By 2025, 75% of the workforce will be composed of millennials. Millennials are digital natives. Essentially, that means they are the native speakers of the digital language, and they value innovative solutions driven by technology.
With that in mind, across the globe, industries are scrambling to incorporate technology in their delivery of services and products as a way of appealing to millennials. The insurance industry, in particular, which for years has relied on traditional modes of operation complete with minimal technology is at the forefront trying to adopt emerging technologies.
That has given rise to insurtech—the use of emerging technologies to develop new solutions for the insurance industry. These solutions are secure, customer-focused, personalized, multichannel (available from various devices) and real-time.
With that in mind, here are the three ways insurtech is disrupting the insurance industry.
1. The use of Artificial Intelligence
Insurance, by definition, is an industry that is built on risk. Insurance companies rely on their ability to predict how big of a risk a company, an individual or an organization poses. Consequently, it follows that the more information that an insurance company has about the consumer, the easier it is to make accurate predictions.
In turn, an accurate prediction allows the insurer to earn extra revenue or save themselves some money. To facilitate accurate predictions; the insurance industry is turning to Artificial Intelligence.
Intelligent machines are capable of analyzing data and situations faster than a human being in addition to providing a more accurate analysis. Moreover, AI helps in enhancing customer experience and customization. A good example to consider is Allianz1. Allianz1 is an AI-based web interface that allows a client to build his or her insurance policy from a selection of modules offered by the company.
Elsewhere, a lot of insurance companies are already using chatbots to communicate with customers and guide them through selecting a policy that best fits them.
2. Incorporating blockchain
At its core, blockchain is a secure way of storing data. With regards to insurance, blockchain is highly effective in two ways. One, it helps in eliminating risks due to human error. How so? The insurance industry deals with a lot of sensitive and personal data, and as a result, it is bogged down by checks and rechecks to ensure the data is accurate.
The use of blockchain ensures that the data can be trusted because the blockchain technology employs various methods to ensure data accuracy. Moreover, blockchain eliminates the need for a middleman which means the data can move directly move from one party to the other further enhancing transparency and eliminating human error.
Second, blockchain helps in dealing with data breach attempts to facilitate maximum security. That is because blockchain is the most secure technology at the moment. Since its inception, despite countless attacks, no one has successfully managed to hack any blockchain based application.
To break this down further, consider the example below of how blockchain is changing and will continue to change the insurance industry.
As mentioned above, blockchain is inherently safe. As a result, once the insurance industry fully integrates blockchain, insurance companies can quote rates for new clients faster than ever before. The traditional model where the company has to gather records from various sources, e.g., different doctors and hospitals when quoting a rate for health insurance will prove unnecessary.
3. Leveraging the Internet of Things for access to increased and accurate data
Internet of Things deals with connecting non-traditional devices to the internet. Insurtech startups are taking advantage of this aspect to access more data about potential clients via devices such as smartwatches that provide real-time online data.
While great for improving the claims process and fraud elimination, more real-time online data creates more vulnerability. Insurers will have to strengthen cybersecurity and improve overall digital privacy hygiene before such can be implemented without risking data breaches. Bear in mind that human errors can still happen despite the presence of basic account management tips.