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Digital Transformation Is Changing The Insurance Industry: Here’s How It Will Benefit You

Jun 22, 2018 | 2 years ago | Read Time: 4 minutes | By Manan Vyas

While many may argue the insurance business hasn’t changed much since its 1861 when the first policies were written out in London, the recent impact of digitisation which has changed the face of manufacturing, healthcare and several other industries has also changed the insurance industry significantly. With millennials accounting for a growing segment of the market, and demanding digital and mobile-centric solutions, insurance companies are setting out to meet these expectations of the market.

According to a study done by consulting giant Bain and Company with Google there are seven key technologies including, including infrastructure and productivity, online sales technologies, advanced analytics, machine learning, the Internet of Things, distributed ledger and virtual reality that are disrupting the insurance industry in ways you never thought were possible. While of course these improvements are helping companies improving productivity and efficiency, they are greatly improving the user experience. Gone are the days when buying insurance meant shuffling through hours of jargon and paperwork while dealing with pesky insurance agents. Instead, the new revolutionised world of digital insurance makes the process easy and hassle free.

Financial impact of the seven technologies

Figure: Financial impact of the seven technologies on a prototype insurer over 5 years (In Germany)

Self-service dashboards and easy comparisons

One of the key benefits of digitisation for customers in the insurance industry will be the availability of the self-service model. Customers can now literally buy insurance policies, mortgages and much more at the click of a button. Customers today are defined as being “omni-channel”, which means they research products online and then talk to their friends via social media about the same to get recommendations rather than buying via retail locations. This means they want a variety of options: text, email web chat to buy their products and the insurance industry is attempting to incorporate this in order to reach potential customers.

Additionally, having such self-serving dashboards makes it easier for customers to decipher complicated insurance policies, calculate monthly premiums and the impact these will have on their longer term financial future and plans. Complicated policy coverage costs can now be seen virtually, helping customers understand the rates of change and thereby, determining which plans will suit them best. Digitization also makes it easier for customers to track the speed at which their policies are growing.

Insurance providers are constantly looking to push the envelope with the advent to the digital age to make applications more interactive and easy to use for customers. For instance, in several countries customers can use their smartphone to upload a picture of something they would like to insure: car, bicycle, camera, or anything else and request a policy for the same. The application uses available data about your product  and comes back with an immediate policy offer which you can accept within seconds.

Advanced analytics (AA) and online sales

Another great benefit digitization of the insurance industry will offer to customers is the availability of customised service. Insurance companies can use cutting-edge technologies to target customers by using online sales, as well as are using AA to gain an insight into the needs and preferences of customers. A great benefit that AA will offer insurance providers and customers is helping in fight off fraudulent claims, by helping build a superior system to detect the same by using big data analytics. According to a report produced by Ernst and Young entitled “Digital transformation in insurance,” fraudulent claims account for about 10% of all submitted claims and impact about $40 billion in the United States alone. Reducing the number of fraudulent claims will help insurance companies cut down on costs of anti-fraud units and instead focus on providing better service to customers.

digital insurance transformation scorecard

Credit: EY “Digital transformation in insurance”

Improved infrastructure: easier claims process

A prerequisite of digitization is modern IT architecture, which for the insurance industry means faster processing, computation and storage. This has enabled insurance companies to arrange and document claims on distributed ledgers. In the past, if one got into a car accident, the process of getting a claim was painful and long and involved several lengthy and complicated documents, including several hours on the phone with an insurance agent. However, now all of that can be done through your mobile, thereby reducing processing time for claims significantly. This has also opened up an entirely new field of “smart contracts”, whereby, policies developed are fully automatic and are updated using a database.

Potential savings from digitalization

Figure: Potential savings from digitalization on a prototype insurer (In Germany)

Undoubtedly, digitisation has remarkably changed the insurance industry and alleviated the customer experience. Once notoriously known for being time consuming, the insurance sector has experienced a digital transformation, making it more efficient and user friendly. Furthermore, digitization in the industry has expanded the base of many insurance companies and improved their profitability, thus giving them greater incentive in continuing to invest in improving the customer experience. Insurance companies know that constantly evolving and innovating to meet the needs of the new millennial customer will make sure that profits will follow.


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