The five trends driving insurtech, live from DIA 2018

There are new digital players in the insurance sector. These so-called “insurtechs,” technology-led companies that enter the insurance sector, are taking advantage of new technologies to provide coverage to a more digitally savvy customer base. At the Digital Insurance Agenda (DIA) in Amsterdam, one of the largest insurtech events in Europe, we found five key emerging trends:

1. Ecosystems and platforms

Customers are not seeking services; they are looking for solutions. The Japanese e-commerce and Internet company Rakuten presented its expansive ecosystem model, which integrates several services on a shared platform to best address the needs of customers. While insurers have traditionally played a more passive role in their customers' lives, this is changing as companies establish their own platforms and integrate their services into established ones. The Chinese digital insurer ZhongAn, for example, has partnered with several of China’s biggest Internet groups to create a vast insurance ecosystem that allows users to buy insurance products directly through retail sites. ZhongAn launched in 2013 and today has 450 million customers.

Participating in ecosystems allows insurance players to add value through network effects—for instance, by leveraging allies’ already-established platforms—and to integrate insurance services into other products. An example of the latter is the cooperation between building insurers and home insurers, together with GROHE Sense, a smart-home solution with water-leakage sensors that mitigates risk. Many insurtechs that presented at DIA, such as Imburse and Amodo,offer standardized application programming interfaces (APIs) for seamless integration across different systems.

Another aspect of this trend is the emergence of third-party insurance platforms that allow insurers and even noninsurers inside the ecosystem to build insurance products and services conveniently. Players such as Element, Outsystems, and Socotra demonstrated onstage how a new insurance product or service could be built in minutes.

2. Artificial intelligence

Artificial intelligence (AI) tools are emerging at many points in the customer journey and will reshape claims, distribution, underwriting, and pricing. Particularly innovative in the insurtech space are tools based on computer vision and natural-language processing. The insurtech Pixoneye, a data analytics SaaS company, provides computer-vision technology that can analyze a customer's public online photo galleries to create a personal risk profile. The insurtech Enterprise Bot builds chatbots based on natural-language processing and machine-learning algorithms that can understand and act on customer queries without labor-intensive and expensive human intervention. It can further measure the sentiment of a query and directly connect a customer to a human agent if it senses the customer is not satisfied.

3. Item insurance

New players are emerging that aim to provide customers with transparent coverage and the flexibility to decide what to insure—and also, often, when. This idea of “insurance as a service,” allowing people to insure items only when they are in use, reflects how policies are increasingly being tailored to the customer. Insurtechs such as buzzvault and Valoo offer an easy way to make an inventory of possessions via video or photo to give users an accurate picture of what they own. To determine the value of these items, Valoo uses an algorithm that draws data from the biggest marketplaces and considers an item’s condition. buzzvault provides customers with an overview of their possessions and gives them the full flexibility of adding or removing items from the insurance policy at any time. Similarly, Slice allows owners renting out their homes to pay for coverage only for the time they are renting them—not a minute or a penny more.

4. Engagement innovation

In the insurance industry today, customer trust can be low and the technologies dated. But customers want a digital experience tailored to their needs. Insurtechs offer new value propositions that generate customer engagement. Gamification can be a way for insurers to do that; by providing chatbots or mobile tools to set up a policy or file a claim, they can make traditionally cumbersome processes more engaging and integrated into their customers’ lives. Wrisk, for example, has an app that helps the “connected generation” interact with their insurer with the same ease and speed they expect in other commercial relationships. Wrisk’s approach is based on the principle of macroinsurance,” where all of a customer’s policies are visible on one individually determined platform. Another insurtech, Bought By Many, demonstrated highly personalized experiences in pet insurance, including gifts on pets’ birthdays and personalized letters in response to claims.

5. Automated claims processing

Customers are increasingly ready to leave manual claims processes behind and move to a purely digital self-service model. To capture the full value of digital, insurers should think about the entire customer-claims journey— from a digital first notification of loss (FNOL) via live video or images from the scene of an accident to an automated settlement. By fully automating back-office processes and decisions traditionally made by claims handlers, claims can be settled more quickly and effectively. Insurtech Carpe Data presented solutions for insurers to identify fraudulent claims and fast-track payments for legitimate ones.

Customers could benefit significantly from services such as an automated verification of car repair estimates and invoices as well as automatic reimbursements as soon as the repair invoice has been verified. Digital tools can also support and assist the decisions of claims handlers, leading to better outcomes. Insurtech Xtract provides a claims tool that aggregates and visualizes crash data for the auto-insurance industry, captures generic crash data at the FNOL, and delivers actionable insights to claims handlers so they can make liability decisions swiftly, deflect fraud, and triage vehicle damage.

DIA has brought together insurtechs with leading insurers and other players in the insurance world, and it’s clear that the start-ups are no longer just disruptors; they can be service providers and partners, too. Traditional insurers can draw inspiration from insurtechs, which are not shy about innovation nor constrained by an inflexible corporate structure. The insurtechs can learn a lot from incumbents, which are already established in the market and have a wealth of data and expertise. At DIA, many insurtechs presented solutions onstage jointly with insurance companies. Insurtechs and incumbents share the common goal of providing the best services to their customers, and as this conference has shown, both can profit by working together to do so.

