Tag Archives: digitization

Digital Future of Insurance Emerges

I regularly communicate with a very large and diverse cross-section of the broad insurance ecosystem. and almost everyone expresses the same professional anxieties and frustrations. With regard to the business of insurance, very few have a clear view of the future, and for obvious and good reasons. However, I believe that several discernible patterns are emerging out of the fog of this pandemic and together they provide a fairly well-defined view of the future of insurance, leaving only the timing uncertain.

Digital Evolution

It’s a good bet that you are reading this article on digital media and that it was published in digital format. As overused and abused the word “digital” may be, it is mission-critical to every aspect of our industry. And, although the migration from analog to digital was already well underway in 2019, the arrival of COVID-19 acted like gasoline on a fire and accelerated the trend. Data by its very nature demands to be digitized to be useful, and no industry has more data than insurance. Technologies such as mobility, connectivity, imaging and artificial intelligence in all of its manifestations are useless in an analog environment. Paper is the enemy of efficiency, information and cost management.  

Claims Is a Major Beneficiary of Digital

No single area of insurance has benefited more than claims from the digital revolution. The “claim is the moment of truth” mantra is tiresome but truer than ever. As insurance fell victim to commoditization, and as advertising budgets became bloated, insurers turned to claim service to differentiate and promote their brands. But true claims excellence is only attainable through end-to-end claims process digitization. From first notice of loss automatically transmitted by connected sensors and devices all the way to claim payments made instantly and digitally, and for every step in between, digital solutions are being adopted and integrated into digital claims platforms at breakneck speed.

Digitization and Innovation 

If, as it often said, “data is the new oil,” then digitization is the refinery, storage facility, pipeline and the distribution network. Innovation essentially means connecting the dots, particularly the ones that others have missed and those that were previously unconnectable. Digitization enables the connection of “dots” – individual bits of information from myriad sources all strung together in an electronic chain to arrive at a critical outcome. That could be an insurance quote, an estimate of repair costs, the identification of a likely fraud and thousands of others, all of which are required to make, build, operate and maintain an insurance enterprise and partner ecosystem. And digital, next-generation technologies enhance an insurers’ ability to easily build a partner ecosystem, embed insurance offerings and enable an innovation culture.

See also: For Agents, COVID Means Digital or Bust

Digitization has enabled mobility and connected vehicle telematics, which in turn has spawned exciting cross-industry partnership products and services linking auto makers, insurers, information and service providers as well as drivers. The resulting rewards and benefits include hyper-personalized auto insurance products, services and rates for drivers, deeper engagement with vehicle owners and greater certainty of safe and proper accident repairs for OEMs, faster and better claims service for insurers and safer roadways for all of us.  

Similarly, digitization has enabled property insurers to develop and market new risk avoidance and claims services for connected homes, factories and businesses. Life, health and accident insurers are leveraging wearables and telehealth to drive meaningful customer engagement and potentially significant new revenue. 

Digital Communications and Customer Experience

A new universe of digital messaging platforms, chatbots, business texting, voice assistants and more has emerged and is in widespread and general use in commerce today, and the insurance industry has taken notice and is quickly playing catch-up. During a recent virtual insurance industry event, a SMA (Strategy Meets Action) survey of participating insurers asked about their interest in and objectives for digital communications and found that 83% consider it a vital part of the overall digital transformation strategy; 75% expect digital communications will help to improve the customer experience (CX). And who among us is not routinely conducting business through videocast – the ultimate digital/human interface? 

Accenture says that “CX is the new battleground for brands.” 72% of businesses say improving customer experience is their top priority, according to Forrester. And no wonder – Forrester found that each single point increase in CX can translate into tens of millions to hundreds of millions in annual revenue.  

In its “Digital Transformation: Powering the Great Reset” of July 2020, the World Economic Forum (WEF) states that as the world moves even more online due to the coronavirus pandemic – which has driven a 50% to 70% increase in global internet usage – the ability to serve customers on the digital channels they choose is no longer an option, creating what the WEF calls a “watershed moment for the digital transformation of business.”

Digital Disruption

The insurance industry has been a laggard in digital transformation, yet a new class of venture-backed startups has disrupted and refocused incumbents and exploited their weaknesses by leveraging new digital technologies. 

