Now is the time for traditional insurance companies to embrace innovation

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This article is contributed by Jason Paau, senior director of program management at digital consultancy Publicis Sapient.

As in other industries, the pandemic has brought about digital acceleration in the insurance industry, allowing some insurance technology (insurtech) startups to take advantage of their agile and innovative digital-first offerings. For example, Lemonade has introduced a new auto insurance offering, supported by the acquisition of insurance startup Metromile. Rather than watch these smaller insurance perfumes continue, spin and grow, traditional players should take advantage of this moment to harness the power of their brands and take ownership of the industry’s inevitable disruption.

The big players need to adopt a more innovative and digital mindset – and fast. While they have their competitive advantages, including scale, resources and trust, incumbents need to improve their customer service and advanced data analytics and make better use of digital platforms. The insurance industry, especially in the non-life category, has not changed much in recent decades. We also see large amounts of capital still flowing into insurance technology. The opportunity is huge for traditional insurance companies that embrace innovation — and potential irrelevance for those that don’t.

Apps and platforms are the future

In our recent insurance survey, we found that the number one reason to switch providers was the customer experience – this surpassed concerns about price or even coverage itself. Specifically, consumers want faster claims, better digital experiences and more personalized offers. With more than 26% of respondents saying they switched providers in the past year, these concerns send a strong message that digital transformation can link to customer retention. In addition, 48% said a particular incident of poor service motivated them to switch providers.

Businesses can improve customer service and satisfaction by modernizing their platforms and apps. Combined with an innovative culture and a robust digital partner ecosystem, key activities such as onboarding or claim submission can be personalised, simplified and accelerated. Seamless experiences, especially across digital platforms and channels, are critical to sustaining and growing business. In fact, we found that while only 55% of survey respondents currently rely on insurance company apps to run and receive claims process updates, 93% cite apps as their preferred future communication channel.

Apps should enable video and photo communications, as well as voice calls and messages, along with easy access to customers’ past communications, claims, data, and coverage details in one place. For example, an insurance company app can provide customers with a list of nearby authorized auto repair shops after an accident, as well as regular updates from the garage if a car is under repair. Some companies are building SuperApps as a controlled gateway to the ecosystem of customer needs, especially in Asia, where such apps are increasingly part of everyday life. Businesses must constantly review their digital strategy to determine how best to meet the evolving needs and expectations of their customers, consistent with the easy and convenient experiences customers have come to expect from online banking or shopping.

Using data to navigate instability for insurance reliability

At a time when customer behavior is changing so rapidly and more users are looking for insurance coverage they can trust, traditional insurers can capitalize on their tradition of reliability. But at the same time, insurers also need to embrace new data sources and ways of analyzing data to ensure risks are understood. Using telematics for driving habits, IoT sensors for home security or weather data to inform localized risks in specific areas are all examples of using data to enable higher quality assessment. Insurers taking advantage of this higher data supply also need to think about the value exchange for the end customer. Consumers expect organizations using these new types of data to offer benefits in return, such as optimal and personalized coverage and premium discounts based on personal driving habits or responsible use of connected home appliances. When premiums rise, insurers will increasingly have to provide data to justify the price change to consumers. This protects insurers, but also ensures that customers receive optimal coverage.

Data is also key to improving customer service, including the onboarding process for new customers and the claims process. Automatically importing approved customer information through APIs or interfaces of customers’ other online services, including their banking or social media accounts, can greatly improve pain points such as manually entering information, creating user profiles, or providing signatures and documents .

Data will also play a central role in improving the claims process. Well organized and well used, data can help speed up the claims process. We found in our survey that payout delays were the most frustrating aspect of the claims process. To speed this up, all of the plaintiffs’ relevant data must be accessible in one place, similar to how Salesforce and Epsilon provide a one-stop shop for data profiles. Insurers can also integrate other technologies, such as replacement car part price databases, to avoid overpayments.

Insurance company platforms will also need to ingest and use data in real time; For example, with the rise of connected cars, sensors in vehicles can transmit damage information for evaluation immediately after an accident or other incident. Drones and mobile phone video feeds will also provide immediate and important data for evaluation, replacing some of the tedious and time-consuming human-led inspection processes now required to assess damage. These new data sources and data integration platforms will make the claims process more efficient, saving both customers and insurers time and money.

Humans and AI work together

In the race to leverage new digital capabilities and apps for competitive advantage, it’s important to remember that insurance stays connected to the physical world and human emotions. Technologies that can “read” the world, such as AI and computer vision, hold particular promise for industry to speed up assessment and adaptation processes. By leveraging data sent by sensors, IoT devices, or other sources that store information, such as a data lake, insurers can quickly create not only a home or car damage report, but also estimate repair costs and assess or damage is covered by insurance.

At the same time, insurers should not fall into the trap of relying on so-called black-box models of machine learning, where people don’t fully understand how computers arrive at answers. Insurers must also ensure that the data is relevant and current, not outdated, and understand its origin. Data management and understanding of data lineage are essential to avoid ethically or legally questionable practices. After all, the decisions of insurance companies affect people’s lives, so the process must be fully understood based on good and legitimate data sources that both consumers and insurance companies are fully aware of.

Many people also want reassurance and human support when making a claim. This can also be done more efficiently; behind the scenes, AI and data sorting can quickly identify and prioritize which customers are most in need of human empathy, along with service, and direct them to the right person, while sending other simpler claims through automated AI-assisted processes. Such a hybrid approach to claims handling and customer service allows companies to maximize talent and technology while meeting different customer needs with the right resources.

There is no doubt that the implementation of such technology and the use of data requires significant upfront investment, one of the main reasons why digital transformation is relatively slow in the insurance sector. Partnering with insurtechs that often rely on such AI technology can be an effective and immediate way for some established players to implement more data-driven processes and decisions. Whether collaborating with startups or expanding their own operations, the use of data and AI, along with the right guardrails, will add tremendous value by saving time and money and creating smoother customer experiences.

If ever there was a time for established insurance companies to evolve to meet customer needs, it’s now. With an increase in loss events and the rise of insurtech companies, they can no longer rely on their resources, scale or confidence to maintain the status quo. They can build on these benefits to maximize the benefits of data and technology and take insurance — and customer experience — to the next level.

Jason Paau is senior director of program management at digital consultancy Publicis Sapient.

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