Trends in technology adoption in insurance

The future may be hard to predict, but it doesn’t have to be hard to prepare for. Insurers are grappling with the difficult new business, investment and regulatory environments resulting from the financial crisis. However, the sector also faces much broader challenges. Demographic shifts, the growing power of emerging markets and changing customer behavior will all contribute to the long-term future of the industry.

Digital technology is a global megatrend that is transforming a variety of industries, including the insurance sector. The insurance industry has been a bit slow in adopting IT due to rapid changes in technology and because their distribution channels are still conservative i.e. managed by agents and brokers and basically not ready to adopt new technology. However, customer adoption of digital technologies, including social media, smartphones, electronic transactions, etc., enabled by cloud service models, e-commerce and mobility, is impacting the technical and commercial capabilities of many insurance companies. Insurers are quick to respond to this trend.

The factors we believe are driving these changes could be categories into:

Social: the balance of power is shifting towards customers.

Technological: Advances in software and hardware that convert ‘big data’ into actionable insights.

Environment: the emergence of more sophisticated risk modeling and risk transfer to address the increasing severity and frequency of catastrophic events.

Economic: the rise of economic and political power in emerging markets.

Politics: Harmonization, standardization and globalization of the insurance market.

Key business drivers for IT adoption in insurance:

Engage customers through multiple customer interaction channels and span all age segments

Devise strategies to incorporate the growing investments in internet and mobile channel strategies for faster and instant communication

Work with partners to launch innovative products in areas such as microfinance, asset management, etc.

Automate underwriting processes using data analytics and business intelligence (BI) and predict real-time fraud and risk analysis

Leverage bancassurance banking systems and regulations available in every country to explore cross-selling of insurance products, especially in emerging markets such as India

While 63% of insurance companies say they are ready for more digital practices, only 23% of these companies are ready, reports a joint study by Forrester and Accenture. To accelerate this process and ensure a successful transition to digital workflows, there are a few key areas we can expect insurers to embrace as they create more automated, user-friendly processes.

Embrace a cloud-based and on-premise infrastructure

Just two years ago, 84% of companies were operating in the cloud, and more than half of these companies reported that the cloud reduced the workload of IT teams, says PC World. Still, IT teams in the insurance industry struggled with what information regulators should store via the cloud versus on-premises. In addition, the proliferation of outdated technology is challenging the cloud-only approach. Many insurance entities are using 40-year-old administration technology designed to manage the claims process, according to a recent report from TrustMarque. This kind of technology hinders innovation, but insurance agents are far from replacing such mainframe technology immediately.

This year, as the insurance industry adopts a more streamlined workflow, we can expect a significant increase in the adoption of technology that can be managed through hybrid cloud and on-premises, providing ultimate flexibility for clients and customers and strong compliance with the ever-changing government regulations within the insurance environment.

Automate business processes where necessary

The key to moving towards a more digital environment and improving customer service is automating workflows where necessary. With the overuse of social media on the rise, and across multiple channels, customers expect ultimate interaction and personalization from their insurance agents and brokers.

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While standard face-to-face interaction may be less common between insurance entities and their customers, relationships are still as important, if not more important, than they were in the past. As such, insurance agents spend more time communicating with their customers and less time sorting papers, scrolling through documents, and keeping up with claims processing.

Choosing programs and systems with the customer in mind

A Forrester-Accenture report recently called this year the “Age of the Customer,” with the customer experience at the center of the digital movement. This means that technologies and new digital processes cannot be implemented with an administration-centric mindset.

Take something as simple as a digital application, for example. While some technology really requires three different phone numbers or two different emails from the customer, how convenient is that for the customer filling out the request? Today’s customers expect a seamless, intelligent process from insurance companies. While this may mean some disruption to internal processes for the agent, the end result should be programs that are easier to use for the customer, not just the IT team.

Social media analytics

Insurers are turning to social media as a marketing medium and platform for collaboration. Social media is widely used for networking with friends and business partners. Using social media is made easy by smartphones and mobile devices. Insurers can target new customers based on their life events and also use social media networks to communicate with internal and external stakeholders.

Focus on SaaS solutions

Insurance companies deploy applications by using SaaS solutions because they offer superior infrastructure, high security, and low risk. Insurance companies have the advantage of accessing the latest infrastructure and IT platforms at a low cost. SaaS offers a perfect solution for insurance companies to improve their efficiency at a minimal cost of capital.

Real-time architectures for flexibility

Real-time data sources are mobile technologies and social media that can be used by insurance companies to become more competitive. Capturing real-time data from online channels is proving to be a goldmine for insurance companies as it provides insight into customer behavior on which to strategize insurance products. Insurance companies are deploying data analytics tools, BI platforms and data visualization tools to reap all the benefits of real-time data.

Data analytics and big data

The ability to capture real-time data, big data and analytics play an important role for insurers in terms of potential customers. The recent trend is the application of sensor technologies, called telematics, which are used to track the driving behavior of the individual. These technologies help insurance companies to offer usage-based insurance policies.

Information plays an important role in the insurance industry in product pricing, development, risk management, claims processing and fraud detection. These functions can be performed by collecting data from multiple sources and using software tools to extract meaningful insights from data. To effectively conduct insurance business, the insurance industry needs to use IT systems, new technologies and networks to capture real-time data and strengthen their data storage capacity for analytics to capitalize on more customers.