Insurers are at a crossroads, where innovation isn’t just a strategic advantage but is essential to their very survival.
The global insurtech market, valued at $3.85 billion in 2021, is expected to reach $166.7 billion by 2030, representing a jaw-dropping compound annual growth rate (CAGR) of 52%. Driving this explosive growth are once-traditional insurers that are adapting to today’s more customer-centric business models while also implementing technologies to optimize and protect their operations.
Following are five of the technological trends that are reshaping the insurance sector:
1. Data Analytics and Artificial Intelligence
Increasingly, insurers are leveraging artificial intelligence (AI) and machine learning (ML) to analyze vast amounts of data in real time, enabling more accurate risk assessment and underwriting processes, personalized pricing, improved decision-making and fraud detection. Predictive analytics, which uses historical data and statistical algorithms to forecast future outcomes, is also helping insurers to anticipate consumer needs to improve their services and develop new offerings, leading to greater customer retention and profitability.
See also: 10 Ways Tech Can Reshape Insurers' Operations
2. Internet of Things (IoT)
IoT is revolutionizing risk management, with insurers leveraging devices such as telematics, wearables and smart sensors to collect real-time data on insured assets and policyholder behaviors. Such data enables insurers to assess risks more accurately and encourage policyholders to adopt safer behaviors. IoT-enabled solutions also facilitate risk mitigation and claims prevention, ultimately reducing losses and improving profitability. As one example, usage-based insurance (UBI) takes into account vehicle type, distance driven, driver behavior and other criteria based on data collected by technology. UBI also supports positive driver behavior modification.
3. Cybersecurity and Data Privacy
Greatly enhanced cybersecurity and data privacy and protection measures are crucial as insurers face growing risks from sophisticated cyberattacks such as ransomware, phishing, data breaches and more. Protecting sensitive customer data, including personally identifiable information (PII), HIPAA-regulated data and financial records, is paramount to maintaining customer trust and safeguarding against financial losses and often irreparable damage to brand reputation.
To read about some of the most recent cyberattacks that have affected organizations within the insurance industry, go here.
4. Blockchain
Blockchain technology can augment security, transparency and efficiency, with industry usage in applications for smart contracts, claims processing and fraud detection. Smart contracts, for instance, enable automated policy issuance, premium payments and claims settlements, reducing administrative costs and eliminating the need for intermediaries. Additionally, blockchain provides an immutable ledger that enhances data integrity and facilitates secure data sharing among insurers and other stakeholders.
5. Customer-Centric Digital Platforms
In the insurance industry, customer-centric digital platforms are in demand for enhancing engagement and loyalty. Mobile apps and personalized, self-service portals empower customers to access their information, file claims and communicate with agents effortlessly, meeting the growing expectations for anywhere, anytime services. Features such as AI-driven chatbots and virtual assistants, tailored policy recommendations and instant notifications and alerts ensure a seamless and highly relevant customer experience. As a result, insurers can not only acquire new customers more effectively but also retain existing ones by delivering value and convenience.
See also: The Sad Truth About Insurance Technology
Future-Proofing the Insurance Business
In a piece on the impact of AI, McKinsey stated that “Most important, carriers that adopt a mindset focused on creating opportunities from disruptive technologies—instead of viewing them as a threat to their current business—will thrive in the insurance industry in 2030.”
The time for adoption is now, and insurers must take action. In our increasingly digital and data-driven landscape, insurance companies should begin exploring and forming partnerships with insurtech providers, technology vendors and expert consultants that can help them seamlessly integrate these emerging technologies into their business models and operations. Such technology transformation will continue to reshape every aspect of the insurance value chain, from product development and risk assessment to claims processing and customer service.
Embracing this wave of digital transformation is one of the best insurance policies that insurers can give themselves for their future success.
Heads up or heads in the sand? The choice is yours.
