The abundance of data -- and the technology used to capture it -- is driving profound disruption in the relationship structure of the insurance industry. As the traditional gatherers and guards of massive amounts of data, insurers face threats from new, tech-savvy competitors that can adapt to changes more quickly.
There are very powerful trends coming together to cause serious industry disruption. That can be a big threat, but if insurers start responding now and embracing the change, it could also be a big opportunity.
What is Insurtech?
Google defines insurtech as referring to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. "Insurtech" is a portmanteau of “insurance” and “technology” that was inspired by the term "fintech" (financial technology).
Longstanding reluctance to change is preventing many organizations in the workers’ comp industry from embracing new technology, especially technology that streamlines processes and worker performance. However, this reluctance is no longer sustainable. Simply stated, those who cling only to the old-time culture and ways will be disrupted. Think Amazon or Uber.
Big data and analytics are forcing insurers to adjust their processes when it comes to collecting and using data. With the expansion of the Internet of Things, sensor technology, machine learning and artificial intelligence, there is more information available than ever before.
See also: What’s Your Game Plan for Insurtech?
Data, the asset
Organizations that continue to ignore the facts will wonder why they are no longer competitive. Those that are open to new approaches using new technology will experience positive results. It is a matter of attitude and willingness to try newer methods.
Nevertheless, insurtech need not be invasive or costly. To make a positive impact on processes and outcomes, an organization must first take the position of "data-centeredness," believing data is its valued asset.
Accepting and incorporating new technology requires focusing on only three basic initiatives: data quality, data analysis and smart application of the intelligence gained through analytics.
If data is an asset, then its quality must be valued and protected. Using poor or erroneous data never ends well. Information gained from poor quality data will not improve an organization’s processes or outcomes and will lead to poor decisions and detrimental actions. Therefore, resources must be applied to guaranteeing quality data input. Moreover, considerable resources may be needed to improve historic data.
Over the last 25 years, organizations have focused on collecting data, but little attention has been paid to insuring that the data is accurate and complete. That must change. A data-centered organization will also guarantee that its data is pristine.
The second initiative needed to avoid insurtech disruption is to analyze the organization’s data. Collect and analyze all data over the previous five years. Methods such as predictive analytics can be applied to gain greater understanding of the organization, how well it operates and what are the cost drivers both operationally and at the transaction level. This is simply a matter of analyzing historic data and monitoring concurrent data to reveal trends, threats, and possibilities. Know thyself.
See also: Insurtech Is Ignoring 2/3 of Opportunity
Intelligent knowledge application
Having quality data and analyzing it leads to the next critical step of designing intelligent solutions to problems identified during the analysis phase. Apply the knowledge gained to specific areas of need by creating “apps” that solve problems and improve processes in the organization.
Alert the right person when conditions or events pose a risk to the organization or work product identified in the analysis phase. Deliver key intelligence to specific individuals or groups at the exact time they need it for decision support. Facilitate timely communication within the organization. Knowledge assistance provided at the right time to the right persons saves time and creates accuracy, efficiency and greater profitability.
Stepping into the world of insurtech and avoiding disruption is largely a matter of perspective and attitude. It requires a view that data is an asset and, when properly managed, lets the organization define its destiny.