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Digital Insurance & You: Understanding the New Industry Standard

The insurance industry is notorious for its delays in adopting the latest cutting-edge technologies and applications. Bogged down by regulations and archaic systems, insurance has historically been slow on the uptake – until now. In just the last few years, it has become evident that the total transition to a digital insurance industry is currently underway.

What is Digital Insurance?

The concept of “digital insurance” is an umbrella term that encompasses the vast amount of new technologies that have changed the way nearly every carrier operates. Another definition of digital insurance is any company using a technology-first business model to sell and manage insurance policies. Many insurance companies today, though, have a digital insurance arm of their business in addition to traditional insurance practices.

These providers generally differentiate themselves in a few key ways:

  • Offering a customer-first business approach
  • Omnichannel experiences – you can research, compare, and purchase insurance online or through an app without having to speak directly to an agent in person or over the phone
  • Pricing, risk evaluation, and/or claims handling rely on modern, open software platforms connected to the insurtech ecosystem (new insurance-specific technology)
  • Coverage options are simplified to cater to individuals or families with less robust insurance needs

To compete in today’s evolving insurance industry, carriers know they have to provide the speed, agility, accessibility, and ease of use that only digital insurance can deliver. This means offering a bevy of services on the customer-facing side of operations – and internally, for that matter – that are entirely online, a sharp deviation from the traditional insurance model.

But what does that look like? Features such as live chat, customer self-service portals, and online claims filing are all made possible by digital insurance applications and technologies, which grow and expand at an ever-increasing rate. To start, however, insurance carriers should implement some of the technological pillars of digital insurance.

Digital Insurance Tools & Applications

    1. Artificial Intelligence Artificial intelligence (AI) is arguably the backbone of digital insurance capabilities. Digital insurance was developed with speed and scalability in mind, and AI makes instantaneous calculations, processing, and communication possible for insurance carriers.In its application, AI in insurance will impact some of the primary functions of the industry, including:
      1. UnderwritingClaims
      2. New Business
      3. Marketing
      4. Retention

      What makes AI unique in the insurance space is the balance it strikes between mechanical insurance functions and personalized service. Today’s consumers want speed, but they also want to feel valued. AI allows insurers to provide lightning-fast service to customers in a way that doesn’t make them feel like just a number.

    2. Machine Learning Machine learning is technically a subset of AI, but it is its own unique part of a digital insurance operation. As insurers move to self-service applications and portals for customers, machine learning is what makes those not only possible, but leverages them into key data collection and analysis tools for insurers.Machine learning automates traditionally sluggish insurance functions – like claims processing – by utilizing preprogrammed data, algorithms, and data shared by customers to automatically service customers in their greatest time of need. As Forbes put it, “machine learning is based on the idea that we can build machines to process data and learn on their own, without our constant supervision.”
    3. Internet of Things In the insurance industry, data is king; it helps drive underwriting, pricing, policies, and more. With the Internet of Things (IoT), carriers can collect troves of real customer data in real time and use it to better inform customer profiles and coverage –  even discover potential instances of fraud.So, what connected technologies are fueling the digital insurance data boom? Telematics, for one, are a new tool insurance companies are using to monitor assets like trucks, cars, or heavy equipment, and improve the accuracy of their coverage and automate the collection of data. Customers have to opt in, of course, but most people are willing to share this type of data to save money on monthly premiums.The proliferation of IoT-enabled devices is expected to grow, with the Connected Insurance Report by Insurance Nexus estimating that there will be 30 to 50 billion devices connecting nearly facet of daily life by 2020. The widespread use of smart devices, in the home, car, or even in medicine, is another opportunity for carriers to leverage the capabilities of digital insurance.
    4. Big Data & Analytics The single biggest benefit of digital insurance capabilities, aside from speed and customer satisfaction, is the data generation, analyzation, and utilization that results. All of these digital technologies generate Big Data – data that contains greater variety, arriving in increasing volume, and with ever-higher velocity – essential giant data sets that contain more actionable information. All of this data is giving insurers greater insights into customer behavior and risk than ever before. When applied, data is every insurer’s biggest asset.To properly utilize this data, insurers need robust analytics systems that paint a complete picture of their business and their customers by pulling data from many disparate systems and consolidating it into actionable insights. Insurers who can be agile with the data they have, to either improve their existing offerings or increase their speed to market with new products, will reap the biggest benefits from digital insurance.
    5. SaaS Capabilities Speaking of speed, digital insurance capabilities are just that, digital, so it doesn’t make much sense to host these solutions on-premises. To maximize the potential of all of the aforementioned tools, most digital insurers use a SaaS-based solution that provides the hosting, support, and resources for all digital insurance tools and applications.

