Technology is transforming the insurance industry in many ways with the utilization of artificial intelligence (AI), distribution infrastructure, connectivity, and next-level automation. Let’s take a look at some of the key trends taking shape in our industry.
AI is the idea that a computer can think, learn, and behave like a human. AI can be used to interpret data and apply its learning to a wide range of tasks. Machine learning is a subset of AI that allows data interpretation and analytics. MGAs and carriers are increasingly using AI and machine learning to facilitate underwriting and pricing, claims handling, and fraud detection to name a few of the applications.
Property insurance underwriters must have access to critical property data in order to identify risks, price appropriately, recommend loss-control measures, and manage renewals. This includes knowing a property’s characteristics and conditions, such as its roof type and material and its proximity to fire and flood zones, as well as how conditions may change from one year to the next. Insurers are utilizing AI-based technology and machine-learning data models to determine these property characteristics to streamline the quoting process from the outset and to deploy better pricing models based on predictive modeling. Underwriters can make quicker, more accurate decisions with access to on-demand property data and analytics.
In recent years, the modernization of claims platforms, as well as the deployment of chatbots, document ingestion tools, and artificial intelligence for data extraction, has assisted some insurers in improving workflow and productivity in certain lines of business while also lowering costs, according to a recent report by EY. The use of drones, IoT-connected sensors and mobile apps is also factoring into the strategy of insurers for claims automation.
Insurance fraud costs the insurance industry more than $40 billion per year. AI can help insurance companies detect anomalies in claims data and identify false information used by customers to obtain a lower premium or a larger claim payout.
Many core processes for MGAs and insurers are hampered by legacy technologies. New technology, including the rapid transition to the cloud for all core systems, is allowing carriers and MGAs to be more agile in launching new products and providing better client servicing. The cloud will also be critical for enabling the type of computer power required to fully understand and utilize massive data sets (such as tens of millions of claims data points). As ecosystems evolve, those moving ahead with new technology will be best positioned to better connect with customers, retailers, and insurtechs, among others.1
Many insurers have begun to use telematics to transform auto insurance. Greater adoption of the internet of things (IoT) could also reshape the property and commercial sectors. Increasing the frequency and specificity of data shared by IoT devices helps customers provide a more accurate view of their needs and MGAs and insurers better understand risk when a customer first purchases insurance and over time.
Emerging technologies will allow insurers to fundamentally rethink product and service. For example, industrial IoT can enable real-time monitoring of equipment, allowing for preventive maintenance to reduce the incidence of claims. Digital twins (a virtual model designed to accurately reflect a physical object) and 3D and 4D printing have the potential to revolutionize the claims experience for all physical damage areas.1
Insurance digitization is impacting almost every process. From policy pricing to claims management and customer service to underwriting, technology is disrupting many key functions. We will continue to share ways in which the industry is adopting new technology and how it’s transforming insurance.
Sources: EY, 1McKinsey
