As you know, the world is advancing very quickly technologically. My iPhone can provide 5G, I can operate my thermostat from my phone, I can click a button and have a product delivered in a day or two, etc. What still baffles me is why I need to wait at the house between 8 AM – Noon or 1 PM – 5 PM for someone to show up. My internet provider and utility company are just a couple of examples of how it used to work in the “old days.”
What I still am surprised by is Insurance carriers that need to visit my house to inspect my roof (assuming I need a new roof). Each visit is a very costly proposition for these carriers and my guess is that over 50% (and probably much higher) are approved based on information that I had already provided. Note to Insurance adjusters – drones are awesome!
As I look at the insurance industry in total, I see that there are many areas where a digital transformation can significantly help the profitability of the carrier, reduce the cost to the consumer and enhance the safety of the consumer. Sounds like a win/win/win, so where do we start?
How Digital Transformation Can Bring Savings to the Insurance Industry
Once the organization has decided their business priorities (i.e. reduce costs, reduce risk, or grow revenue) it is then time to execute. One of the areas that I think have tremendous potential is in reducing costs for the carrier. When we look at these priorities, there are several use cases that come to mind such as the following.
Claims Processing
The cost to process (not pay) a claim can easily be in the hundreds of dollars. Information about the claim needs to be gathered typically via phone and then I need to provide documentation, potentially the police report if it was a car accident, repair estimates, etc., before the claim can be analyzed. Being able to submit a claim online using a browser or a mobile device, would not only save personnel costs but also provide a more streamlined process for the customer. Some carriers have their own app where customers can upload pictures of the claim while they are submitting their claim. By leveraging Artificial Intelligence (AI), carriers are now able to automatically approve the claim based upon certain criteria. AI can also have a huge impact in fraud detection, something that the credit card companies have been very good at.
Risk Prevention
Very few people I know are excited about giving their insurance company access to their driving performance with their vehicle. We all tend to speed, either on purpose or by accident, and I don’t need big brother raising my rates because I speed. At the same time, my insurance company can be a huge asset in helping me reduce my rates. In our previous house, my insurance policy said that we had a security system, which we did, however it wasn’t turned on. I still got a discount for having the system in place!
Now with the advent of IoT (Internet of Things), it would be great if my insurance company could oversee certain/some of the devices in my house to help me prevent a claim. For example, if the insurance company sold a flood detector that could both turn off the water if it was detected in the basement and alert the carrier to the issue, that may help reduce my premium. If the thermostat was set at 50 degrees in the winter (when I am out of town) and if it drops to below 40 degrees, I could be notified of a problem early so someone could come out to fix the furnace. Again, this can get creepy with “big brother” so what gets shared may be limited.
Enhanced Underwriting
When organizations are pricing policies, this is often being done using historical data across a lot of wide variety of customers. What is you could price policies using data from the consumer also? For example, most of my activities/workouts are tracked on my wearable/Garmin and shouldn’t I get better pricing for my medical insurance because I am active? If I often rent my house using airbnb or VRBO, does this present a higher risk for a claim? If I drive to work on a highway that is more prone to accidents vs. other highways, should I pay a higher premium? Firms have built and continue to build systems that aggregate data from a variety of sources to help the underwriters get access to this data quicker and easier.
Customer 360
When I think about my financial broker, I have access to a website where I can see information on my holdings, trades, etc., and it is very user friendly. When I think about my insurance policies, I don’t think about their website. I am not sure why that is, so I decided to login and look around. What I found was a home page that listed out my auto and home policy, but it provided very little else. Sure, I can print out my ID card or look at the billing details however there is nothing on the site to recommend other products that I can bundle (to save money) or ideas on how to reduce my risk (and ultimately the premium that I pay). My carrier doesn’t have a mobile app that I am aware of, and I have been trained over the years to call the agency instead of trying to do it online.
The opportunity for insurance organizations moving to digital is immense and the amount of work required is equally as large. Old legacy systems that can’t be easily modified or integrated with, often slow the transition to be more digital. The insurance companies that move quickly to support the younger generation’s needs of digital transformation will be the big winners in the next 20 years.
Looking for a strategic partner to successfully move into the future? Sikich is here to help.
