Digital transformation has brought significant change in many sectors, but the insurance industry still lags, mainly because of legacy technology.
Therefore, it is time that the insurance sector takes advantage of advanced technology to make their consumer’s experiences worthwhile.
The top trends in insurance industries include implementing blockchain technology, predictive analytics, the API (Application Programming Interface) economy, automation, chatGPT to improve customer experience, various digital channels and the Internet of Things (IoT), and cloud storage.
Read on to learn how these trends in insurance digital transformation could transform your business.
Top 8 Trends in Digital Transformation for Insurance
According to a study, digital insurance companies are outpacing traditional ones by boasting a performance rate of 54% in 2023, compared to the 20% of their counterparts.
InsurTech businesses are making it quicker and simpler than ever for consumers to find and buy insurance policies online, where claim processes are optimized through digitization for increases in speed, efficiency, and customer effort.
Therefore, digital transformation is not simply a choice in today’s digital world but a requirement.
Here are the top eight trends in digital transformation for insurance:
1. Rise of Blockchain
Since blockchain can bring transparency into transactions with good record keeping across various parties while preventing fraud or errors through immutability; insurers have been paying close attention to it.
The market for blockchain in insurance was valued at $208 million in 2020 and is anticipated to increase to $25B million by 2028 at a CAGR of 82.42%.
The following are the few ways blockchain can help in insurance claims.
- Blockchain is a distributed ledger technology that enables secure and transparent transactions between multiple parties without intermediaries.
- It is used for fraud detection, claims management, underwriting, security, and other processes.
- By implementing the benefits of blockchain technology, insurers can streamline their operations, reduce costs, and enhance customer trust and satisfaction.
Although initially modest, blockchain will significantly impact the insurance sector over time.
The use of automation technologies such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA), can help insurance companies streamline their processes, reduce costs, and improve efficiency.
For example, insurance companies can utilize RPA to automate routine tasks such as data entry, claims processing, and underwriting, freeing up employees to focus on more complex tasks.
According to McKinsey’s study,
automation can reduce the cost of claims management by as much as 30%.
Here are a few ways it can help insurance claims
- Automating repetitive tasks and streamlining processes can improve operational efficiency and reduce costs.
- AI and ML can be used to analyze large amounts of data to identify patterns and make predictions, which can help insurers make more informed decisions about risk assessment and pricing.
- Besides, automation can help insurers improve the customer experience by providing faster, more accurate service.
3. ChatGPT to Improve Customer Experience
Implementing ChatGPT and similar virtual assistants is helping customers in most industries, including insurance.
A survey conducted by Statista reported that
44% of customers are comfortable using chatbots to make insurance claims, and 43% are comfortable using them to purchase insurance plans.
These time-saving tools can learn as they interact with customers and staff, providing prompt and relevant answers.
- Spending a little time programming your chatbot to answer simple repetitive questions saves your CSRs thousands of hours.
- OpenAI charges customers based on the number of tokens used, with a pricing model that starts at $0.002 for the first 1K tokens and decreases for larger volumes.
- By programming your chatbot to answer, your call center will stop receiving many inquiries, meaning less overhead cost.
Similarly, when a chatbot runs into a subject it cannot answer and a human representative takes over, tit utilizes AI and machine learning to remember the response.
4. The Expansion of Digital Channels
Insurance has traditionally been a people business, often built on relationships and face-to-face interactions.
However, while the personalized touch is still essential, doing business digitally wins for the convenience factor for many people.
The ease of doing business from their laptop in their bathrobe outweighs their desire for human contact.
In order to meet this demand, insurers are expanding their digital client channels as customers become more comfortable conducting business online.
Even agents and brokers are switching to digital tools more frequently, and the self-service digital channel is expanding due to the explosive growth in consumer demand.
Insurance companies can provide mobile apps, online portals, and social media platforms like Facebook, LinkedIn, and Twitter to reach potential customers and engage with existing customers.
Customers can use these channels to buy insurance policies, submit claims, and manage their policies, where even offline processes are transitioning into the digital realm.
For example, products that require offline execution, like physical signatures and medical underwriting, are progressively becoming digital with the help of technology.
It is up to insurers to make it possible for complex transactions like those involving insurance to be performed digitally.
