Five tech trends reshaping insurance
By Ahmad Zaki
Digital ecosystems have existed in the tech world for several years, slowly infiltrating people’s lives until they have become second-nature. Apple’s ecosystem is famous for keeping its users entrenched in an environment that encourages them to purchase only Apple products. China’s WeChat has also made its name as the world’s first ‘superapp’, allowing its users to do practically everything under the sun, from sending money, to sending memes.
For insurance, the idea is the same. In combination with other technologies such as Blockchain, digital ecosystems may allow for a complete unbundling of services. For instance, the main functions of a bank such as lending, money transfer and safekeeping of assets, could be offered by a group of separate providers in a digital ecosystem.
According to a Munich Re report, there has been a shift in the business model to a “layer player” pattern. This means that one step in the value chain is offered to a large number of customers. For example, collaboration with specialists for the underwriting of exotic risks or for more efficient claims handling.
An API allows one piece of software to interact with another piece of software, whether in one system or in a network or distributed environment. Open APIs are published on the internet and shared freely. A company might publish the API of their software to encourage external developers to figure out new ways of using it.
According to Munich Re, the open API system would ideally create a win-win situation for insurers. The external developer can make money by licensing a new service with advanced functionalities, such as an innovative use of the service in ways the originator hadn’t thought of. And the company benefits from more widespread use of their service.
Open APIs increase competition between providers, since everyone can integrate their systems and contribute to better products and services. Consumers are thus likely to benefit from cost-effective services tailored directly to their demands.
Robotics and data
Robotics is a catch-all term for AI, machine-learning and automation. Data and robotics go hand-in-hand, as data is what helps an AI learn to do its job and AI is required for insurers to make sense of the oceans of data they can get access to.
AI can also play a bigger role than just process optimisation. Several insurers, such as Singapore’s NTUC Income, have launched a Facebook-embedded chatbot that helps people purchase travel insurance. The chatbot even automatically comes online when the user is logged in at an airport, and the transaction takes minutes.
Companies can also implement AI to dig further into their claim trends and get more granular in determining what interventions will really drive better outcomes.
Wearables and telematics provide insurers with a wealth of data that helps them accurately assess risk and reduce cost. Beyond that, IoT data helps insurers all across the organisation.
For actuaries and underwriting, IoT provides rich new data to more accurately assess and price risk. From a claims perspective, IoT can power automated loss notification based on sensor data. For marketing executives, IoT brings opportunities for unprecedented insights into customer behaviour.
The risks behind IoT are also well-documented – most IoT devices are insecure, due to the need for a smaller physical profile, which puts user data at risk. In the day of stringent regulations on data privacy and protection, organisations utilising IoT must take extra precautions to ensure customer data remains secure.
Blockchain is a digital ledger that can be shared but not altered. This technology enables better information-sharing, especially sensitive information such as contracts. The potential reduction in administrative costs that come from reviewing claims and checking payments by third parties is high, as the blockchain ensures all of this information is shared, fraud-protected, and easy to verify.
According to PWC, blockchain could particularly benefit reinsurers – reducing the steps involved in the process and leading to potential savings of $5-10bn worldwide. For example, reinsurers in healthcare could cut costs and save time using smart blockchain contracts to quickly verify consumer data and insurance history, reducing the back and forth that’s commonly involved.
Several blockchain initiatives and platforms already exist in the insurance industry, such as InsurWave, a collaboration between EY, Guardtime and various insurers servicing the marine sector.