Specific legacy vulnerabilities and areas of opportunity for these well-funded startups have included new cyber risk and gig economy protection products, underwriting, administration and claims management. 

Applying many types of artificial intelligence (AI), including machine learning (ML), natural language processing (NLP) and imaging technology to fraud prevention addresses one of the industry’s most enduring pain points. 

Another intensely painful area is the claims process, which has long been a protracted, labor-intensive, inefficient and costly process and has hurt customer satisfaction, loyalty and retention. New technology offerings have come to market that streamline and compress the end-to-end claims process using AI and digital imaging to augment damage appraisals, track and report repair status, automate disbursements to policyholders and vendors and better engage with policyholders. 

See also: New Digital Communications

Insurance claim payments have always been slow and complicated, involving multiple parties such as other insurers, attorneys, healthcare providers, auto and property repairers and contractors. New digital claims payments systems have come to market to solve those challenges, and the rush to touchless and virtual claims processes, boosted by pandemic-driven consumer preferences for safer contactless transactions, is driving adoption of these systems.

None of these advances would have been possible without digitization. The future of insurance is starting to come into focus, and it is filled with exciting new digitally enabled opportunities for everyone involved.  

This theme will be explored in depth with industry CEOs and C-level speakers during The Future of Insurance USA from Reuters Insurance Events online, Nov. 16–18, 2020.

New Sense of Urgency on Going Digital

If necessity is the mother of invention, the insurance industry can proudly say that, in the face of COVID-19, necessity also became the mother of innovation. 

Kudos to the Insurance Industry

From repositioning hundreds of thousands of employees from offices to a fully effective remote work-from-home format in less than a month to quickly implementing technologies enabling them to continue to offer products, services and support, barely missing a beat, the industry rose to the challenge.

These accomplishments did not just happen. It took decisive leadership, starting in the C-suites of the industry, and focused, well-articulated action plans that flowed down into middle management and out to the front lines.  It also took increased investment, some of which was unexpected and unbudgeted. Marshaling the capital required a compelling justification, and in business there is no more convincing target than results and outcomes, which are measured by a variety of metrics beyond just financial results, including customer experience and satisfaction, retention, market share growth, reputation management, credibility and competitive strength. 

More Work to Do

But this transformation is far from over and will no doubt continue long after the pandemic recedes. There is a sense of urgency not evident prior to March 2020. Events over the past few months have forced C-suite leaders to realize that their digital transformation efforts need to be expanded and accelerated to light speed. It is now broadly accepted that a comprehensive digital strategy and implementation plan is critical to carriers that are serious about becoming digital insurers. 

Immediate, Enterprise-Wide Digitization Now Job #1  

Unfortunately, not all carriers will succeed in this journey. The survivors will be innovative, nimble and fiercely customer-centric. They will be committed to enterprise-wide conversion to digitization. Investments in mission-critical technology will need to be prioritized. Speed to market will be mandatory. The hallmarks of successful carriers will include leveraging high-powered transformational technologies, including IoT, telematics, sensors and more. These same market leaders will learn to find and engage with traditionally unreachable customers and convert them into their brand ambassadors. And these leaders will adopt digital technology as a strategic priority and achieve automation efficiency by arming their companies with the very latest in client communications, finance processes, digital and touchless claims processes and digital marketing.

See also: COVID-19: Technology, Investment, Innovation

According to Reuters Events’ Connected Insurance 2020 Report, in 2019, 63% of insurance carriers rated the development of new digital products and services as a key expected outcome over the next 12 months. In a post-pandemic world, it is likely that figure will be nearer 100%.

We need to take every opportunity to listen and learn from our industry leaders, who understand what it takes to survive this challenging period and emerge even stronger.

This theme will be explored in depth in the Reuters Events webinar titled “CNA, Nationwide and Quadient: A C-Suite Take on Results Driven Technology” on Sept. 3, 2020. Register here. This webinar is being run in conjunction with The Future of Insurance USA 2020, which takes place online Nov. 16–18.

What Digital Can Do for Disability Claims

Healthcare is being transformed by advances in artificial intelligence, virtual reality, machine learning, sensors and other innovative technologies. Practically everybody has a smartphone, making it easier than ever to gather data and consent to third-party access. Unique data insights mean providers can offer people products and services tailored to them individually.