How Intelligent Automation is Changing the Shape of Insurance Industry in Digital Age

Category:

Insurance

Automation

According to McKinsey Global Institute report, 2017, there is 43% of automation potential for Insurance and Finance industries. By 2025, up to 25% of the task force in the insurance industry may be consolidated or replaced, especially in Operations and Administrative Support. The insurance industry is now aggressively looking at use cases for intelligent automation as AI, Machine Learning & Cognitive tools are merged with Robotic Process Automation (RPA) to bring efficiencies into existing processes and reduce operational costs.

Challenges and Opportunities in the Insurance Industry

Traditionally, premiums paid by customers were being invested by the insurance companies into a number of financial instruments to get good returns. However, in today’s low-interest rate scenario, this source of income has dried up.

The online P2P insurers with minimal brick and mortar infrastructure are offering low rates making the market much more competitive and tougher.

In the near future, there looms potential competition from companies like Amazon, Google, and Facebook which are sitting on top of huge personal data to offer personalized insurance products. In fact, Amazon is already hiring insurance professionals looking to disrupt the insurance market in the UK, Germany, France, Italy, and Spain. According to GlobalData 2018 General Insurance Survey, 18% of consumers would buy their motor or home insurance from Amazon.

Therefore, insurers are facing constant challenges to optimize operational costs, improve overall accuracy & customer experience and maximize the highest return on allocated capital.

Now, let’s look at some of the issues/challenges that limit insurers’ ability to meet their objectives:

The insurance industry runs on vast reservoirs of data, dealing with mixed data formats which include both paper and electronic documents. The manual effort to extract information from these documents and different data sources is not only considerable but also costly and prone to errors.
The larger insurance companies use a complex IT environment which comprises multiple legacy applications and disparate systems. This results in operational inefficiencies and unnecessary costs spent on administrative functions.
Besides issuing policies and processing claims, there are tons of backend processes which are manually intensive, time-consuming, repetitive and prone to errors. Some examples of such back-end processes are policy quotes & servicing, underwriting, drafting receivables & payables, renewing premium, identifying premium discrepancies, conducting compliance and legal/credit checks, etc.
Like any other business, scalability is another issue which comes into play during seasonal peaks in the insurance industry. It gets challenging further during the events of a large-scale catastrophe which requires the claims process to be efficient and accurate to process a large volume of claims.

Use Cases on Intelligent Automation

Before we look at some of the use cases, it is important to consider the following while embarking on an automation journey:

Not all complex processes are worthy candidates for automation.

It is important to assess whether automating such a process will offer any significant savings, as automating a complex process incurs significant automation costs. It may be better to pick up medium or fewer complex processes which can offer significant cost benefit.

Start small and expand gradually.

Begin with a small initiative with defined objectives, keeping the larger picture in mind. This will help insurers to evaluate the efficiency of the process with the new solution. Once the results are in-line with expectations, expand the solution on a larger scale gradually.

Avoid over automation.

Often, organizations would look at automating the entire process, eliminating the need for any human intervention. This may result in significant automation effort and cost. However, it is important to assess if a hybrid approach can be taken where the optimized use of automation and human intervention can be used to achieve the desired objectives. Similarly, if it is just a one-off activity which will not be repeated after its completion, then, automating such activity using RPA may not be useful.

Now let’s look at some of the use cases which may be worthy candidates for intelligent automation in the insurance sector:

Smart Media Reader: The insurance industry deals with piles of paperwork during policy issuing and claims process. The paper documents are scanned and stored in their digital repository for respective back-office operations teams to manually extract relevant data and enter it into the front-end policy and claims systems. This is inefficient, error-prone and repetitive, which can be streamlined with a minimal human intervention using intelligent automation. A smart media reader solution can be developed using Robotics Process Automation (RPA) which can read and extract relevant data from scanned documents. The solution can use OCR capabilities to read data; use smart references, NLP, and machine learning capabilities to validate & process data; and interface with relevant systems to perform automatic reconciliation. The solution can be integrated with existing processes where there is a heavy reliance on extracting data/information from paper documents.
Smart Claims Handler: Reducing handling and cycle time of the claims processes to improve customer satisfaction is one of the top priorities for any insurance organization. Therefore, it is important to streamline the claims process where we can create a condition-based RPA solution which will validate and verify the incoming request. The claims requests which meet criteria for automatic handling can be routed to the robotic processing & resolution system (e.g. chatbots); whereas requests not meeting the criteria can be routed for manual resolution. The solution can also have inbuilt rule-based fraud detection capabilities. It can be integrated with smart media reader solution to further bring down operational costs.
Smart Underwriting Solution: One of the most classic debates of all time in underwriting world is whether – ‘Underwriting is an Art or Science?’ I believe it is both, and therefore, the solution needs to have provision for both. A rule-based RPA solution can be built for underwriting system where it will determine if a submission or renewal is a candidate for automated or a hybrid process. Under the automated process, the rules, predictive models, and machine learning algorithms will evaluate, rate and price a submission. In case of more complex submission, a hybrid process can be used where underwriters will use their art and knowledge, supported by recommendations generated by the solution.

Conclusion:

With the constant emergence of challenges driven by disruptive technologies, intense competition, and complex market, the insurance sector is looking at optimizing costs, improving overall accuracy and maximizing returns. Intelligent automation can be used to quickly automate key processes to achieve higher efficiencies and streamline operational costs. This will enable professionals to focus more on value-added functions driven by smart solutions and contribute efficiently to overall organization objectives.