Data Modernization • March 16, 2023

Riding the Wave of Modernization: How Digital Trends Are Shaping the Insurance Industry

The insurance industry is witnessing a digitized revamp of its traditional architecture, as it adopts a matured digital infrastructure. With the emergence of new technologies such as artificial intelligence (AI), machine learning (ML), and big data analytics, insurers are better equipped than ever to understand their customers, manage risks, and provide tailored solutions. However, deriving a learning curve to gain organic productivity crucially depends on the dexterity of observing data trends and technical retrospection.  

Role of AI/ML in Digital Transformation

The use of machine learning and artificial intelligence is increasingly becoming a critical component in the digital transformation of the insurance industry. These advanced technologies allow insurers to unlock the full potential of underutilized data points and gain insights into customer risk profiles. Additionally, by incorporating AI and ML into their operations, insurers are able to automate manual processes in areas such as underwriting and claims processing. This results in improved efficiency and a more streamlined customer experience. The implementation of AI-powered, low-touch solutions is also helping to enhance communication between insurers and their customers.

Areas disrupted by AI

AI disruption in insurance

Let's take a look at various trends which will affect the insurance industry in the coming years.

AI/ML and digital trends in insurance for 2023

Targeted Product Development

Development in digitization results in providing the customer a more intimate and tailored product. Through advanced analytics and personalization techniques, businesses can now provide more intimate and tailored products and services to their customers. This not only enhances the customer experience but also increases customer loyalty and drives revenue growth.

  1. Hyper-personalization: There is a growing demand for specialized insurance products in the current market. In coming years, insurance carriers will use large amounts of data at hand and data analytics to understand customer needs and preferences. This will enable them to develop products tailored to specific customer segments or niche markets. For example, in car insurance, carriers will offer usage-based insurance (UBI), which uses telematics data to track and assess a policyholder's driving habits and offer more personalized coverage. 
  2. Simplification: The insurance industry will simplify the products in order to improve customer satisfaction and productivity. Premiums and product offerings will adapt to an individual’s behavioral patterns. This, along with add-on modules, will offer flexibility and customization to the customers. 

Multichannel Policy Distribution

The insurance industry has seen significant changes with the introduction of digital channels. The traditional model of selling policies through insurance agents and brokers has been disrupted as companies now use websites, mobile apps, social media, chatbots, and virtual assistants to interact with customers and distribute policies. This multichannel approach allows insurers to reach a wider audience and cater to customers' changing preferences to research and purchase policies online.

  1. Multichannel strategy: In the next three years, the use of digital channels for purchasing and servicing insurance policies, including online comparison websites and mobile apps, will continue to grow. 
  2. Self-service platforms: We have seen an increase in the use of multiple digital channels and thus an increase in demand for omnichannel reporting and analytics offerings from clients. Customers will start their journey with any self-service digital channel and compare various products from different carriers. With AI/ML algorithms creating risk profiles, carriers will offer near-instant quotes while giving a hyper-personalized experience. 
  3. Advisory role: Agents will act as an advisor or a guide and facilitate the customer's journey. They will use smart personal assistants to optimize their tasks and support the customers through in-person, virtual, digital, or a combination of any of these modes of interaction.

Data-driven Pricing and Underwriting Automation

Subsequent to digitizing the insurance landscape, data-driven pricing and underwriting automation have become the dynamic duo, working together to further impart a catalytic growth to industry. This enables insurers to make smart decisions about pricing and underwriting, leading to enhanced profitability and happier customers. 

  1. Data-directed decision making: The use of data analytics will continue to increase in years to come for making informed pricing and underwriting decisions. Data sources will expand to include social media data, news articles, weather reports, open-source data, and other alternative data sources. Predictive modeling and risk assessment tools will be adopted to a greater degree by insurers to better understand and price risks. 
  2. Process automation: The growth of automation in the underwriting process will continue, reducing the burden of menial tasks on underwriters and thus increasing their productivity. As per our experience, more and more insurers are trying to fully automate the document processing part of the underwriting providing cost savings of as much as 30%3. The next two to three years will see a major reduction in the use of paper. Customers will upload the documents largely in pdf or image format. The data in the documents will be captured and presented to an underwriter directly through the dashboards. 

Digital Policy Servicing

 Another consequence of digitization involves this innovative solution that streamlines policy management and enhances customer experience through the power of technology. With digital policy servicing, insurers can offer their customers a seamless, user-friendly experience, while also reducing costs and improving operational efficiency.

  1. AI-Assisted digitized platforms: The forthcoming years will see continued growth of digital platforms and automated systems for servicing insurance policies, including the use of AI/ML. In order to improve customer satisfaction, insurers have started to adopt the usage of chatbots and voice bots. This not only reduces the turnaround time from having to interact with agents but also enables the agents to focus on high-priority work requiring human intervention. All the activities right from answering FAQs to endorsing additional covers would be performed by these bots.

AI-driven Claims Processing

  1. Auto-claims adjudication: The claim handling and settling processes are a core insurance activity with high potential for digital disruption. We have seen insurers processing more than ten million claims a year through automated systems, which speaks to the amount of manual labor saved by adjusters. We have helped many of our clients automate and expedite their claims process by building platforms for document processing, models for detecting fraud, and predicting the probability of litigation. Advanced digital tools and AI models will help claim handlers in the whole adjudication process starting from FNOL (First Notification of Loss), claim triaging, decision-making to settlement.
  2. AI-Assisted customer monitoring: Insurers will focus more on risk monitoring, mitigation and prevention. The IoT devices, telematics and other data devices will also be used to monitor risk and trigger intervention when the device readings exceed the predefined levels.

The insurance industry has come a long way in its journey towards digitalization but the pace of change is only accelerating. With the growing adoption of emerging technologies and changing customer preferences, insurers have an opportunity to transform themselves into more agile, customer-focused organizations that can adapt to new challenges and seize new opportunities. As the industry continues to evolve, companies that can harness the power of digitalization to deliver personalized, seamless experiences to their customers are likely to emerge as the leaders of tomorrow.

Get in touch with our experts to learn more about how you can expedite your digital transformation journey using our solutions.

Written by

Sony Ambooken

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