For insurers, digital technology offers new ways to manage risk that relies less on face-to-face and traditional clinical assessment; this is why there is so much interest in understanding how innovation might work. Selected comments from four key players in the digital health ecosystem make clear the appeal of putting two and two together.

Thomas Lethenborg at Monsenso, a mobile platform for mental health, said, “Digital technology helps an individual move from reactive behavior to being more proactive – and this changes the paradigm in particular with engagement.”

It’s a view shared by David Forster of Thrive, a digital interventions app for mental health: “Data drives our understanding of what works best for the individual.” According to Forster, the success of digital technology in clinical settings points to real opportunities in insurance: “It makes it possible to provide policyholders help with illness prevention, early detection and assistance on a personal level.”

Ian Prangley, of exercise rehabilitation service TrackActive, continued the theme when he said, “For insurers, digital solutions can drive connectedness, engagement and customer satisfaction while enabling people to self-manage their health. Harnessing data insights and implementing artificial intelligence (AI) is key to achieving this.”

See also: Why to Digitize Disability Claims  

A comment by Danny Dressler of AIMO, an ecosystem integrating intelligent motion analysis into musculoskeletal care, added further confirmation: “As more and better data is gathered and processed safely, AI offers the most promise to take care of people’s health, and fix issues in both healthcare and the life and health insurance sectors.”

By using digital means, insurers can create scalable, automated, speedy ways of supporting people when they need help the most. Proponents argue it offers better health outcomes for policyholders that will reduce the costs associated with long disability claims – a win-win for both insurers and consumers.

Dressler also said that “technology like ours lets insurers offer customers new solutions such as dynamic pricing and automated claims and even help to prevent claims from happening.” Lethenborg says it represents “an opportunity to ensure the data collected gives holistic insights and analytics that we can use to intervene more rapidly, when help is needed.”

But it’s crucial the highest levels of privacy and data protection are guaranteed and operators are in full compliance with regulations. An imperfect balance of privacy with innovation is a deal-breaker for consumers.

Forster is clear how delicate this balance is: “We recognize our responsibility to safeguard users’ data, but at the same time information technology empowers people to make choices and participate actively in managing their own health – it puts them in the driving seat for the first time.”

For digital solutions to be convincing, research and scientific evidence are needed, but with newly made services, long-term experience is scarce, and a leap of faith is required.

Dressler spoke for all in saying, “We maintain strong links to scientific institutions because the general technologies underpinning our solutions emerges from scientific thesis…[This means] we only implement new features or functions after a rigorous validation process, especially because we are asking people to trust us with their health and well-being.”

Dealing with high volumes of data is not without risk, particularly when it’s shared with third parties.

See also: Digital Innovation in Life Insurance  

Prangley has pointed to recent concerns over how sensitive data is being used to highlight the challenges faced, “The key is to anonymize and protect data, and have customers consent to sharing it on the understanding it will be used solely to improve their health.” This insight is driven home by Lethenborg, who said, “Transparency about how the data will be used is essential to building trust.”

Digitization has already brought new products and services that have had positive medical and scientific impact. As Prangley said, “Technology has connected people and changed how we relate to each other. There [are] arguments for and against this of course, but in the context of health and wellbeing we believe it’s a great thing.”

With mental health and musculoskeletal problems as the leading causes of disability claims in every market, these companies can bring digital solutions and opportunities – and health insurers can also feel great about them.

Small Insurers and Digital Priorities

From what I’ve seen in recent insurance technology news updates, it appears that the insurance industry is finally ripe for change, ready to make the leap to digital technologies that will lead us into tomorrow. Or is it?

Consider these core drivers of change: digital innovations such as cloud, telematics, IoT, analytics and AI, mobile, real-time 24/7 access to data, the growing need for on-demand products and, in general, using these transformative technologies to create operational efficiencies, adopt new business models and anticipate and exceed customer expectations.

Even though we know these technologies are enabling new insurance products, methods, processes, services and business models, there is still an omnipresent culture that hangs on to the troubling “it’s the way we’ve always done it” battle cry. This is often voiced by insurers that share their frustrations with being challenged to change existing culture from inside out to address these digital drivers.

