Technological Advances in the Insurance Industry
The Fintech revolution has startled many industries. Insurance is one of the industries that have been affected. A large percentage of insurance executives believe that they use outdated technology as a part of their day to day operations. Hence, they are also of the opinion that the insurance industry is prone to attacks and disruptive innovation. This is the reason why many insurance companies have started exploring newer ways in which technology will impact the industry. As a result, a number of startups which have been funded by insurance giants have suddenly come into existence. In this article, we will have a look at some of the technological advances which are now rapidly becoming mainstream in the insurance industry.
Usage Based Coverage
The Internet of Things (IoT) is likely to have a huge impact on the insurance industry. This is because lack of accurate and relevant data was probably the biggest reason that insurance companies were not able to price their products properly. The end result was that products were priced incorrectly. As a result, people who were conservative in their lifestyle had to end up paying more premium whereas the risk-takers got a good deal.
For instance, earlier, car insurance was issued based on mileage. Also, health insurance was given out based on very little information about the patients health. However, with the advent of the Internet of Things (IoT), this is likely to change.
Now, there are devices available which will help insurance companies gather data about the way the driver uses the car or the lifestyle habits of individuals. This means that companies can accurately assess risk and offer premiums accordingly.
Also, Internet of Things (IoT) will change the insurance game to being predictive from being reactive. Insurance companies will now be able to predict if their customer is likely to have a lifestyle disease. They will, therefore, be able to advise the patient to take proper precautions and hence save costs. Internet of Things (IoT) is expected to be a revolutionary technology which will end up drastically reducing the cost of insurance.
Big Data and Analytics
With the advent of IoT and usage-based coverage, big data is also making its way into the insurance industry. The basic premise is that as newer technologies are implemented in the insurance industry, they will end up generating huge tracts of data. However, insurance companies still do not have a way to convert this data into meaningful insights. This is where big data and analytics come into the picture. They will help insurance companies structure their data in such a way that meaningful insights can be easily derived.
Robotic process automation is the way forward for most industries and insurance is not really an exception. A large number of costs in the insurance industry are incurred because of the humungous amount of paperwork and back-office processes that need to be followed. Right from issuing the policy to paying the claims, many processes need to be followed.
The insurance industry is trying to cut costs by automating some of these processes. Some companies have gone as far as automating the entire claims administration process. Claims are not the only process where automation is happening. Many insurance companies have started using algorithms which are capable of underwriting policies by suggesting premiums based on the information provided.
Robotics is also being used in order to expedite data gathering. For instance, in order to pay housing claims, surveyors are expected to visit the damaged houses as well as click pictures. These pictures are then used to ascertain the extent of damage that has been done and the compensation that needs to be paid. Many insurance companies have started using drones to conduct this process. Drones are faster, cheaper and therefore more efficient than manual surveyors.
Insurance companies are also betting big on the blockchain technology. It needs to be understood that Bitcoin and blockchain are not the same. Bitcoin is a currency which uses the blockchain technology. Blockchain simply means using a shared and automated system of recordkeeping.
As we have already mentioned above, insurance is a paper-intensive process. This means that the entire process is prone to frauds and misinterpretations at every step along the way. On the other hand, since blockchain is digital, it cannot be easily manipulated. Lets understand this with the help of some examples:
- Insurance fraud costs companies millions of dollars. One of the most common ways of committing insurance fraud is by using the same incident to make two separate claims. For instance, a policyholder could make two claims for a single car accident with two different insurers. Blockchain technology prevents this from happening. Blockchain has an electronic record of the object on which the claim is being made. Hence, if any more attempts are made to make another claim, the relevant insurance companies will be identified, and the fraud will be prevented.
- Blockchain also has the potential to evolve into smart contracts. At the present moment, manual intervention is required to interpret the contracts and make claims. However, with the advent of blockchain technology, no manual intervention will be required. Contracts will be able to confirm coverage, look at the basic policy details and trigger claims process if required.
Hence, the insurance industry is likely to undergo a lot of changes in the near future. It is likely that the insurance industry of the future may not look anything like it does today.
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