Industries are becoming increasingly technology-driven, from manufacturing to services, as companies embrace the ever-growing digital economy. The insurance industry isn’t exempt. Digital insurance is adopting and integrating technologies to manage and sell products directly to customers.

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Ignoring tech innovations is a mistake that insurers looking to lead the industry can no longer afford. In this article, we’ll talk about the benefits of digital insurance, trends associated with it and challenges in implementation.

What This Guide Covers

• What Is Digital Insurance?
• Benefits
• Trends
• Challenges
• Conclusion

What Is Digital Insurance?

Digital insurance is the transformation in the insurance landscape brought about by new technologies, from custom software solutions to artificial intelligence.

Traditional insurance requires claimants to make phone calls, send emails or even visit an agent in person. Such run-around causes inefficiency and costs customers time and effort.

Insurers leverage tech capabilities through digital channels to eliminate inefficiencies and satisfy customer needs. Agencies can directly reach out to clients instead of relying on agents and intermediaries. With multiple communication channels, from websites and apps to email and social media, it’s easier than ever to stay connected with customers.

Digital insurance also helps customers understand what they’re buying. Complex jargon and unclear instructions involved in traditional insurance can be enough to put off potential policy buyers. Digital insurance tools allow you to offer simplified coverage options, increased ease-of-use and greater accessibility to clients.

While CRM and sales force automation software serve the customer-facing side of the business, machine learning and data analytics tools provide performance insights to measure productivity. By leveraging the right tech tools, you can improve internal processes to boost growth and discover new business opportunities.

Primary Benefits

Digital insurance capabilities are a prerequisite for agencies’ competitiveness in the modern insurance market. By adopting digital solutions, insurers and policyholders benefit in the following ways:

Better Customer Service

Digital insurance capabilities like online portals and mobile apps allow customers to access their insurance information on any device, whenever they want. With AI and marketing automation tools, you can provide personalized communication, assistance and recommendations for greater customer engagement.

By engaging with policyholders regularly instead of only reaching out at renewal time, you cultivate customer loyalty for better retention numbers.

Simpler Process

Traditional insurance is a multi-step process that can seem lengthy and complicated to buyers. Digital insurance allows you to automate tedious processes and implement a buying process similar to e-commerce websites. A familiar and intuitive interface makes it easy for users to navigate, compare and make decisions throughout the customer journey.

Faster Claims

An insurance company’s claims process is what determines its credibility. Due to the paperwork required, policyholders often find it challenging to submit insurance claims. By eliminating paperwork and switching to mobile forms and data collection software, digital insurance provides quicker, stress-free claim settlement.

Lower Pricing

Traditional insurance has higher operational costs due to the need for office spaces. From rent to supplies, higher overhead expenses mean lower profits. Digitizing allows you to cut down on expenses across the value chain for a more cost-effective model. These savings translate to cheaper policies and lower premiums for customers.

Better Fraud Detection

The FBI estimates the total cost of insurance fraud to be more than $40 billion annually. While it’s impossible to eliminate fraud completely, digital insurance tools like AI and advanced analytics help identify patterns and out-of-place behavior. You can even use tracking tools to mine social media data for better fraud detection.

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Improved Employee Experience

Digital insurance programs like CRMs and policy administration systems make it easier for reps to write policies, process claims and collect payments. Automating business functions like regulatory compliance and claims processing saves employee time, enabling them to focus on other business opportunities.

Productivity platforms facilitate collaboration, helping employees keep track of projects and internal communication for more agile working methods.

Less Paperwork

Traditional insurance involves massive amounts of paperwork. Filling out lengthy forms and keeping track of all the documentation is inconvenient for customers. With digital insurance, policy buyers must fill out only minimal paperwork for maximum convenience.

Better After-sales Service

Digital insurance simplifies post-sales services, such as filing claims with paperless transactions. Using social media handles to receive feedback and complaints allows you to provide better post-sales service much faster. Rather than delegating after-sales service to agents, you can build direct relationships with customers.

Superior Data Insights

Analytics tools track performance metrics to identify inefficiencies. Data models for pricing, risk and growth opportunities enable you to streamline business strategies, make data-driven decisions and foster innovation for higher returns over the long term.

