The insurance industry’s ability to adapt to and adopt the rapidly approaching wave of insurtech is the key to survival, say the partners in a Sydney-based consultancy.
Ian Chisholm and Nick Careless, partners at independent management and technology consultancy Frazer Walker, which specialises in insurance, say the industry is on the cusp of massive change through insurtech advances.
“Insurance organisations that stick their heads in the sand risk drowning as the wave passes over them, while the innovators surf towards success,” Mr Chisholm says.
The pair has written a comprehensive white paper that explores the myriad technological innovations being created and implemented to improve efficiency in the insurance industry.
“Insurtech can help the industry better manage product development, distribution, rating functions, claims and customer management, and administration,” Mr Careless says.
The white paper says insurers’ top priorities are typically operational efficiency and profitable growth. With inflation driving the rising cost of claims and rate increases difficult to implement, insurers are focused on improving efficiency and pricing accuracy while reducing leakage and waste.
“Competition is fierce, the pace of change relentless, and increasing regulatory compliance mandates continue to erode scarce capital. Concurrently, customers are demanding high-tech, easy-to-use digital solutions,” Mr Careless says.
Insurers have historically lagged the banks in implementing tech, primarily because they don’t have such regular customer contact. “Renewals happen annually and claims are generally far less frequently. In contrast, most customers interact at least weekly with their banks,” Mr Chisholm says.
Large banks generally have had more capital to invest in tech and are therefore more advanced in their journey to digital transformation, but insurtech is inevitably flowing on from banktech’s advances.
Mr Chisholm says insurers need to build a strong business case before they will invest. “Insurers are wary of having to write off large projects if they make the wrong decisions.”
For all financial institutions, ease of use is key to the customer experience and, for insurers, that means brokers and policyholders.
Mr Chisholm says start-ups, many of which are underwriting agencies, will likely claim a large chunk of business once considered the exclusive domain of the big, traditional insurers. But the long-standing insurers are hamstrung by antiquated legacy systems.
“Insurers must be cognisant of the customer experience when introducing new technology, not just consider how tech can save them from making phone calls or entering data.
“Customers are no longer loyal. It’s much easier for them to change insurers than banks. At renewal time, customers shop around and they’re willing and able to leave,” he says.
Tech can improve the customer experience, for example, by helping a claimant find the nearest approved repair shop or autofilling property details. That creates efficiencies for both parties and improves data accuracy.
Chatbots can avoid customers being left hanging on the line, being told ‘your call is important’ when the reaction time demonstrates that it is not.
The white paper authors say anecdotally there’s an 80% success rate with chatbots and a transcript of the conversation. However, it’s often difficult for customers to find other ways to make contact and, if they have a complex problem that needs human interaction, that’s frustrating.
The white paper outlines how all the major general, life and health insurance core platforms are now committed to delivery via cloud-based software as a service (SaaS). It explores the benefits and pitfalls for insurers.
The authors show that, while machine learning, artificial intelligence and robotic process automation are not yet revolutionising the insurance industry, they’re not far away.
They explore the ramifications of the internet of things and blockchain and show how the agency sector could likely steal a march on the big players through being tech savvy and fast to market. Security and privacy protection measures are also scrutinised.
Read the white paper: Insurers must surf the insurtech wave to survive.
Released by: Kate Tilley, Frazer Walker Communications Consultant
P: 07 3831 7500 E: email@example.com
Release date: 27 November 2023