with cloud computing technologies rapidly maturing, insurers can think about moving some of their non-sensitive workloads to the public cloud. For instance, functions such as administration and accounting can move to the public cloud.
P&C Insurers can also use the cloud to work on large datasets that potentially contain billions of data points.