I.T. (insurance technology) had to be you
Valentine’s Day celebrates the values of love, trust and companionship. With this in mind, it presents a perfect opportunity to reflect upon the relationships we have built with each other, both in our personal and professional lives. Take the insurance industry as an example.
Insurers should be increasingly exploring ways to build better relationships with their customers, even though the nature of the industry means that consumers generally like to avoid their providers as much as possible. After all, once somebody has bought their wedding insurance, they’re unlikely to want to speak to their insurer again unless disaster strikes and they need to make a claim.
So, during this festival of love, insurers should ask themselves how they can build positive relationships with their consumer base. For many, the answer comes in the form of insurance technology, known as insurtech. At its core, insurtech is in keeping with spirit of Valentine’s Day, as the use of technology can bring insurers and their customers closer together by ensuring the relationship between the two runs as smoothly as possible.
So, in the absence of Cupid shooting a magical arrow through all your potential customers, here are eight key insurtech trends that insurers should consider if they have a genuine passion for improving their customer relationships:
- Artificial intelligence (AI)
In the dating world, AI has been a hit. Online dating site eHarmony, for example, is now using AI to nudge users on its dating app to meet in-person when they have been chatting in the app for a while.
The same can be said in insurance, as we have seen a huge increase in the amount of AI-based technologies being used across insurance in the last year: it is now being widely deployed for chatbots and other forms of online communications, as well as within claims analysis. Chatbots will grow increasingly significant as insurers realise the benefits they provide. For example, these bots can top and tail their customer interactions with a human agent to speed up the processing of claims, collecting essential information and then closing a call.
Communication, after all, is key to any healthy relationship. The best of these chatbots will quickly link a customer with an advisor who has the skills that are most likely to meet a customer’s needs, thus freeing agents from managing routine queries so that they can focus on for more complex or valuable activities. In short, AI speeds up the process, meaning that communications with insurers can feel less like a gruelling blind date and more like love at first sight.
- Big data
In many ways, big data and AI make the perfect couple, as AI will enable insurance firms to add structure to the sheer volumes of data available. So long as users of big data take on their share of the responsibility in this relationship, the technology can provide firms with the ability to develop significant insights into their insurance markets, allowing them to generate new product sales, near-time actuarial analysis and methods of investigating risks. Overall, it will be through effective data capture and structuring that insurance firms will set themselves apart as a true catch.
- Internet of things (IoT) and 5G
Back in 1835, individuals in the UK sent 60,000 Valentine’s cards by post. Five years later, they sent 400,000. This dramatic increase can be attributed to an improvement in communications infrastructure as the invention of the postage stamp in 1840 meant that individuals could affordably send cards for the first time.
Similarly, the volumes of data relevant to insurance policies and claims will expand in the coming months through the proliferation of IoT-connected devices. The launch of BT’s 5G network will act as the framework that can underpin the expansion of IoT by increasing connectivity and solving the main challenges previously faced by IoT; namely speed, latency and costs. For insurance, a network of hyper-connectivity that provides information around human behaviours, the performance of connected devices and environmental risks is potentially a huge development.
- Distributed ledger technology (DLT)
DLT is about trust. create an authoritative, 100% verifiable record of past transactions that is wholly trustworthy. One of the defining moments of the last 12 months was the delivery of the first blockchain transaction by Willis Towers Watson and its partners.
Building on this progress, insurance will likely catch up as the provenance and authority that serves as the basis to cryptographic technologies means that the industry will inevitably find DLT increasingly valuable. Expect to see more collaborative efforts, further proof of concepts and even some DLT-based products that can be finalised and deployed by firms that you may not have expected to be in the vanguard of DLT development. By bringing better collaboration and trust to the scene, the potential value of DLT is hard to overestimate.
- Mergers and acquisitions (M&A)
Just as Valentine’s Day can mark the beginning or end of a relationship, so can merger and acquisition activity. In fact, the likely increase in M&A in insurance will have a huge impact on insurtech as insurance firms look to cut costs and adapt to the technological demands of the market.
Mergers and de-mergers will have a huge effect on technology, forcing firms to re-consider their infrastructures from the ground up. For many, this should be an opportunity to ask forward-looking questions: is this merger an opportunity to automate more processes? Will it enable AI to be implemented in a more sophisticated way? Crucially, these moments of clarity present an opportunity to ascertain whether they are moving in the right direction.
- Application programming interfaces (APIs)
Without APIs, much of the software we use to contact each other wouldn’t have been born. As a result of M&A in insurance, and after decades of using legacy technology, firms are also looking to create synthetic middle layers where the middle layers create APIs.
The creation of this synthetic layer of APIs allows you to simulate a modern world out of your old legacy worlds by opening access to the back-end systems while simultaneously embracing new technology because you have a platform to integrate insurtechs, new partners and new technology engagement points. By creating an API layer, firms can extract data, provide real time analysis to customers and keep up with ever changing regulatory demands. Firms can then silo off or transform the legacy systems and speed up the process of digitisation. “Api-fication” will be an enabler for the M&A drive as well as the transformation of legacy technology.
There’s huge momentum cloud technology in insurance, with firms saving millions of pounds by moving from on-premise systems to hosting their data on the cloud. Firms are now properly analysing their data centre estates to better understand the possibilities presented by cloud technology. Through increasing cloud usage, we will see more economies of scale.
Momentum has also been building from a regulatory perspective: firms now need to adapt to updated guidance from the FCA on cloud usage and the impact of related reputational risk.
Overall, it is clear that building strong relationships requires a multi-layered approach. In insurance, this approach needs to consider all the available options or technologies. The most significant progress will be made as pioneering technologies come together through the combination of cloud, big data and AI, as well as through APIs and their ability to enable digital change.
So, as Valentine’s Day approaches and prompts us to celebrate our relationships, the insurance sector should fall in love with the technologies that will bring us ever closer to our customers, creating relationships founded on collaboration and trust.
By Alex Foster, director, insurance, wealth management and financial services, BT