Digitization in insurance: Uncharted digital territory
Digitization will change the insurance industry in the coming years. But how? Startups and conventional insurance companies are currently giving this a great deal of thought. How do they intend to make digital customer interactions a positive experience? And what role does artificial intelligence play in all this? A look at the present and the future.
Is it all just science fiction? A video by a German reinsurance company at Insurance Conference Munich 2016 demonstrated the support a customer will receive from their car insurance in future in the event of an accident: If a dongle placed in the car independently detects a rear-end collision, the insurer automatically gets in touch with their customer to inquire about their situation. A camera-equipped drone then arrives at the scene of the accident a short time later and films the extent of the damage. The insurer immediately arranges for a taxi to collect their customer from the scene of the accident and for the car to be towed. Meanwhile, the other party is still frantically trying to get in touch with their insurer. The video gets to the heart of the state of the industry with regard to digitization: On the one hand, there are those companies that still have a low level of digital maturity. On the other hand, there are those who are willing to make enormous investments in digital technology in the coming years. And this is not without reason: “New digital tools and technologies frequently represent uncharted territory for insurers. For many, acquiring technological expertise is the only way to keep up,” explains Carsten Hoffmann, insurance consultant at Willis Towers Watson.
The challenge: the car of the future
The car of the future illustrates the relevance and impact digitization will have on insurance companies. Newcomers and representatives from other sectors will likely challenge insurers in this line of business. With things like self-driving cars, connected drive and share economy, car manufacturers from Palo Alto, Wolfsburg, Rüsselsheim and Stuttgart could soon find themselves taking on the role of mobility service providers, becoming insurance brokers or policyholders. What can insurers do in response? What do they need to do to optimize their digital services in customer management? Switzerland’s largest insurance group already has an answer to that: They have designed their online platform as a complete digital ecosystem. In addition to a customer portal and digital customer support, it boasts many new services that go beyond what conventional insurance companies have to offer. For example, smartParking helps customers with everyday parking problems downtown, and WayGuard virtually accompanies women home using a professional control center.
Opportunity: using existing data intelligently
Cars are offering insurance companies even more opportunities to expand their operative business using digitization. One example of that from the United Kingdom: The Automobile Association (AA) has begun offering direct insurance with smart boxes that measure the speed, braking performance and types of roads used from within the car. The policyholder receives all the data collected online, allowing them to adjust their driving habits and, over time, their premium. The German debate surrounding telematics rates among insurers will soon gain momentum with the introduction of the European emergency call system eCall and its installation in new vehicles. Telematics solutions could also play a key role in developing fleet rates since the information collected can provide important indications about driving habits, leading to fewer injuries and lower insurance premiums.
In focus: young target groups
Currently half of German customers use comparison sites and search engines to look for an insurance product online. Compared internationally, the Germans’ affinity for the internet is at the top of the ranking according to the Digital Insurance Monitor 2016’s findings. By contrast, technically-minded millennials use apps on their smartphones. For this young target group, customer proximity is no longer synonymous with a home visit from an insurance agent. InsurTech startups are concentrating on these customers and have developed products tailored to their lifestyle. This includes, for example, apps for taking out short-term insurance for stadium and concert visits, daycare trips or cycling tours. Temporarily insuring friends and family members on your car is also quick and easy to do. Travel insurance is offered by text shortly after crossing the border and can be taken out immediately. More than 800 million US dollars is invested in InsurTech start-ups worldwide that aim to change or revitalize the traditional insurance sector. What can companies do in response to ensure they do not lose these young policyholders to the new competition? One option would be intelligent and adaptive chatbots that analyze personal data with the help of artificial intelligence (AI) in order to offer better insurance for every life situation faster than conventional apps.
Insured without the long wait times
The example of a Hamburg-based life insurance company makes clear how insurance companies can benefit from AI and adaptive systems. In this case it takes only five days from the application for life insurance being submitted to the policy being handed over to the customer. Normally this process takes three to six weeks. So how is it possible for this to now be done in just under a week? The insurance company has developed adaptive software that can deduce risks from a combination of individual medical symptoms. With the help of an AI component, the system makes decisions and draws parallels between similar cases. The result: The number of applications requiring complex health checks is now under 20 percent.
At one Japanese life insurance company, AI from IBM Watson now performs two tasks: The system evaluates documents from doctors and hospitals in order to calculate payments due. The software is also capable of looking over particular clauses in insurance contracts and determining whether there is an agreed payout limit. This prevents insurers from paying out too much money. The number of cases handled each year totals 132,000. Three other Japanese insurance companies are currently testing the use of AI systems.
Outlook: a flexible partner for current life situations
According to the findings of the “Insurance 2025 – Reducing risk in an uncertain future” study carried out by IBM, almost 80 percent of managers in the insurance industry believe, that their industry will change through digitization. Digitization will see insurance products and insurance itself become flexible partners for the current living situations of customers. They will need to offer service packages that help and benefit the customer individually and locally. Only those insurers that are able to offer these products in a quick and customizable way using digitization will continue to have a future in this competitive environment. In the second part of our “Digitization in Insurance” series, we outline how the use of artificial intelligence in customer service can be successfully implemented.
Author: Editorial staff Future. Customer.
Image: Galyna Andrushko – Fotolia/Adobe Stock