My view is that, while many of the larger insurers are making the hard move to adopt digital technologies, it’s still not a priority for many small- to medium-sized insurance companies. And now, more than ever, there is a certain urgency to having that discussion. Tanguy Catlin, senior partner with McKinsey & Co., when addressing the issue, referred to it as the “tipping point” that is “where those that have not adapted their [digital] strategies fade away.”

See also: Darwinian Shift to Digital Insurance 2.0  

In research results published by MIT Sloan Management Review (SMR) and Deloitte’s Digital practice, 87% of executives queried believe that digital technologies will disrupt their industries, yet only 44% felt they were adequately preparing for it. Gerald Kane, professor of information systems at the Carroll School of Management at Boston College and MIT Sloan Management Review guest editor for the Digital Business Initiative, compares insurers’ thinking about digital disruption to homeowners in disaster-prone areas who often seem caught off guard when an actual hurricane or cyclone strikes.

Source: MIT Sloan Management Review

So, why isn’t adoption of digital technologies a priority for more small- to medium-sized insurers? While many see the opportunities presented by digital technologies, perhaps they don’t believe the likelihood is high that digital will actually disrupt their own organization. But the authors of the research note that, if digital technologies represent an opportunity for your organization, they also represent a threat for your competitors — and vice versa.

I get it, change is hard… but, the argument, “we are not in a financial position to prioritize” is irrelevant to the discussion of digital technology investments. Competitors aren’t waiting for your company to be in a better “financial position” before they act. Moreover, because at some point in the coming years insurers will need to replace their growing faction of retirement-age employees with a younger, more tech-savvy labor force. And in a war for the best talent, the A and B players have absolutely no desire to work on outdated systems. So, what does that mean for the future of your company?

See also: Digital Insurance, Anyone?  

Just remember, technology is an accelerator for your company and your staff. In other words, the more digital technologies that are put into play, the greater and faster the return. Those insurers that ignore its call will fall further and further behind until they reach the tipping point and slowly fade away. Remember what happened to Blockbuster Video when it failed to adapt in a time of digital change. Don’t be a Blockbuster in a Netflix world.

Digital Innovation in Life Insurance

There is a view that the life insurance business needs to change or to innovate to remain relevant and reach new customers; if incumbent players don’t make an environment that appeals to new customers, someone else will step in and do it in their place.

It’s possible that big data warehouses – or mobile and digital operators – will mass market life and health insurance protection to their customers, based on the data they have about them. While we can’t rule it out, this outcome is unlikely for multiple reasons.

For a start, life insurance is not a simple transaction, and access to it is selected. It requires capital, distribution channels, underwriting and claims expertise, product knowledge and actuarial know-how. While these challenges may deter new entrants, they are not insurmountable obstacles.

See also: Selling Life Insurance to Digital Consumers  

Life and health insurance are closely linked to healthcare provisions; our products align with fundamental biometric events – including ill health, disability, disease and death. It’s no surprise we manitain a mainly medical approach to risk selection.

Technology offers new ways to manage risk that rely less on face-to-face disclosure and traditional clinical assessments. This is why we see so much interest in understanding how innovation might work.

Healthcare is adopting artificial intelligence, virtual reality, machine learning, sensors and other innovative technologies – including genomics – to deliver a more patient-centric approach. Insurance can similarly transform by adopting more customer-centric solutions.

In healthcare, digital channels and mobile health solutions are welcomed when they blend with traditional methods and work simply. For insurers, this could mean placing innovation into spaces where it helps customers and where it makes sense to augment existing ways.

See also: 2 Paths to a New Take on Digital  

This means the focus is on how we engage with people and offer them services linked to ensuring their health. The focus can move from life protection to life enablement, support that helps people lead a long and healthy life.

The industry needs the energy, innovative vision and technical skills of entrepreneurs. In turn, entrepreneurs need the network, customer base and data – as well as the insurance expertise – brought by insurers and reinsurers. Working together, we can create an environment where people will share their personal data, knowing we can be trusted to use it appropriately, to keep it safe and to have it be a force for good. To do this means examining the emerging digital options and working out how to optimize the benefits to our customers.