High-Value Insurtech Trends to Watch in 2022
- The many applications of AI to simultaneously boost an insurer’s competitive advantage and save insurers on fraud detection losses makes this a trend that insurers can’t afford to ignore.
- The application of blockchain and AI to securely automate claims management is just one use case of how blockchain can allow insurers to be more agile.
- When applied in the insurance industry, predictive analytics can be used to analyse the data of past claims and look for patterns in consumer behavior to predict the probability of future fraudulent claims.
- Traditional insurers need to break the stereotype of insurance being cold, slow, and inaccessible. They need to reposition themselves with digitization so they can be part of the Millennials daily lifestyle.
Insurtech has been a buzzword for the last few years and it is not going away anytime soon. The insurance industry is one of the many industries disrupted by technology and it is only getting more and more competitive. Insurtech trends such as cloud computing are popping up left and right, but which ones are just a flash in the pan and which ones have staying power?
To answer this question, we set out to identify key trends creating the most impact in the industry. Our criteria for creating impact is based on how they contribute to growing revenue and saving costs for insurers—both of which boost the bottom line.
Without further ado, let’s now look at the top 4 insurtech trends that deliver the most impact to give insurers the best ROI for their investment.
Trend #1: AI for better products and customer experiences
The insurance industry has been using artificial intelligence (AI) to personalize insurance products for their customers. The power of AI lies in how it can be used to rapidly analyze customer data from sources like social media and other cloud-based industries to produce insights into their needs.
With these insights, insurance products and services can be modified according to different needs or life stages like getting married, having children, or buying a new home. It can also be tailored according to how much coverage customers need or what their budget is.
It’s a no-brainer that personalizing products will lead to happier customers and increased revenue for businesses, no matter what industry. For example, British outdoor retailer Mountain Warehouse boosted their sales by 10% after introducing advanced personalisation solutions through their website.
What makes the AI trend even more impactful is how it’s not just limited to creating better products for customers. AI is also being used to create better customer experiences, such as by automating claims management.
The many applications of AI to simultaneously boost an insurer’s competitive advantage and save insurers on fraud detection losses makes this a trend that insurers can’t afford to ignore.
Trend #2: Blockchain for agility and competitive advantage
Blockchain is a decentralized ledger that relies on bits of data called blocks to be added in a linear and chronological order. This technology allows for complete transparency between insurers, reinsurers, customers, and partners, as well as greater security of data without the need of an intermediary.
Since blockchain technology allows transactions without the need of a central authority or third party, it becomes safer and more reliable for insurers to achieve agility and gain a competitive advantage.
For example, insurers may hesitate to use AI to automate claims management because they have concerns over security or accuracy. Not adopting AI could give them a disadvantage in the market when other competitors are able to offer automated claims management to their customers.
With blockchain technology, insurers can adopt new technology or processes to achieve agility with full trust that blockchain is an incorruptible digital ledger of transactions that is tamper-proof to provide greater security.
By combining AI with blockchain to automate claims management, both the insurer and the claimant will be in the same network. Other ancillary information, such as police reports or dashcam videos, can be added into the network securely and safely.
This process leads to two key advantages. The first advantage is that it eliminates manual processing for insurers. This saves resources for insurers while making claims processing faster for the consumer. The second advantage is it sets the foundation for predictive analysis to detect fraudulent claims, which we will expand more about in the next section.
The application of blockchain and AI to securely automate claims management is just one use case of how blockchain can allow insurers to be more agile. Other use cases of blockchain to achieve agility include fraud detection, risk prevention, health insurance, reinsurance, and more.
Achieving agility is a key competitive advantage, especially when consumers have concerns about job stability, economy, travel safety, and more during the pandemic recovery phase.
Trend #3: Predictive analysis to prevent losses
As mentioned briefly in the previous section, blockchain sets the foundation for predictive analysis to detect fraudulent claims.
Many insurance businesses have struggled with fraudulent insurance claims for years or decades. These claims are often made to try to take advantage of the system or to increase profits.
