The insurance industry is facing a fast-changing landscape. As the world deals with COVID-19, insurers are seeing changing customer and employee expectations.

This is in addition to the “cost-conscious” customer, who changes from one insurer to another. Now more than ever, insurance leaders are seeking digital transformation and innovation while reducing costs of operations.

When it comes to information technology, the legacy systems of yesterday are very rarely capable of handling the unique challenges of today – to say nothing of the difficulties posed by the possibilities of tomorrow.

This is especially true for insurance companies, where core system transformation is expected to remain a top priority across the board for the next several years.

Have you ever tried to check your insurance claim status? It often requires several calls, some emails, or even visiting an agent to get claim status details. Lack of web presence equals lower customer satisfaction. Today, nearly 61% of customers prefer to monitor their application status with digital tools.

While some insurance carriers have made significant modifications courtesy of disruptive digitalization, most companies trail behind.

Business models, services and processes are rapidly evolving, largely backed by technological developments. The particular historical context of COVID-19 provides a suitable case to understand the relevance of exploiting technology to react quickly to traditional and emerging risks.

Modernizing insurance company information is time consuming, costly and risky – but it is not impossible. For insurance companies to truly build and implement the solutions they need, they must keep a few important strategies in mind.

Perhaps the number one way to modernize insurance company information technology is to build not necessarily with the challenges of today in mind, but with the end results needed for tomorrow.

Insurance companies need to have technology systems in place that don’t just keep things like investment budget or time to market in mind, but also with future plans, strategic priorities and more. It’s a balance to be sure, but it’s an important balance to strike.

Technology Strategies for insurers

COVID-19 drove innovation mechanisms in the industry and forms the context of this research. We observed the greater or lesser relevance of innovating through the medium of technology, whether already in place in these companies or introduced for this purpose, and how technology can help companies to react quickly to traditional and/or emerging risks.

By Microsoft Report, the most representative insurance companies at the global level, this research focuses specifically on the role played by technology and market impulses in cultivating innovative initiatives in the sector.

1. Leverage advances in Artificial Intelligence to drive operational improvement

There are three main areas of benefit from Artificial Intelligence: detecting insurance fraud, reducing claim costs, and mining voice data to enhance customer service.

Natural Language Processing (NLP) allows unstructured documents, such as claim adjuster notes, to add even more value, serving as a mechanism to detect fraudulent claims and patterns of fraud.

NLP can also be used to read and process handwritten insurance-related forms and mine information to save the insurer money on claim costs. Voice recordings from agents and customers can also be used to enhance the overall customer experience and improve service.

2. Smart and intelligent automation

Smart and intelligent automation focuses on the application of advances in predictive analytics and Machine Learning, applied beyond automating data collection processes through the use of robotic process automation (RPA) tools.

Insurers should explore automating processes like property assessment, personalized customer interactions, fraud detection, and claims processing and verification.

There is a huge opportunity to redefine operational improvements in call centers with voice translation, automated call monitoring for sentiment analysis leading to early escalations. Insurers can also benefit from a virtual call center that does not have all agents in one location and some agents are remote.

3. Self-service drives “improved experience” while lowering costs

The food and retail industry are large proponents of the use of self-service for improved customer experience. However, this can also greatly benefit insurance companies for similar reasons.

Implementing self-service both in claim settlement (touchless claims with automated claims payouts) and customer care through bots and virtual agents can cut costs, increase customer satisfaction, and lead to more personalized customer experiences.

4. Employee experience matters

Most companies regularly invest in their brand and customer experiences, but many forget to invest in a crucial component of a successful company: the experiences of their employees.

To attract, retain, and boost the productivity of employees, insurance companies should increasingly look for ways to improve employee experience—whether virtually or in person—without compromising on security.

With COVID-19, we have all learned the value of social distancing and insurers are redesigning workspaces to better address employee health. With an increasing number of remote employees, the employee experience and need for productivity from any place and location will be even more important.

5. Competitive edge through data

Insurance has always leveraged data and thrived on data analytics. However, the need for data is more important now more than ever. Pairing big data with machine learning and predictive analytics, companies can leverage data to bring about new products, save costs, and stay competitive. Insurers are reinventing underwriting by leveraging new sources of data for competitive advantage and offering new products.

6. Rise of new insurance products

The increasing shift towards autonomous cars and the use of sensors and IoT creates a disruption for insurance companies. Companies need to shift focus and tackle new opportunities appearing alongside these new technologies. New insurance products will emerge, insuring new types of risk. Technology teams will need to be prepared to support these new products.