Trends

As insurers leverage newer technologies to get a leg up over the competition, let’s look at some recent trends in digital insurance:

Artificial Intelligence

Targeted AI deployment improves organizational efficiency across business functions. Process automation, data management and analytics are some areas where AI tools come in handy.
AI-powered chatbots that process customer requests can recreate agent behavior to reduce customer service costs and increase engagement. Fraud detection tools identify suspicious customers faster and initiate countermeasures to lower insurance fraud costs. Biometric AI can scan images and recognize faces to discover suspicious activity.

The Internet of Things

The IoT consists of devices that use sensors to track pertinent information stored and transmitted over the internet. Statista projects the number of IoT devices to reach 30.9 billion by 2025. IoT capabilities are valuable, allowing you to collect customer data and incentivize good behavior and safe practices.

For example, monitoring devices mounted in vehicles can track safe driving behaviors. The policyholder benefits from lower premiums, while you can use collected data to inform future underwriting decisions.

Embedded Insurance

Embedded insurance involves bundling insurance with a product or service at the point of sale. Instead of buying insurance separately from the product, bundled insurance gives customers the option of add-on insurance for a nominal cost. By integrating the insurance product within the purchase cycle, customers can access relevant coverage without additional effort.

Big Data

With increasing digitization, the amount of data and data points will keep growing. Putting this data to good use helps you discover new customer segments, gather insights into customer needs and develop ideas for innovative products and services.

Using tools like predictive analytics, machine learning and AI, you can leverage data into actionable insights for their adjustors, salespeople and other stakeholders. According to a McKinsey report, quality data analytics are crucial to success in the property and casualty insurance sector in the coming decade.

Machine Learning

Machine learning tools study patterns within insurance statistics to inform everything from underwriting to claims and pricing.

Machine learning engines can determine a customer’s risk profile by analyzing medical and driving history records. These profiles help underwriters further predict risk quality and determine pricing for individual policies.

Blockchain

Blockchain is a decentralized public ledger of records allowing all parties to securely access the distributed data of a contract. With blockchain technology’s transaction verification abilities, insurers, brokers and customers can always rely on having the same inalterable information.

In its Digital Disruption report, McKinsey forecasts blockchain data to impact digital insurance in three significant ways:

• Trust building
• Fraud prevention
• Higher efficiency

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Challenges

Similar to the adoption of any new system, moving to a digital insurance ecosystem involves growing pains. Let’s look at some challenges to adopting digital insurance.

Data Migration

Traditional insurance companies possess vast amounts of policy, claims settlement and user data stored on legacy systems. Due to regulatory requirements, this data can’t be lost or deleted, making it essential to ensure the integrity and security of older data while implementing digital technology.

Digital technology isn’t static. Implementing a digital ecosystem is a continuous process. As existing technologies become obsolete, consider switching to newer systems. Managing data transitions will be a never-ending challenge if you want to stay up to date with the latest technology.

Employee Training

Digital insurance offers excellent potential, from increasing productivity to driving innovation. But implement it wrong, and you can end up disrupting your organization’s workflow.

Implementing digital technology is only possible if your employees can actually use it. Agents, underwriters and examiners will need training to get used to new processes before you start to see benefits across the board.

Cyber Security

While the paper-based storage of traditional insurers was safe from the risk of cyber attacks, the nature of digital insurance makes it a prime target for malicious actors.

Cyber risk management policies must be implemented during the technology implementation stage. Regular awareness training and risk assessments protect your digital insurance business against attacks and data breaches.

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Conclusion

The insurance industry has long been held back by manual processes, obsolete workflows and limited tech infrastructure. Insurance companies leverage digital technology to cut costs and get better returns on their investments with benefits like increased customer retention rates, workflow efficiencies and less fraud.

As customers demand a better user experience, clear policy communication and cheaper rates, insurance companies will need to adapt and adopt the latest technology or be left behind. Given the expectations of today’s insurance buyers, it’s safe to say that digital insurance is here to stay.

Defining a strategy for your organization’s needs and outcomes is the first step to implementing a thriving digital insurance ecosystem. Has your organization invested in technology tools? How has it helped? Let us know in the comments below.