Sanjiv Gossain, European Head of Cognizant Digital Business
Insurance companies will work very differently over the next few years compared to the way they work now. This is mainly due to the rise of data, algorithms and artificial intelligence (AI). The whole market is poised for disruption, making it imperative that insurers look at how digital technologies could help them stay relevant.
The insurance industry is going through a similar transformation as seen in the banking and finance industry over the past three or four years. In the face of increasing competition from non-traditional areas, what should insurers do to maintain their competitive edge and support customers most efficiently? Cognizant has identified three key areas, based on recent research, on which insurers should focus to stay relevant long term:
- Embrace technology
Insurance companies are embracing new technologies in order to maintain a strong competitive position. Research states that insurers failing to embrace digital risk are missing out on the $1.6 trillion of value that the latest developments in digital is set to create in the next three years.
The rise of the Internet of Things (IoT), the gathering of enormous amounts of data coupled with machine learning are having a strong impact on the way insurers work. As more and more insured objects, such as cars and buildings, collect permissible user data, insurers are obtaining real-time insight into the use and condition of these objects. This will enable them to better assess the risks faced by the insured. These insights are helping insurers identify where they can add value for their customers as well as how monitisation can be optimised.
- Monitoring human behaviour
The use of wearables has exploded, with people increasingly connected to the internet. As a result, more data can be collected under strict rules and regulations. This data can provide insight into, for example, not only the physical condition of the wearer, but also their lifestyle. This information can completely transform the relationship between the insurer and consumer, potentially leading to additional benefits such as providing the customer with a tailor-made insurance contract and developing new products to meet specific needs.
Although users must first give permission to use this data, a survey by loyalty specialist Aimia shows that consumers are willing to do so if they perceive real benefits from sharing. This offers insurers the opportunity to tailor policies and premiums to the individual. For example, by using wearables that follow physical activity in a life insurance policy, insurers can ‘reward’ the consumers with a discount if they prove to lead healthy lives. This can go even further if the insurer not only provides competitive prices, but also offers insight into what the data means. By providing advice on how people can improve their health, potential problems may be prevented. An example of this is an experiment with Artificial Intelligence (AI), which identifies depression at an early stage and can be used to tackle it.
- Creating new business models
In-depth data analysis and the development of new technologies pose a major challenge for insurers: how do you remain relevant in this rapidly changing society? Companies such as Airbnb, which are ahead of the current sub-economy, are making it impossible for insurers not to adopt a more inventive insurance model. This has led to, for example, on-demand and peer-to-peer insurance initiatives in recent years, in which a group of consumers sets up a premium whereby they insure themselves jointly against a certain risk.
In order to accelerate the development of new business models, it makes sense to consider entering into strategic partnerships. Innovative startups are able to recognise disruptive elements in the market. An example of this is Allianz who works with Lemonade Insurance Company, a New York-based startup that uses AI algorithms to speed up processing claims that are now handled in minutes instead of days.
Insurers’ five-year strategic planning cycles are unfortunately no longer fit for purpose. To compete and grow, they must build deeper, richer relationships with people, partners and customers. To do this requires data and analytics, optimised with machine learning and advanced AI, and combined with deep human insight, domain, data management and operational expertise.
Only by investing in such new technologies and establishing strategic collaborations, will insurers be able to deliver greater personalisation to their customers, improve internal productivity and accelerate business growth.