Another year is almost behind us. The good news is there’s plenty to look forward to in 2018.
While the insurance industry has a reputation for moving slower than molasses, companies are not blind to technological advances. Many insurance businesses have been quietly updating their legacy systems, making it easier to do business with them.
Some of these upgrades include advanced digital management platforms and interactive customer portals. And, there’s more on the horizon.
Here are the top insurance industry trends to look for in 2018:
Even if Bitcoin never becomes the standard currency, the technology it’s built on is revolutionary. Blockchain is what makes cryptocurrencies so interesting to so many people.
Why? What’s so special about blockchain technology?
Well, it’s the ledger to end all ledgers. It allows anyone to record anything of value (especially transactions) without any risk of the ledger being corrupted. And, this digital ledger is distributed across the Internet, residing on millions (possibly hundreds of millions) of different computers.
Imagine a spreadsheet that was shared with everyone in the world who wanted to see it. Then imagine that anyone could update the spreadsheet — presuming that the changes are validated by a majority of ledger managers — and it would sync across all computers instantly.
Financial transactions would be reconciled instantly, without the need for a centralized database.
That is the blockchain, in a nutshell.
So, how does the insurance industry use this?
Well, blockchain can be leveraged for a variety of uses, including automated policy administration. Claims and payout conditions can be automated to reduce delays in claims payment and to make claims processing much more transparent.
A specialized 'smart contract,' would be triggered by data feeds from a public database and various connected devices, like a smartphone. When certain conditions are met, and an insured event occurs, the claim is automatically validated (by an edge network of controls) and the claim is paid. No waiting.
The Internet Of Things
The Internet of Things refers to a network of digitally connected physical devices that interface with the real world and communicate with each other and with server systems. These systems gather information and send data to a database. The data is then analyzed and can trigger other events (sometimes using blockchain technology).
For example, in the life insurance industry, wearable tech, like Fitbit and other health apps and wearables, can transmit data to life insurers. Because many policies sold today are term life and universal life insurance, where mortality charges can change yearly or even monthly, insurance businesses can more accurately assess the risk of a policyholder and adjust their risk distribution and management strategies accordingly. A similar strategy can be employed in the health insurance industry.
Connected cars are helping property and casualty companies better assess the risk of drivers. More than that, auto insurers can adjust premiums based on how much a policyholder drives his or her vehicle. This 'usage-based' approach to insurance will reduce policyholder premiums and improve pricing accuracy, so insurance businesses can offer more competitive insurance products.
Property and casualty companies also benefit from improved pricing on homeowner and renter policies. Smart sensors can gather ongoing data about water usage, temperature, energy consumption, and more. So, for example, if your home were to experience a water leak, the insurer can be notified before serious damage occurs to the house. Likewise, dangerous electrical connections, shorts, or other malfunctioning electronic devices can be discovered long before they cause a serious house fire.
Data Science: Improving Outcomes
Rather than relying on product-driven or gut-instinct approaches to marketing and sales, insurers will start switching to data-driven business models. Customer intelligence, from advanced data analytics, will drive the sale.
For example, when prospects fill out an online form to receive a quote, they may be asked a series of questions about current insurance policies, amounts, where they live, and so on. For auto quotes, this information could be used to intelligently serve up quotes based on zip code. Higher-risk neighborhoods might pay more to insure vehicles that aren’t parked in garages or off-street.
A similar premium hike might apply to homeowners insurance for homes in high-crime neighborhoods. But, data could also be used to give policyholders a break on premiums if they live in low-crime, low-risk areas, or if the accumulated behavior dataset suggests a consistent pattern of responsible conduct.
Predictive analytics can also be used in an insurance distribution business to empower agents to better assess a potential client’s insurance needs. If the agent knows the prospect is young and has a child, for example, then this person may have a significant need for more life insurance. Given that studies on life insurance consistently show most people are chronically underinsured, predictive analytics may suggest offering this prospect life insurance in addition to other types of coverage.
Cloud-based management platforms can also make the sale simpler by enabling agents to access client data from anywhere. Agents, armed with smartphones, can run quotes, look up policyholder details, and make smart recommendations for more coverage while sitting in a coffee shop with a prospect or client.
New Products For The Sharing Economy
Uber and Lyft changed the way people commute. Airbnb changed the way people travel and book accommodations. But, the insurance industry is seeing potential in the sharing economy too.
For example, SafeShare is an insurance company startup offering the first blockchain-based insurance product, using the blockchain to validate claims and offer insurance in real-time to its users.
MetLife, an 'old hat' in the insurance industry, has partnered with Lyft to provide an endorsement on insurance policies to protect both drivers and passengers — while the driver is waiting for a passenger request, during the trip, and even while en-route to pick up the passenger.
As the marketplace demands more and better coverage options, some players in the insurance industry — a sector not known for being innovative — are surprising critics and delighting policyholders with their relatively quick adoption of new technology and innovative products. At this point, there should be little doubt that it will be those players, and others similarly change-inclined, that lead the way into 2018 and beyond.