What are the benefits of a SaaS insurance solution? Besides speed, insurers gain:

Agility: Work faster behind the scenes and develop new products for key market opportunities in a fraction of the time

Scalability: Only implement what is needed now, so insurers can grow as they go, adding new tools and features only when they need them

Most up-to-date programs: Stay constant with the latest system upgrades, as SaaS systems are continuously updated with the newest functionality

Security: Encryption protocols ensure that all SaaS solutions are safe and secure

Benefits of Digital Insurance

Insurers know the intrinsic value of being on the cutting edge of the industry – insureds want to know and trust they are working with a company that is using the latest tools and technologies to give them the best service possible. Implementing digital insurance solutions is the simplest way to communicate that, and insurers will quickly see the benefits, such as:

  1. Meeting & Exceeding Customer Expectations: Today’s consumers expect everything to be instantaneous, when and where they need it. Whether it be communication, payment, or even service, insurers must have the infrastructure to meet insureds where they are. Digital insurance makes that possible, with features like self-service portals, live chat, and insurance apps catering to modern consumers and making key insurance functions like policy administration, claims, and billing a nearly automatic process.
  2. Fraud Detection: As mentioned before, the greatest benefit of digital insurance applications is the sheer volume of data that they generate. And while it is generally positive data that helps insurers perform their jobs better and customers to get better rates, data is also catching criminal activity. Customer relationship management software can be used to search customers’ social profiles for any activity related to a claim, and predictive analytics is being used to spot trends in customer behavior that might be a red flag for fraud.
  3. Cost Reduction: Going digital has been shown to greatly increase cost savings, both for insurers and insureds. With more accurate underwriting driven by big data, AI, and predictive analytics, insurers and insureds both save big. Digital insurance is also increasing the speed to market of new products, another revenue generation opportunity.The McKinsey report, Digital Disruption in Insurance: Cutting Through the Noise, says “Digital technology puts margins under pressure as premiums fall under the weight of price competition and as new ways of mitigating risk emerge. Under these conditions, insurers will need to harness digital to make their operations more efficient, aggressively lowering costs.” The report says insurers can expect cost savings of as much as 40% from the claims process.
  4. Employee Experience: Digital insurance is just as sought after by insurance brokers and employees as it is by consumers. Digital tools such as comprehensive dashboards, SaaS applications and tools, and unified data systems not only make their jobs easier, they help them perform their job duties better as well. With all the tools possible at their disposal, insurance companies are investing in their employees with digital insurance.
  5. Low-Code Capabilities: There is a common and valid concern that converting to a largely digital operation will require hiring developers, IT professionals, and people who are well-versed in working with these digital insurance tools. Fortunately, low-code solutions exist to mitigate these fears. Low-code is an easy-to-use development methodology that lets users drag and drop application tools and features to build their own digital solutions. No more computer science degree required, and no need to hire an entire new team of web and application developers.
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Jeff Wargin
As Chief Product Officer, Jeff Wargin leads the direction of Duck Creek’s P&C insurance solutions, responsible for strategy, direction, release planning, and roadmapping of these products. Jeff has spent 20+ years in the P&C Insurance software market, focused on bringing innovative, future-proof products and solutions to insurers and others in the value chain. Jeff’s background is in technology, but his work experience has provided him with a deep understanding of the complexities of the P&C Insurance industry.