Evolving technologies and insurance in 2016

Dipak Sahoo outlines the benefits new and emerging technologies can offer insurance

Evolving technologies and insurance in 2016
According to Capgemini’s latest World Insurance Report, general insurers in Australia experienced some of the best results in the world in 2014, by lowering claims and improving profit margins in comparison to global counterparts. 2014 saw the claims ratio decline by 17.6%, a drop attributed to fewer natural perils and better operating efficiency due to increased focus on technology transformation.

However, the report also reveals that Aussie insurers suffered the highest decline in customer satisfaction at 7.3%, pushing Australia to eighth position from sixth. Claims servicing, in particular, was one area that experienced the highest decline in this category.

This steep decline tells us that although insurers are investing heavily in technology, the impact of their investments is not immediately obvious to customers. Claims servicing, a key area in which Australian insurers are falling down, requires insurers to strike a fi ne balance between customer-centricity and loss reduction. There are a few key ways this can be achieved, from managing claims payouts well by improving the initial claims decision-making process, to reducing the instances of claims by using preventative methods.

The adoption of innovative new technologies can help insurers strike this fine balance and better manage the claims process while improving customer engagement.

Telematics/connected cars could change the way insurers engage with customers through the provision of each driver’s driving data. The efficient use of collected data creates opportunities for increased positive engagement with customers and also incentivises good driving behaviour.

Eventually, these models will result in reduced premiums for good drivers and also allow insurers to offer an improved claims experience.

‘Pay as you drive’ insurance models will advance a number of business functions, including increased profitability through better risk pricing and a more efficient claims process due to automation of the FNOL process and the reconstruction of accidents and damaging events.

It is predicted that, by 2025, half of all US homes will be Internet of Things (IoT)-enabled, with integrated monitoring and control solutions, providing further opportunities for insurers to improve their home and contents offerings. Home insurance companies are increasingly incentivising customers to install connected devices into their properties to warn of potential danger, such as short-circuiting, plumbing issues or home invasion. These integrated technologies can aid insurers in monitoring customer properties remotely and will allow them to react immediately in the case of an incident.

Wearable devices are increasingly used by insurers to monitor customer health conditions and fitness levels. The natural extension of everyday wearable usage is primarily seen in the life and health insurance sectors, where data can be collected in real time to predict risk events and allow proactive intervention by the insurer or customer.

‘Nearables’ have started to infiltrate the market and are already being used by insurers to track items and implement task automation based on proximity. For example, travel insurance companies have started working with airline operators, using nearables on a traveller’s checked-in baggage to prevent loss of baggage and reduce the instance of insurance claims.

As drone technology advances, insurers are leveraging this technology to increase operating efficiency and safely obtain loss information at the site of an accident. Australian insurers, for example, could use drone technology to increase the safety of claim adjusters or risk engineers in collecting information from inaccessible or dangerous areas after a loss event or catastrophe, eg roof damage inspection after hailstorms, or to prevent fraud during underwriting or claims involving large or inaccessible areas such as agricultural farms.

Through the use of natural language processing technology, insurers can analyse huge amounts of unstructured data collected from connected devices, process voice instructions and implement intelligent text mining, all without human intervention, while improving efficiencies in the following areas:
  • Act on customer conversations in emails, surveys, online chat and community forums as well as social media.
  • The analyser can automatically search for potentially fraudulent activity in the claims process.
  • Insurance analysts can easily tap into case notes and claims to understand the root cause of the loss, avoiding unjustified costs and expenses.

The list of potential innovations in the insurance industry is long and constantly evolving. We can only speculate about the true impact of innovations, such as driverless cars, that could completely transform the traditional insurance business model. The potential of these trends becoming mainstream will depend on factors such as perceived value, resistance from customers, and regulation around privacy. Irrespective of the long-term outcome, there is enough evidence to suggest the Australian insurance industry is in for some exciting changes in 2016.

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