Voice Technology: CX Differentiator for Financial Services
Jan 30, 2020 • 3 Minute Read
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Digital Disruption in the Insurance Industry
Nov 05, 2020 • 3 Minute Read • Brad Johnson, Group Account Director
Change tends to come slowly to the insurance industry. Perhaps because it’s a business based on minimizing risk, the insurance industry has for years been slow to embrace the technological wave that has transformed the financial services sector.
That appears to be changing. According to a report by Deloitte, insurtechs saw $2.6 billion in investments in 2018 and over $4 billion in 2019. Insurance companies are beefing up their own digital capabilities in response to insurtech innovations and the changing demands of consumers.
Here are four of the top digital trends that will impact the insurance industry over the next several years.
1. A Digital-First/Customer-First Approach
The insurance industry has traditionally taken a product-first approach to marketing, which worked in a low-engagement era when customers interacted with their insurance company only once or twice a year.
Now, however, consumers want an on-demand user experience with the innovative services offered by insurtech startups. Tech-savvy Millennials, who make up the largest consumer segment, prefer to connect with insurance companies first and primarily through digital channels.
Just as the retail experience has moved beyond simply selling products, the insurance industry must do more than simply accepting payments to make it easy, even enjoyable, for customers to do business. This means reimagining every touchpoint to focus on what customers want, what they need, and how they like to engage.
2. The Rise of Telematics
The most obvious telematics application for general insurance is usage-based insurance. Progressive, the first insurer to implement UBI, has now logged over 25 billion miles through its Snapshot application. Experts believe usage-based insurance will grow at a compound annual growth rate of 24% for the next several years.
Research shows that nearly 50% of consumers are willing to share information with insurance companies in exchange for lower rates, a surprisingly high number compared to information-sharing across other industries.
Insurers embrace UBI programs because they lower claims costs, but there has been another, rather unexpected benefit. It turns out that drivers who participate in UBI have a higher level of satisfaction with their insurance company and develop a deeper, more loyal relationship.
Telematics have applications beyond the auto insurance industry. Parsyl, a French startup, developed a system that monitors the condition of goods in transit between destinations. Insurance companies are integrating the technology into their products so they can identify damaged products in real-time and settle claims immediately without waiting for an extensive investigation. The technology is creating more touchpoints with business customers, leading to stickier relationships.
3. AI as a Capability
AI is poised to transform the entire insurance ecosystem, allowing insurance companies to extract full value from the data they collect. Most insurers utilize about 15% of their data, but with behavior data models, they can process and analyze vast quantities of unstructured data to develop innovative products, accurately classify risk, and incentivize behaviors that mitigate loss.
Machine vision is another AI-based technology with promising applications. Machine vision analyzes images from smartphones, dash cams, satellites, and even drones to help insurers assess a broader range of risk, potentially impacting the entire underwriting and claims lifecycle.
Insurers have a unique opportunity to harness AI to create deeper customer relationships. Employees can use natural language processing to speed up access to data hidden in claims and customer service inquiries using search-based analytics. AI-powered voice authentication can be used to confirm identity and even interpret emotion so that calls are routed quickly and accurately to the person who can solve the problem.
4. The Blockchain Revolution
Few technologies have more potential to upend the insurance industry than blockchain. Using blockchain, adjusters and underwriters can create a single version of a claim that can be validated and updated simultaneously by multiple parties in real-time. This dramatically increases transparency and reduces administrative costs.
Blockchain also plays an important role in reducing fraud. According to McKinsey, about 10% of non-health insurance claims are fraudulent, costing the insurance industry about $40 billion a year. Blockchain-enabled smart contracts automatically facilitate, authenticate, and enforce contract provisions.
For example, a smart life insurance contract instantaneously checks online death registers, confirms the terms, and automatically issues a payout of the claim, significantly reducing the risk of fraud. Everledger is making a name for itself in the diamond industry by creating a blockchain distributed ledger documenting all transactions involving precious gems. This information is invaluable in helping insurers detect and prevent fraud.
Preparing for the Future
Digital transformation has lagged in the insurance industry, but the change is well underway. Insurance companies will build new capabilities at their own pace, but survivors will embrace new digital technologies to provide the experience their customers demand.
Successful insurers will target digital customers, capturing and analyzing data to segment them by behavior. This means moving beyond isolated interactions at policy renewals and anniversaries to build a more meaningful relationship.
Ultimately, insurance companies that transform themselves into fully connected, customer-first digital businesses will excel in the spaces they currently occupy.