7. More insurance companies will have strategic alliances with tech companies

The advances in big data, AI, and data analytics are causing insurance companies to become more technology and data-driven than ever.

As technology adoption increases, insurers will need to improve their technical capability.

To strengthen their technical capability, insurers will seek access to big tech partners and influence features in their technology to stay competitive. Already, a handful of leading insurers have formed strategic alliances.

8. Use of drones, sensors, satellite imagery, and Augmented Reality (AR) and Virtual Reality (VR)

Many of the processes that are typically done in person, such as user and employee education, coverage decisions, and damage prevention are being simplified with technology, creating a more immersive, accurate, and cost-effective experience for insurance companies.

The use of augmented and virtual reality applies to the claims handling process, accident recreation, and many more processes. Uses of other technology, such as smart sensors or satellites to prevent and assess damage or reduce costs, will continue to increase.

9. Legacy system modernization

Many insurers are still running old technology that is due for an upgrade. The benefits range from a reduction in costs, business agility, and improved productivity and user experience. Being able to leverage the advancements in new technology and the various new FinTech offerings is also a key benefit of system modernization.

10. Trust and transparency in multiparty scenarios

Leveraging technologies that lead to increased trust and transparency in the transaction will lead to cost savings. Some scenarios include digital subrogation (where the insurance company collects money from the party at fault or their insurance company), workers’ compensation with worker presence verification, and digital identity services. Some insurance companies are also exploring ways to make the premium breakup more transparent to the customer as a way to ensure loyalty.

In the insurance company, needs change on a regular basis. Customer preferences are fluid, regulatory norms one day are gone the next. To truly modernize insurance company IT, change management must become a priority.

Business sponsors, program management officials, experts, vendors and more should all be able to regularly monitor deployment until the end of the program for the absolute best results moving forward.

Modern insurance company IT demands a certain level of flexibility and versatility that can only be provided by SOA support, or Service Oriented Architecture. When it comes time to integrating between peripherals and external systems, having a separate team on-hand to oversee this very important (and time consuming) process is always advised. This is a team that won’t have to split their attention in countless directions and can instead focus on the important task at hand.

Vertical players look for a short pass to the digital age. Some companies make internal changes by backing insurtech startups or establishing innovative labs, while the rest are only hesitating.

What kind of changes should be made in the first place? These are the main problems to address:

  1. Internal processes of insurance companies are often too complicated.There are so many duplicating business operations that nearly 1 million insurance jobs in the US alone can be automated. This means insurance companies can automate 50 to 60% of their back-office operations.
  2. Insurants are not satisfied with their service providers. The Morgan Stanley and BCG studies claim that insurance companies tend to provide poor customer experience. About 60% of insurance clients worldwide aren’t satisfied with their service providers and nearly 50% of insurance clients consider turning to newer models.
  3. Young prodigies prefer to join technology, consulting, or other financial companies rather than insurance. According to Deloitte, only 4% of millennials are interested in working in the industry. As a result, companies frequently don’t have enough technically-skilled employees to follow changes let alone drive them.
  4. In the face of the COVID-19 pandemic increasingly more consumers are looking towards providers with strong digital capabilities. A recent PWC survey claims that 41% of consumers are likely to switch their insurance company in favor of a more digitized one.

Innovation and new technologies have the potential to affect the franchise value of insurance companies, with accompanying competition policy considerations. Policies which have tailored coverage and simplified claims processes can improve coverage to segments of society that hitherto were not able to access financial protection.

Regulatory approaches, such as the regulatory sandbox being developed by a number of jurisdictions, may bridge greater competition and prudential requirements, although ensuring a level playing field as solutions graduate into the full market require some consideration.

There are a number of areas in which greater regulatory discussion should take place, as the transparency of the technology and the impact on policyholder’s choice and rights may not be clear.

Data protection is an area that will require closer examination by regulators, as the volume of personal data handled by insurers increases, whether consensus was gained for the intended use becomes blurred.

Data aggregation brings forth the possibility of certain segment of the population becoming uninsurable, so how data is harnessed should be closely considered. The treatment of algorithms is also an area for further discussion to ensure that the assumptions built in are appropriate and unintended consequences are avoided in so far as possible, and regulators have a means of engaging in this assessment.

These could have implications on the ongoing monitoring of operational risk and internal control of insurers. Ensuring that policyholders are fairly treated and appropriately protected when the implications of certain innovations and technologies are uncertain will be important going forward.

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