The insurance sector is undergoing advanced digital transformations, which insurance companies, technology firms, and insurance BPO companies are spearheading globally. These transformations will lead to the development of updated insurance products and other advancements and breakthroughs in business practices to address current needs. This blog post will analyze some digital transformation trends shaping the insurance sector in 2023.
Some noteworthy statistics are as follows:
● According to a report by Accenture, nearly 80% of insurance customers in the United States use digital channels to interact with their insurers.
● In a survey of insurance executives conducted by Accenture, 77% said that digital ecosystems would significantly impact their insurance business over the next three years.
● Digital insurance companies are also outperforming traditional ones, with a performance rate of 54% in 2023 as opposed to 20%.
One crucial factor that led to this splendid performance is the adoption of digital advancements and outsourcing opportunities. Insurance BPO services embrace the digital trends and provide cost savings, streamline operations and improve customer experience. They also help with guidance on data driven insights, analytics and multiple other factors that can smoothen the adoption of digital trends.
One of the most significant trends in enterprise IT is the increasing adoption of low-code/no-code development. Although no-code tools have become the norm in the SMB segment, enterprises traditionally rely on internal resources or external integrators for development projects. However, this is changing as vendors offer mature, enterprise-grade no-code tools that focus on security and compliance. As a result, enterprises can now delegate a few of the development responsibilities to line-of-business users while maintaining governance and control.
These tools are becoming increasingly popular because they solve several challenges faced by IT teams. No-code tools help to alleviate overstretched internal resources, reduce backlogs, and increase productivity. Their most critical advantage is their ability to accelerate time-to-market for new digital applications and products compared to traditional development requirements. With no-code tools, insurers are now able to deliver better applications faster, improve the customer experience, and enhance overall insurance tech services.
With the proliferation of digital channels, insurers are generating an ever-increasing volume of customer data. While this presents a challenge in terms of effectively managing and storing the data, it also presents an opportunity for insurers who can leverage this data effectively to gain a competitive advantage.
In the coming years, we anticipate that more insurers will adopt advanced data analytics tools to extract insights from customer data. These insights can be utilized to improve various aspects of insurance operations, such as customer experience, underwriting, and claims handling.
The emergence of technology trends such as no-code tools and "headless tech" means that financial service organizations can improve the digital experience for customers and employees while keeping their legacy architectures intact. This will enable insurers to capitalize on the benefits of customer data without the need for significant infrastructure changes.
Adapting a product to cater to a person's unique requirements is not a recent idea. However, technological advancements in data analytics and machine learning have made it feasible. In earlier times, insurance companies would have had to depend on customer surveys and other market research methods to obtain the essential data points. Nevertheless, with the enormous amounts of data available today, insurers can gather information from a much wider range of sources, including social media, browsing history, and even wearable devices. This wealth of data empowers insurers to obtain a much more profound understanding of their customers, enabling them to deliver products that are accurately aligned with their needs.
Insurance products were traditionally sold through physical channels such as offices, agents or brokers, resellers, and call centers. However, digital channels are gaining popularity. As customers feel more comfortable conducting their business online, insurers are looking to expand their digital customer channels further to meet the growing demand. In addition to the conventional web and mobile self-service channels, insurers are now considering chatbots, virtual customer assistants, and even voice-based customer service.
Moreover, agents and brokers are increasingly turning to digital tools, while self-service digital channels are on the rise due to customers' increasing demand. A survey of European insurance executives in late April 2020 revealed that about 89 percent of respondents anticipate a significant acceleration in digitization, with most anticipating a further shift in channel mix.
Offline processes are increasingly transitioning to digital channels. Even insurance products that require offline execution, such as physical signatures and medical underwriting, are now transitioning to digital with the aid of technology such as legally binding eSignatures, face recognition, and telemedicine.
Usage-based insurance (UBI) is an insurance model that calculates premiums based on actual usage rather than an estimate of usage. Pay-as-you-drive insurance, which makes customers pay based on the number of miles they drive, is the most prevalent form of UBI.
UBI is increasingly becoming popular for providing more affordable insurance to low-mileage drivers. UBI can also motivate customers to change their driving habits to reduce their risk of accidents. For instance, some insurers provide discounts to customers who use telematics devices to monitor their driving behavior and demonstrate that they are safe drivers.
AI is becoming increasingly important in the insurance industry as it provides solutions for various insurance operations, including claims settlement. However, the value of machine learning extends beyond claims processing and can aid in automating the entire insurance process. With the increasing digitization of files, AI algorithms can easily analyze them, eliminating the need for manual processing. This can improve processing speed and accuracy, not only in policy administration but also in risk assessment. As a result, machine learning and AI technologies are expected to gain more popularity as risk assessment tools in the insurance industry.
As competition in the insurance industry intensifies, with the entry of new players like digital-first insurers and tech giants, insurers need to transform themselves. They must become more customer-centric and focus on delivering a superior customer experience, as customers are increasingly demanding. To remain competitive, insurers must also embrace new technologies that can enhance their agility and efficiency.
In the next decade, rapid technological advancements will bring about disruptive changes in the insurance industry. Carriers that succeed with AI-based insurance will be those that leverage innovative technologies to create new products, utilize cognitive learning from diverse data sources, streamline processes, reduce costs, and exceed customer expectations by offering personalized and adaptable solutions.
Arthur Williamson graduated with a degree in Business and Management at the University of California, Berkeley. He is knowledgeable about what small and big businesses require to keep operations moving.
