The following is an opinion piece written by Sanjiv Gossain, European head of Cognizant Digital Business. The views expressed within the article are not necessarily reflective of those of Insurance Business.
The insurance industry is rapidly changing due to the rise of data, algorithms and artificial intelligence (AI). With the whole market poised for disruption, it is imperative that insurers look at how digital technologies could help them stay relevant.
Facing rising competition from non-traditional players, insurers must innovate to support customers and maintain their competitive edge. But how can insurers achieve this and stay relevant in the long term?
Digitise, optimise, monetise
Research estimates that the latest digital developments are set to create $1.6 trillion of value over the next three years. As such, insurers that don’t embrace new technologies will not only miss out on the value-add, but risk maintaining their competitive advantage.
The Internet of Things (IoT) has triggered an explosion in data, which when coupled with machine learning, is transforming the way that insurers work. A growing number of insured items, such as buildings and cars, now collect permissible user data, which enables insurers to obtain real-time insight into their use and condition. This not only helps insurers with optimisation and monetisation of policies, but helps them identify where they can provide additional value for their customers.
The human touch
The rapid growth of the wearables market has significantly increased the number of people connected to the internet. Now, under strict rules and regulations, more data can be collected to provide insight into the physical condition and lifestyle of the wearer. This promises to completely transform the consumer-insurer relationship, with the opportunity to create tailor-made insurance contracts – and even develop new products – that better meet individuals’ needs.
Ultimately, the power lies with the consumer to give permission to the insurance company to use this data. But, research by loyalty specialist Aimia illustrated how most are on-board when they perceive there to be a fair return. This enables insurers to deliver more tailored policies, premiums and rewards. For example, medical insurer Vitality rewards active users with a weekly Starbucks if they measure a specified step count per week.
Insurers can deliver value beyond competitive prices by providing data-driven actionable insight, such as how people can improve their health or avoid potential problems. This experiment, which uses AI to identify depression at an early stage, shows how such data could help users diagnose health issues and understand how to tackle it.
Adopting new business models
Relevance is perhaps the greatest challenge that established insurers face. Technology is enabling the growth of sub-economies that are disrupting all industries, such as the rise in peer-to-peer schemes like Airbnb and hiyacar. The insurance market is no exception, with on-demand peer-to-peer insurance initiatives growing in popularity in recent years, enabling a group of consumers to set up a premium whereby they insure themselves jointly against a certain risk.
To accelerate the development and adoption of new business models, insurers should consider entering into strategic partnerships. Partnering with an innovative start-up, for example, may help established firms identify the opportunity to take advantage of disruptive technologies or trends. One company that has taken this approach is Allianz, which works with New York-based start-up, Lemonade Insurance Company, to develop AI algorithms to speed up processing claims that are now handled in minutes instead of days.
Today’s ostrich, tomorrow’s dodo
The insurance industry can’t just keep its head in the sand. Those firms that don’t acknowledge, adopt and adapt to the massive industry shift face extinction.
To compete and grow, insurers must adopt new technologies to build deeper, richer relationships with their partners and customers. Only by investing in new technologies, such as data analytics and AI, and by establishing strategic collaborations with new innovative industry players, will insurers be able to deliver greater and tailored value to their customers, accelerate business growth and survive the mass industry disruption looming on the horizon.
