Just like in banking and finance, insurance companies have long remained reluctant to apply digital technologies in their workflow. The sluggishness is mainly caused by the complexity of internal processes and strict regulatory barriers. This leads to poor customer experience and dissatisfaction with the services.
eep customer dissatisfaction with insurance services and poor automation of back-office operations have influenced the inception of a new trend in insurance – InsurTech. InsurTech allows insurance companies to effectively tackle a wide range of persisting problems in the industry as well as provide more flexible services aimed at new customer segments.
Those companies that invest in InsurTech solutions gain a competitive advantage in the market. Moreover, they manage to significantly automate daily tasks and decrease operational costs, providing cheaper and faster services to their clients.
In this article, we’ll explain what insurance technology is, why InsurTech is important, and share our use case of how to develop a high quality Insurance software solution.
What Is InsurTech and How Are Insurers Using It?
Insurance technology, also known as InsurTech, refers to any insurance business that leverages the power of digital technologies to enhance its services and inner workflows. Although today any insurance company can implement digital technologies in their work, the surge of InsurTech provoked the emergence of new businesses and startups that started blending insurance services together with digital solutions.
Currently, InsurTech is rapidly growing in popularity and more and more traditional insurance companies seek ways to cooperate with IT service providers to upgrade their legacy systems.
Here is how insurers use InsurTech to improve their services and working process:
- advanced data analytics – using Big Data analytics, insurance companies can perform a more precise estimation of risk parameters, better forecast insurance events, make data-driven decisions, and provide their clients with the tools that can assist in various insurance plan evaluations in order to choose the best option, and much more;
- instant service provision – customers don’t have to visit brick-and-mortar facilities to purchase or prolong insurance services anymore, instead, they can order them online or via a mobile app;
- P2P services – companies can provide services to a group of people who are ready to cover similar risks, i.e. an insurance payment is distributed among a group of people and they use the service till the contract expires; if an insured case occurs, an insurant gets the coverage while the rest sum is equally distributed among the participants;
- service personalization – insurance companies can improve their online presence by providing their services via various Internet sources, e.g. social media, custom developed mobile and web applications, and others; this helps establish close relationships with their customers and find out more about the quality of the services; moreover, using wearables, mobile apps, and IoT technologies, insurance companies gain access to a wider range of information on their clients which is analyzed with the help of Big Data tools;
- provision of microinsurance – turning insurance on and off when it’s needed is a new trend that is rapidly moving upward in its popularity; this way, consumers can pay only when they use the service, e.g. hourly rented cars, traveling, and others;
- cost reduction – insurance providers can significantly cut their operational costs and accelerate many of them by using task automation; each task can be processed with advanced analytics tools and fully or partially automated with software and robotics; as a result, companies will require fewer employees and their work will be more efficient;
- claims fraud detection – the issue of fraud detection can be resolved with the help of predictive analytics; Artificial Intelligence can analyze insurance rules in combinations and model possible events, providing business owners with the ways to put the risk of unfair service use to a minimum.
The Technologies That are Currently Used in the InsurTech
To effectively provide the services outlined above, InsurTech companies implement the latest digital technologies in their solutions. Let’s have a look at some of them and find out how else they can help the insurance industry.
Artificial Intelligence (AI) underpins a variety of features that can be realized in InsurTech solutions. The most prominent features supported by AI are advanced and predictive analytics. Artificial Intelligence can swiftly process large amounts of data and find the existing patterns in it. By comparing these patterns AI provides insurers with the final results which they can use for further insights.
Optical character recognition (OCR) is another AI-driven instrument that distinguishes printed or handwritten texts, transforming them into a digital format. The technology can help companies get rid of extensive archives with paper documents and convert them into convenient digital resources.
Chatbots and digital assistants also heavily rely on AI. These software agents can help companies facilitate communication with their customers by providing customer support on a 24-hour basis.
Internet of Things (IoT)
InsurTech companies have found a broad application for IoT technology in their services. They offer their customers selective discounts if they use smart devices that help to minimize insurance event risks. For example, establishing flood or fire detectors in their houses or provision car mileage meters and overspeed adjusters, and much more.
Apart from risk reduction, IoT can also be used for insurance personalization. For example, based on individual health indicators provided by various wearable devices.
Benefits of Custom Insurance Software Solutions vs. Off-the-Shelf
The insurance market is full of ready-made insurance software offerings each suitable for various cases. For example, there are health, travel, business poverty, real estate, and many other types of insurance apps. Agents, brokers, and software vendors can have their own vision of these categories and require different functionalities for each piece of software. Therefore, although these solutions can be extremely robust and have a high level of security, they can still be very cumbersome to use.
The situation can deteriorate further if an insurance company is searching for an in-between solution that combines several types of insurance services, e.g. travel and vehicle insurance. The best option could have been to opt for several apps and pay fees for two or three pieces of software. However, there is a much more efficient way to address the issue – build your own custom insurance software.
When creating custom insurance software, companies can rest assured that their digital solutions include only the needed for their business functionality. Moreover, in case of any changes in their business goals they can always add or remove stand-alone features without affecting any core functionalities. Apart from using only important business features, companies can empower their software with the latest technologies from AI for advanced analytics to Blockchain for enhanced transparency.
InsurTech is a recently emerged technology that is already effectively disrupting the insurance industry. InsurTech companies use the latest digital technologies to enhance their digital solutions and provide outstanding services to their clients as well as their customers.
With InsurTech solutions, traditional insurance companies can bring their services to a new level and unlock new customer segments. Therefore, those businesses that are only considering utilizing digital technologies in their workflow, should start adopting them now. Otherwise, they risk falling behind the competition in their market niche.