Across the globe, trends in technology, economics and socioeconomics are culminating to disrupt the way entire industries operate and deliver products and services to consumers, write Carl Moodley – Chief Underwriting & Claims Officer; Stuart Forbes – Chief Risk and Compliance Officer; Eugene Olivier – Chief Information Office; GENRIC insurance Company.
When it comes to the impact of technology, there is no industry riper for disruption than the financial services sector, including insurance, which for the longest time remained trapped in outdated product development and delivery models.
That has changed, and today we’re seeing the pace of change and meaningful innovation in the insurance sector escalating. Not only is the existing insurance model from advice, underwriting, onboarding, risk management, servicing, and claims processing being turned on its head, but new product solutions are now possible for market sectors that have been entirely underserved and marginalised by the formal economy.
These are the key trends that will reshape the insurance sector over the next decade:
1: It’s all about the customer
Until now, most innovation in the insurance sector has been internally focused with little direct value to the customer. That is changing as insurers and insurtech providers accept the importance of customer-centric approaches that focus heavily on customer experience and satisfaction.
The industry is pursuing far greater personalisation of processes such as underwriting, based on unique behavioural data, online claims management and developing product solutions that are significantly customised to individual customer needs and behaviours. There is a distinct shift where insurers view their customers as individuals, rather than broad, homogenous customer segments.
There is focus on the integration of IoT, spatial mapping technology, sensor technology, telematics, advanced analytics and AI in the short-term insurance space to deliver more granular, individual risk profiles – that’s good news for consumers looking to streamline their costs and take ownership of their risks, and for insurers wanting to offer truly personalised, behavioural-based solutions and underwriting. Expect to see more models of insurance that are designed from the outside in, with the customer placed firmly at the epicentre of innovation.
This emphasis on product personalisation is good for customers and insurers – along with improving customer experience, greater personalisation of products means more accurate risk assessments and stable margins. Insurtech will drive towards greater customisation of product solutions based on behavioural data to meet diverse customer needs.
2: Technology will open new insurance markets
South Africa is a case in point. For the longest time an enormous sector of our population has had to survive and face unavoidable risks such as weather catastrophe without the protection of insurance – not because the need for it never existed – but because outdated and rigid systems, regulations and a lack of payment solutions simply did not encourage the innovation needed to cater for a diverse society.
Spatial mapping technology and IoT devices are now enabling the creation of insurance solutions for customers whose property and assets were previously ‘uninsurable’ – and who have to date been ignored by the insurance market.
We can also expect to see more demand for and development of ‘usage-based’ insurance which provides customers with the ability to switch cover on and off at specific times for when they need it – for example the globally mobile executive who only needs theft and fire cover for his parked vehicle while he works abroad.
Likewise, for South Africa’s emerging market where many people are struggling with consistent income security, customers will look to solutions that allow them to pause their insurance or reduce the scope of what’s covered for a specified period of time. Innovation in this space gives customers greater control and transparency of their insurance cover, when they need it.
3: Digitisation and optimisation of processes
Companies across all sectors are adopting digital strategies not just to achieve cost savings and operational efficiencies, but to improve customer communications and satisfaction. Consider that almost every aspect of banking can now be done online without needing to visit a branch.
The case study of Shenzhen-based Ping An Bank is illustrative – according to an article published by Euromoney, at the end of 2015, Ping An Bank had Rmb280 billion ($39.1 billion) of retail deposits – representing just 13.2% of its total deposits – and 13.95 million mobile users. Fast forward to June 2019, it had 28.35 million mobile app users and retail deposits of Rmb540.8 billion.
Part of the bank’s transformation was developing its mobile app, investing in support and development staff and learning lessons from China’s biggest technology companies, rather than rival banks. Its branch network was radically transformed into ‘smart branches’ where bank accounts are opened in minutes using facial recognition to speed up processes and artificial intelligence suggests appropriate products.
The insurance sector has a way to go to achieve this level of digitisation and optimisation, but strides are happening. Mundane, paper-driven and time-consuming processes are being transformed through digitisation. Claims logging, processing and loss assessments will be automated as far as technology will allow to ensure speedy processing and resolution for the customer.
Brokers too will need to evolve with how advice and customer engagement is delivered and how customers are onboarded. In this space. GENRIC’s work into providing full automation of quotations and online acceptances including online FICA clearances when onboarding new customers is a gamechanger for brokers who are grappling with integrating technology into their advice and service processes.
Maintaining the advice process remains an important aspect in emerging markets like South Africa since consumers still require significant personal finance education and motivation to take up insurance solutions. Here insurance companies are striking a balance by delivering process automation that supports brokers to perform complicated and tedious admin tasks in the blink of an eye.
Not only do brokers benefit from more streamlined processes and satisfied customers, but insurers get to empower a key part of their distribution network to close more business, quicker and easier, while ticking all the compliance boxes.
4: Artificial Intelligence
Artificial Intelligence and machine learning have the potential to make virtually every process in the insurance value chain more efficient and streamlined. Aspects such as underwriting, pricing, personalisation, data collection, fraud detection and even advice (advice robots are coming) are set to be transformed by this technology. This shift will be driven by insurers looking to achieve greater efficiencies by solving challenges in the manual activity value chain with automation.
However, AI is still new technology and there is much to learn and decipher about important aspects such as data and input bias – AI and machine learning are based on the data received and processed – if the data upon which learning is based is skewed for whatever reason – due to usage patterns, demographic bias and so on, the outcomes and learning are likely to amplify that bias 100-fold. Human intervention and interpretation will remain highly relevant in the AI space, at least until the flaws are fixed and, if and when, we get to truly autonomous AI.
5: Data becomes the new gold
Insurers will look to unearth the value of their own, existing data gathered over the years in areas such as risk assessment, claims and losses, servicing and so on. Using AI, carriers will look to transform existing data into useable intelligence, mapped against trends and data gathered from sensor technology and IoT devices to become analytics-driven businesses.
Essentially blockchain is a more sophisticated way of recording digital events and information in a database and once there, the blockhain or database cannot be altered in any way, creating a verifiable, permanent record. Cryptocurrencies were the original result of this new technology, but the influence of Blockhain in the insurance sector is significant, notably on issues such as fraud, third party payment transactions, customer service and security. Blockchain’s ability to provide complete accountability, transparency and superior security will help insurers save time and money, as well as improve customer satisfaction and automate claims processing through smart contracts.
At a time of rapidly changing customer needs, growing regulatory demands, capital pressures and technological disruption, GENRIC is focused on investing in insurtech to help build a more resilient insurance business, new lines of coverage that meet the evolving exposures the market is facing and optimising and modernising traditional insurance distribution by embracing the opportunities presented by technological disruption.