5. Implementing Predictive Analytics
Predictive analytics is a form of artificial intelligence that is used for making predictions about future events.
Insurers use this technology to determine risk factors and set products prices.
According to Willis Towers Watson,
more than two-thirds of insurers attribute predictive analytics with reducing issues and underwriting expenses, and 60% say the resulting data has helped increase sales and profitability.
Predictive analytics technology like’ telematics’ is on the rise. Telematics technology uses sensors and GPS to track a vehicle’s movements and collect data on driving behavior, such as speed, acceleration, and braking.
Insurance companies can use this data to create a risk profile for each driver, which can be used to adjust premiums and policies based on the driver’s driving behavior.
For example, drivers who exhibit safe driving behavior, such as obeying speed limits and maintaining a safe following distance, may be offered lower premiums or discounts on their policy.
Insurance companies can use predictive analytics tools for the following analysis:
- Identify the company’s current and future insurance needs
- Forecast risk factors for various business verticals or lines of business
- Find out potential risks associated with business customer insurance cancellations
- Discover potential clients using trend analysis
- Identify trends across multiple claim types
6. Demand for Internet of Things (IoT)
The Internet of Things supports insurance technology by providing precise and timely data, making it challenging to process and analyze the data using traditional batch processing methods.
The demand for innovative streaming analytics has increased with the growth of IoT because of the sheer volume and velocity of data being generated.
Did you know the IoT insurance market is projected to grow at a CAGR of 9.84% over the forecast period from 2021 to 2026?
This increases the precision of risk assessment and enables insurance holders to determine the actual cost of their policies and take immediate actions based on the insights gained.
- IoT devices can collect data on customer behavior, such as shopping habits or product usage patterns.
- This data can be analyzed in real-time using streaming analytics to gain insights into customer behavior, which can be used to personalize marketing strategies and improve customer experience.
- In addition, IoT devices can also generate data on environmental factors such as temperature, humidity, and air quality.
- Streaming analytics can monitor this data in real time, enabling businesses to take immediate action to improve environmental conditions and prevent issues such as equipment failure.
- By improving risk assessment and customer experience, IoT devices can also help insurers to reduce costs by enhancing claims processing.
7. Rise of API Economy
The rise of the API (Application Programming Interface) economy is a significant trend in digital transformation for insurance companies.
APIs enable companies to easily share data and services with other companies and developers, which creates new business opportunities and revenue streams.
According to Capgemini’s Top-10 Trends in Property & Casualty Insurance,
Insurers are improving customer engagement by implementing APIs to integrate data from various sources to provide more meaningful and personalized offerings.
- Insurance companies can use APIs to integrate their services with other platforms and applications, such as mobile apps or social media platforms.
- This can make it easier for customers to access and purchase insurance policies, file claims, and receive support.
- Additionally, insurers can use APIs to collect and analyze data from various sources, such as connected devices and social media, to better understand customer behavior and preferences and develop new products and services that meet their needs.
- It could also connect with healthcare providers and automatically verify medical expenses, streamlining medical claims processing.
Hence, the API economy is a significant driver of innovation and growth in the insurance industry. Companies embracing this trend will likely be more competitive and thriving in the long run.
8. Transitioning to the Cloud
The digital transformation in the insurance industry helps cloud-based technologies to provide better customer experiences while lowering insurer overhead.
According to a study,
69% of businesses already use cloud technology, and 18% plan to implement cloud-computing solutions in the future.
Moving to the cloud can offer several benefits for insurance companies, including increased flexibility, scalability, and cost-effectiveness.
Technologies that reduce costs for insurers also offer on-demand customer service that fosters loyalty.
For example, customers do not want to wait on hold for a customer service agent after a car accident or a natural disaster.
They can communicate with their insurance company in real time using customer-facing technologies, streamlining the insurer’s operations and shortening the claims cycle timeline.
By using cloud-based services, insurers can more easily adapt to changes in the market and scale their operations up or down as needed.
This can ultimately improve insurance companies’ efficiency, productivity, and profitability.
Digital transformation has given businesses across the sector new ways to conduct business.
As a result, insurance companies must stay up-to-date with these trends and incorporate them into their business strategies to continue to meet the changing needs of their customers and remain relevant in the industry.
Get in touch with Benekiva to start your insurance digital transformation.