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Dec 2017

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Innovation in insurance: Are we doing enough?

Source: Asia Insurance Review | Nov 2017

InsurTech Technology

 
Innovation is considered the only insurance against irrelevance. Yet, the insurance industry appears to be taking its time with innovation, while other industries – from transportation to retail – have been moving full steam ahead. Are insurers taking their own industry for granted? Mr Kenneth Koh, Director of Insurance for SAS’ Global Industry Practice shares his views.
 
 
No doubt, the role and impact insurance has in our society is second to none. Insurance can be there to comfort disheartened families facing grief and loss or encourage risk taking to propel businesses forward. With the rise of digitalisation and IoT, insurers are considering the use of new technologies to mitigate risk and provide unique customer value proposition to stay ahead of the competition. 
 
   One of the key requirements to innovate successfully is to have a proper data warehouse. The data warehouse must have the capability to evolve with the business growth and strategy of the insurer by being able to capture new data elements such as digital data, social media data, and advanced analytics data. Through a proper data warehouse, insurers can leverage data for innovation, and identify unique opportunities to pursue. Without such a data warehouse that is able to continually integrate with these “new” data elements, there will not be sufficient insights to make informed decisions and on the contrary, may impede innovation.
 
   There are three key areas in which insurers can innovate and apply the data collected to spearhead business opportunities and efficiencies:
 
Artificial Intelligence and Machine Learning
According to Accenture’s Technology Vision for Insurance 2017 report, 79% of insurers agreed that Artificial Intelligence (AI) will transform how they obtain information and interact with customers. Seventy-seven percent of insurers see that we could be moving from mobile-first to AI-first.
We are already observing this trend quietly gaining momentum in the insurance industry. With more customers expecting personalised services, traditional methods like cold-calling and surveys do not work as well anymore in the sales process.
 
   The use of AI can help insurers identify customer trends and patterns based on their social profiles, allowing insurance companies to offer more personalised services. For example, UK-based VitalityHealth used the lifestyle and activity data generated from fitness trackers, such as Fitbits and Apple Watches to determine the premiums to charge their customers. Customers can then work to reduce their premiums by proving through their trackers that they are minimising their unhealthy habits. This gives customers the flexibility to “decide” on their insurance coverage.
 
   Another utilisation of AI to identify insurance claims and underwriting fraud. Through pattern recognitions and advanced analytics, the incidence of claims and underwriting fraud can be determined during the first notification of loss or application. By applying these risk scoring models early into the operation process, insurers can determine if submitted cases should be sent for further investigation. These will enable insurers to manage their case allocations and improve their service level turnaround times.
 
The adoption of data analytics across the value chain
Insurers today already sit on a treasure trove of data that resides in their transaction systems. By incorporating additional third-party data, the insights generated to facilitate strategic development and planning purposes can be extremely beneficial for insurers.
 
   Many insurers have already begun their analytics journey by focusing on the marketing function, but there is huge potential and opportunity in extending this across the company’s entire value chain, including claims, actuarial, underwriting and more.
 
   From implementing loss predictive models at the underwriting stage to predicting future risk policies, to fraud detection and analysis during the claims stage, analytics can enable companies to generate better – and faster – data analysis and insights. This allows more insurers to be deployed at the front line to capture new sales, improve retention and create more face-to-face customer experiences for prospects and policyholders.
 
   With digitalisation at the forefront of many insurers’ strategic roadmaps, web data and social media data can be a great source of insights for the insurers to orchestrate their customer experience journey with their prospects and policyholders to engage them across multiple channels and provide a source of lead generation to their distribution channels. By understanding the granular details of their web search behaviours, relevant offers and services can be made available to them while they are on the website.
 
   Insurers are also experimenting with using their agents’ social media network to generate potential leads by capturing the lifestage of their network, based on information posted on social media sites. This “moment of truth” lead generation activity transcends the traditional batch customer centric campaigns that insurers have always excuted.
 
Fintech, Healthtech and now, InsurTech
The digital revolution is driving a new form of corporate economic culture, and the emergence of specialised vendors providing innovative offerings for specific functionalities of the insurance value chain has led insurers to partner with these vendors for collaboration.
 
   Just like how consumers can conduct banking transactions or get medical consultation in the comfort of their homes via a smartphone, the same is taking place for insurance too. This is evident in how major insurers like AXA and Aviva have partnered with or invested in Insurtech/digitally-savvy firms to improve their current offerings.
 
   This move is not unexpected – after all, shouldn’t there be an app for everything? Juniper’s recently released InsurTech research found that personal broking apps will streamline processes and allow consumers to manage their policies with minimal effort. The same research also saw that the number of home insurance policies using Insurtech is set to exceed 86 million globally in five years’ time.
 
   As more customers strive for convenience in their consumption choices, insurance companies have to meet such demands. While this might come at a cost, not embarking on such innovations at all will result in greater costs in the long-term.  
 
   Thus, the impetus to innovate has never been greater for insurance companies. The opportunities are huge and it is up to industry players to take advantage of the technologies out there to deliver the best that they can for their customers.
 
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