When was the last time you sent a fax? For that matter, how many in-person meetings have you had this year? From the first cellphone call in 1973 to the first text message sent in 1992 to the rapid adoption of online meeting platforms in 2020, people are constantly exploring and adapting to new technology quickly, with many embracing the next digital update wholeheartedly. Unfortunately, the same cannot be said about the insurance industry, which is mired in antiquated business activities.
Insurance is an essential safety net for people, but often the industry relies on outdated business models and systems, some based off mortality tables that were developed in 1971 and 1984. At the same time, industry leaders have refused to embrace technology so much so that, in a Center for the Study of Financial Innovation survey about the risks facing insurers, insurance companies ranked outdated technology as the greatest threat to their business. According to a McKinsey report, nine out of 10 insurance companies identified legacy software and infrastructure as barriers to digitization.
Many corporations rely on the mentality of, “It’s worked for 100 years, so why fix it?” This became even more evident during the COVID-19 pandemic when many consumers, quarantined at home, turned to digital channels to find solutions to their insurance needs but found a lack of digital adoption. This doesn’t just prevent companies from gaining new clients but also alienates existing ones. According to a Bain & Co. brief, consumers who encounter problems in their digital interactions tend to give their insurance provider lower loyalty scores.
While there has been a plethora of data to help insurance companies create more responsive products and attract new consumers, most insurance companies analyze only dozens of different variables -- many based on that data from decades ago -- to arrive at their numbers.
By contrast, cloud-based artificial-intelligence (AI) assisted software can process 6 billion records composed of mortality, consumer demographic, health and social trends. The result is more precise, dynamic, insurance-oriented algorithms than can be leveraged throughout the insurance value chain.
In fact, cloud-based AI can compare thousands of variables simultaneously in a few hours. The resulting analytics and algorithms are easy to interpret and integrate into insurance processes that enhance pricing, risk assessments and customer acquisition, resulting in a data-driven competitive edge.
A robust, full-stack, Insurance-as-a-Platform (IaaP) approach can quickly and robustly analyze and process all of this data to help insurance companies more precisely determine risk, create better, more appropriate products for their clients and improve customer experiences. This enhanced data can also help insurance companies price products more accurately, understand the demographics of who is ready to buy and when they are ready and get the right risk on their books — making them and their agents more profitable in the end.
See also: 5 Things to Know When Integrating AI
Insurance companies that embrace technology will be the ones that succeed. Insurtech companies can help them succeed by providing data-based recommendations for competitive product pricing, to create products that consumers want and to improve the insurance-buying process, making it easier for both the client and the agent.
In a digital world, data -- and the ability to fully analyze it -- is critical to insurers’ survival. The businesses that will succeed will be the ones that can quickly analyze and adapt to data to make better business decisions and serve their customers better and faster.
Now, agents will never be left out of the equation. They are the ones who develop relationships and build personal networks — an agent serves as a place of trust. But the future of insurance is a hybrid where consumers can choose a digital experience or a traditional one and move between the two.