According to a report from Mordor Intelligence, fraud detected in the UK alone is estimated to be more than €1 billion annually. The report further estimates that undetected fraud could be costing an excess of €2 billion per year. While in the US, losses incurred by fraudulent claims is estimated at more than USD 80 billion a year across all insurance lines.
How can predictive analysis help protect the insurance market from these massive losses caused by fraudulent claims? First, let’s understand what predictive analytics is.
Predictive analytics is a set of practices that analyze current and historical facts to make predictions about future or otherwise unknown events. Some key techniques used in predictive analytics include data mining, predictive modeling, and machine learning techniques.
Thus, for predictive analytics to be possible, it needs to ride on the backbone of blockchain and AI. This makes predictive analytics more effective because the blockchain allows data to be collected from numerous sources securely. On the other hand, AI allows for faster processing of data mining, predictive modeling, and machine learning.
When applied in the insurance industry, predictive analytics can be used to analyze the data of past claims and look for patterns in consumer behavior to predict the probability of future fraudulent claims. For example, if a person has made many small-value claims in the past but suddenly makes one large-value claim, it might indicate that they are trying to commit fraud.
Adding a layer of predictive analytics to the process of automated claims processing can help insurers spot red flags so they can intervene during the automated process and initiate a deeper investigation or probe. This prevents consumers from taking advantage of claims processing and minimizes losses caused by fraudulent claims for insurers.
Trend #4: Digital transformation to attract Millennials—The largest target market in the insurance industry
Millennials, or Generation Y, is now the largest target market for the insurance industry. According to a recent Gallup poll, millennials are the least engaged with insurance when compared to previous generations. This poses a challenge for traditional insurers who are stuck on legacy systems designed to serve the baby boomer generation.
Insurers who adopt digitization have a significantly better chance to engage with Millenials. As digital natives, Millennials expect digitization to be part of the products or services they engage with. Digitization is simply part of their lifestyle—from how they listen to music to how they order food delivery. In short, it's easy for insurers to outperform with insurtech.
To increase engagement with Millenials, traditional insurers need to break the stereotype of insurance being cold, slow, and inaccessible. They need to reposition themselves with digitization so they can be part of the Millennials daily lifestyle.
Want to target the digital nomad entrepreneur? Make it possible for them to buy travel microinsurance on a whim through the touch of a button in an app.
Want to reach out to the new homeowner with a young family? Make it easy for them to select a customized package that protects their home and their family health.
Want to gain loyalty from busy professionals? Integrate insurance plans with other cloud-based industries, such as telematics and health wearables. Offer rewards, discounts, and other incentives for behavior-related achievements.
These innovations are just some ways that insurers have pivoted to reach Millennials. The potential and growth in this space is only set to grow further as technology continues to proliferate.
For example, augmented reality (AR) and virtual reality (VR) is a promising technology in the health insurance line. These technologies complement current telehealth technology, such as tele-consultations, e-visits, or home monitoring systems to provide healthcare for patients in their homes.
By integrating AR and VR to improve teleconsultations and sharing the information with insurance, customers can receive more customized insurance plans without overpaying for coverage they don’t need.
Of course, health insurance is not the only insurance line that can benefit. New technology is continuously being developed in multiple fields, opening up a myriad of possibilities for insurers to engage with Millenials. With commercial space travel possibly on the cards in the near future, perhaps the sky is no longer the limit for insurance, but only the beginning.
Growing insurance businesses on the cloud
With these trends rising, it’s no wonder that the global insurtech market has been predicted to reach a value of 10.14 billion by 2025 (Source: Mordor Intelligence).
It’s important to note these four trends are not independent of each other. Rather, they need each other to maximize the potential of each one and create an impact on customer loyalty, savings, and business growth for insurance businesses.
The common thread tying together these trends is cloud computing. Therefore, to make the most of these trends, the first step is to adopt cloud computing. After taking this step, insurers will then be able to benefit from the impact these top insurtech trends can have on their bottom line while simultaneously streamlining their own operations.
About Cloud Insurance
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