As the world is moving out of a year-long lockdown, people across the globe have gotten used to the so-called ‘new normal’. One of the most visible transformations across continents has been the increased adoption of advanced digital technologies and touchpoints to keep critical services afloat. Since the quality of interaction that businesses drive with their customers in times of emergency has a longstanding effect on the consumer’s sense of trust and loyalty, companies are compelled to deliver cutting-edge low-touch user experience.
Tech giants like Google and Amazon are also seeing this as an opportunity to penetrate the $6 trillion insurance industry leveraging big data and technological lead. Against this backdrop, where companies across industries are competing for customer experience, incumbent insurance carriers have no choice but to up their game with regards to digital transformation and service delivery.
But where does the traditional insurance industry stand at present? During the pre-pandemic era, only 30% of insurance firms believed they have the necessary digital capabilities to undertake a digital transformation and only 25.7% of GenY (individuals aged 18 to 34) customers agreed that their insurance experience was positive. The global pandemic has not only uncovered the shortcomings in the digital capabilities of this industry but also forced the industry to reorganize itself. Insurance carriers, therefore, are now re-imagining all aspects of the business around customers’ needs and preferences. This includes newer products, operating models, and most importantly enhanced low-touch customer engagement mechanisms that are completely aligned with the new normal.
Some insurance carriers were already ahead of the technology adoption curve in the pre-pandemic era and were experimenting with advanced digital technologies and touchpoints such as the pay-per-use operational model, touchless claims, and automated call centers. They were able to react faster and make prime-time changes. However, others struggled to keep their operations afloat and had to focus on business continuity during the initial months. They were forced to make hastened strategic changes to make digital adoption their top priority. In hindsight, it is safe to say, all the digital services that were considered ‘good to haves’ have now become ‘must haves’ and the majority of insurers are already implementing digital transformation strategies.
Another aspect of this transformation drive is the fundamental shift to cloud computing at an unprecedented pace. Cloud adoption is now one of the top priorities for CIOs in 2021. The inherent advantages of the cloud, from reliability, scalability, to most importantly seamless and secure collaboration with remote systems, made it uniquely suitable to tackle the current challenges. Not just the speed of adoption but also the nature of workload that is moved to the cloud is now being changed to best serve customers’ needs and preferences. Modernization of core platforms, prioritizing customer 360 degree initiatives, creating cloud data platforms to tackle new customer-centric use cases faster are among the top priorities for insurers. We are also seeing greater adoption of generally available native services and APIs from cloud providers to cut down on implementation costs and realize business values faster.
The other piece of the puzzle that insurers must solve to take operational efficiency and customer-centricity to the next level is detecting and implementing artificial intelligence (AI) and machine learning (ML) use cases across the value chain, starting from marketing, sales, and distribution to product pricing, underwriting, loss control, and claims servicing. They should leverage statistical ML to increase marketing effectiveness in various channels, specifically in lead generation and targeted marketing. Deploying sentiment analysis, CLTV prediction, cross-sell, and up-sell models can help serve the onboarded customers. Document AI use cases can be implemented in pricing and underwriting workflow. Some carriers are even going a step further and using document processing and computer vision solutions for auto adjudication of claims. These implementations can help reduce operating expenses by 30% and increase revenue by 25% by the end of 2021.
However, the evolution of the digital landscape has given rise to unprecedented challenges like cybersecurity and data privacy, compelling insurers to boost spend on data security. Nine of the top ten CEOs and presidents of insurance firms expect to boost spending on data privacy. Moreover, this is an area where insurtechs are challenging incumbent insurers by bringing state-of-the-art technology and innovative products.
All these changes together are driving a tectonic shift in the insurance market. The fundamental value proposition of insurance products is changing from commodity to service solution as more and more carriers are gravitating towards packing various customer experience-centric solutions and services along with fundamental risk coverage. Hyper-personalization fuelled by applied AI will play a key role in achieving this vision. Insurers will continue to bet big on AI-driven initiatives around unstructured text, imagery, voice, speech, and statistical ML. As 5G becomes more mainstream, big bets will also be on IoT-driven services as well as edge computing. So, we can say that the pandemic proved to be a turning point for insurers and gave them the required push needed to embrace cloud and AI for a better future.