What is Digital Insurance?
Digital insurance refers to several technologies that have changed the way insurance service providers operate. It is a reference to insurance companies that have a technology-first operation model to handle the sales and management of insurance policies. Most insurance companies have a separate digital wing of their business for this, while also following traditional practices. Digital insurance service providers have the following differentiators:
- Customer-first approach to business transactions
- Omni-channel presence so that potential clients can research and understand the brand without waiting to speak to a representative
- Insur-tech ecosystem in place where pricing, risk evaluation, and handling of claims is done with open, connected software platforms
- Coverage plans for customers who need little coverage
Digital insurance models offer speed, agility, easy accessibility, and a user-friendly interface. This digitalization enables the creation and implementation of newer and better services.
Benefits of Digital Insurance
The insurance sector needs to use technology to improve operations. The benefits insurance companies stand to gain include:
Going Beyond Customer Expectations
Today’s customer demands instantaneous service and products. This could be anything from communication to payment statements. Insurance is a consumer-centric service and needs to have the infrastructure to meet clients’ needs. With technology, features such as self-service portals, chatbots, and apps allow for personalized interaction. These features automate insurance processes and help the company reach the customer when needed, which increases brand loyalty.
Positive Outcomes to Uses of Data
Digital insurance applications generate vast volumes of data, which can help employees do their jobs better. To enhance business practices, employees can channel this data into a customer relationship management software (CRM) and analyze it. Clients can get better rates, receive customized packages, and have their needs anticipated. Predictive analytics can spot any red flags for possible fraud or claim issues.
Insurance is an expensive business, but digital companies have a track record for saving costs: for the organization and its clients. With better data, artificial intelligence, and predictive analytics, underwriting costs are more accurate and new insurance products go to market faster--giving digital companies an edge.
Better Employee Experiences
Digital insurance benefits the company’s bottom line and improves employee efficiency. With a smart dashboard, implementation of SaaS applications, and comprehensive data systems, employees can do their jobs better, increasing the efficiency of the organization.
Leveraging Low-Code Capabilities
A common concern for most insurance companies is the investment needed to go completely digital. The cost of hiring IT professionals and investing in complex digital platforms can seem daunting. Companies can utilize low-code capabilities which let users simply drag and drop features they need to build a specific digital platform. Investments are kept low, but the benefits remain the same.
Implementing Digital Insurance
There are a number of technological pillars that allow digital insurance companies to succeed:
Artificial Intelligence Systems
This is the foremost pillar of digital insurance capabilities. Artificial intelligence (AI) makes instant calculations, enhances processing speeds, and smoothens communication lines. AI can be applied to underwriting claims, soliciting new business, marketing campaigns, and customer retention. It also strikes the balance between automated and personalized service. While customers appreciate speed, they still want a personal touch.
With more insurers incorporating self-service applications and portals in their systems, machine learning (ML) becomes essential. ML leverages data and analysis tools, speeding up services such as claims processing. It uses programmed data, pre-set algorithms, and shared customer data to provide quick and seamless service to customers when they need it.
Internet of Things
With the Internet of Things (IoT), insurance providers have access to massive loads of customer data collected in real-time. This ascertains customer profiles and the coverage they might need. It also exposes any potential for fraud. There are connected technologies, such as telematics, that companies need to use as a bridge (with customer approval). This approval is easy to get because customers know they can save more on their monthly premiums by sharing this information.
Big Data and Analytics
Digital insurance capabilities create vast volumes of data. Using the appropriate analytical tools, insurance companies can gain a bird’s eye view of their functioning. They can also improve their offerings and market their products based on data insights.
Since digital capabilities are all about speed, it can slow companies down to host all these solutions on premises. The best way to make use of digital capabilities is with a comprehensive software-as-a-service-based (SaaS) solution that provides host services, support, and all the resources needed for digital insurance tools and applications.
Challenges for Digital Insurance
As with the adoption of any new system, there are some challenges to implementing digital insurance:
Blending the Old with the New
Existing insurance companies have set policy writing, claims settlements, and data storage that can be updated with new digital technology without removing existing legacy systems. Data already collected through traditional means still holds value. Even with the adoption of digital processes, technology is constantly evolving. Merging the old with the new requires a strong business plan so transitions are seamless for the company and customers.
Training, Testing, and User Experience
Customers may be open to digital technology but may not understand how to use it. The user interface has to be simple and intuitive for easy customer access. Employees will need to undergo training to help them function in a standardized environment. New processes require constant training and testing.
The Exponential Explosion in Data
Transforming to digital insurance will result in more data that needs to be processed. Some data may be used to upgrade catastrophe modeling (an analysis of risks across insurance sectors) that insurance companies undertake yearly. This analysis can open up the potential for new offerings. With a potential for new offerings comes new problems, such as the interpretation of data. Data interpretation has to be standardized to ensure there are no quality issues.
Cyber-Security and Privacy
The risk of cyber-attacks are real and on the rise. Digital companies need to safeguard against potential attacks.
Attacks on insurance companies can be of two kinds--the first is a ransom attack, which disables the system till a ransom is paid. The other kind of attack is through stealing or manipulating data. Protecting against such attacks is an ongoing and complex task for all kinds of organizations.
Several factors can place a crunch on financial resources, and organizations will have to come up with creative ways to succeed.
The demand for digital advances continues to grow, and insurance companies need to update to stay competitive.
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