Amwins: 5 technologies impacting insurance

Throughout 2022, the insurtech sector experienced a fundraising paradigm shift from "growth at all costs" to a greater operational focus on sustainability, responsible growth, and even more importantly, toward a clear path to profitability. 

It was an important market correction, but the shift has been challenging for both public and private insurtechs, resulting in reduced share prices, pulled IPOs and strategic employee layoffs.  

Now, at the start of 2023, the insurance industry is abuzz with speculation over the fate of insurtechs and the impact on continued digital transformation. Without insurtechs pushing traditional carriers to apply new technologies to remain competitive and profitable, will innovation slow? 

While it's true that 2023 may prove an obstacle some startups won't overcome, companies that have focused on responsible growth are likely to survive. They'll look different than the last few years, but they'll continue to evolve, disrupt the market, and challenge incumbents for market share. 

As incumbents continue to leverage tech advancements to fill the gap between customer needs and current capabilities, we will see both insurtechs and traditional carriers investing in technology to offer more innovative and cost-effective products and services.

This article explores five such technologies that are currently aiding the digital transformation, and that will continue to add value this year. 

Technologies Fueling Digital Innovation

1. Automated customer service

The insurance industry, like many others, continues to adopt automation to streamline processes and make them more efficient and cost effective. It's also an industry, however, where expert guidance is necessary to successfully identify risk exposures and navigate complex regulatory environments. 

While technology has transformed the methods insurers use to interact with customers (websites, social media, blogs, newsletters, email), the most successful practitioners are those who use a combination of the traditional personal connection that an agent provides, along with the speed, convenience, and data analysis that technology enables. 

Examples include applying automation to mundane account management tasks like filling out and submitting forms, as well as implementing digital solutions like online payments and filing claims.

Such automation can free staff to focus on more specialized work—and ensures that human interaction isn't missing when experience and expertise cannot be substituted with automated or digital approaches. 

2. Big data and cloud computing 

Just as technology has streamlined communication with customers, Big Data and cloud computing have all but eliminated geographical boundaries for human resources and vendor partners, prompting many insurers to embrace more cost-effective back-end operations and administrative functions alongside customer-facing services.

The biggest impact, however, is the increased availability, and the lower acquisition cost of significant volumes of data from a variety of sources. This access to global data has enabled insurance companies to develop deeper, and previously unimaginable, insights into risk exposures, mitigation tactics, and customer behaviors. 

These vast pools of data coupled with predictive analysis algorithms are helping to refine risk assessment and predict insurance losses with unprecedented precision, allowing for both new business opportunities and better risk management among insurers. 

3. Predictive analysis

Predictive analysis has improved underwriting by allowing insurers to proactively collect data (e.g., customer reviews, recent news and announcements, changes in executive leadership, etc.) beyond traditional financial records and claims history, to evaluate the complete circumstances of a potential insured. Advanced analytics not only predict the specific risks of a business, but also the likelihood of future claims and losses. 

Machine learning is also being used to automate certain underwriting processes such as eligibility determination and risk classifications. Using technology to automatically collect relevant data and make rapid calculations streamlines the policy acquisition process and significantly reduces costs associated with the manual review of applications. This allows underwriters to quickly deliver quality policy proposals to greater numbers of potential customers. 

4. Internet of Things (IoTs)

IoT technology has had a dramatic impact on the insurance industry, allowing companies to monitor and assess the risk of high-value assets in real time, for example, insurers can track ocean shipping containers in transit. This provides invaluable insights that help insurers better manage and allocate resources for protecting their customers' property. 

IoT technologies are also helping drive the development of microinsurance initiatives that create customized coverage tailored to the needs of specific groups. With these microinsurance policies, insurers can access new markets with clients who may have previously been underserved. IoT technologies promise to transform the insurance industry by providing greater accuracy, speed, and cost savings for both insurers and insureds alike.

5. Telematics

Telematics, while included in the IoTs, is deserving of its own callout for the way it has revolutionized auto insurance and aided the transportation industry. Think of it like wearable technology for a vehicle—it records tons of real-time data such as speed, location, time on the road, etc., to generate a unique driver profile based on habits and other characteristics. 

This profile coupled with advanced analytics allow insurers to accurately determine an insurer's policy eligibility and premium prices based on real-time risk assessment. 

Telematics have not only encouraged better driving habits and lowered some driver's rates, but also are helping to solve a significant problem the driver shortage has caused for transportation companies. Traditionally, new drivers have needed to hold a commercial driver's license (CDL) for two years or more to be included on a company's insurance policy, but real-time driver monitoring is helping to waive this requirement so companies can hire and train less experienced drivers and still be covered against business losses.  

Last thoughts

As new technologies emerge and consumers continue to rely more on digital transactions, it will become increasingly important for incumbent insurance carriers to integrate new advances into their operations.

Finding the right mix of human expertise and technology will be key to insurers' success. The most successful will be those who establish ongoing strategies for future innovations that keep them competitive and profitable without sacrificing customer experience.