![This is image title](https://www.pexels.com/photo/photo-of-people-leaning-on-wooden-table-3184325/ "This is image title") The digitalization of business processes has already reshaped the economic landscape in many industries. Not only did it...
The digitalization of business processes has already reshaped the economic landscape in many industries. Not only did it bring tremendous financial benefits, the digital transformation has also reshaped the customer expectations towards a nearly-unanimous approval of digital-first services. In this light, the field of insurance is expected to step up its efforts from the current piecemeal experiments to a comprehensive, industry-wide digitalization strategy. This article gives an overview of notable technologies with the potential to spearhead the process.
The insurance industry is ripe for disruption. With complexity rivaling that of the banking sector and reliance on legacy solutions, several factors have emerged that drive the change forward. Here are the most significant ones:
Customer Experience: According to the report by the Boston Consulting Group, more than half of insurance clients are not satisfied with the quality of services. In the industry which depends on customer engagement, this is a troubling sign.
Operations Complexity: In the absence of a comprehensive digitalization strategy, the technological and operational components of the insurance industry have developed independently. As a result, many routine tasks are still done manually, which is neither time- nor resource-efficient.
Consumer Expectations: With the onset of the COVID-19 outbreak, the demand for modern, remotely-accessible services has surged. So far, digital transformation innovation has been nearly single-handedly fulfilling this demand, with the insurance sector mostly lagging behind.
Talent Retention: The rapid digitalization of business is a major selling point for the current workforce generation. In this light, the opportunity of working in the insurance sector is not particularly attractive, with less than 5% of millennials considering it as a career choice. As can be seen, nearly every aspect of the industry’s operations could benefit from digital transformation, which is vital for its long-term success.
Fortunately, the market is already responding to the demand. Today, one can choose from a variety of technologies to facilitate change as well as approach software outsourcing company to assist with the process. Below is the list of the most promising ones.
Smart Data Management Data is among the most valuable assets of an insurance company and, as one might expect, it is among the operations that benefited from the introduction of digital tools. However, in most cases, it was handled in a piecemeal manner with no underlying digitalization strategy or a unified approach to data management. This not only makes these systems difficult to integrate with other business processes but also not sustainable in the long run.
From this perspective, cloud storage offers two solutions to the problem. On the one hand, they can serve as a digital data pipeline to handle inputs from different internal sources, which increases interoperability of the documentation. On the other hand, they allow for granular configuration of access to data, such as making some information public or available to external parties through an API.
AI-Powered Data Analytics Another business process that is critical to the industry and the one that can benefit from the digitalization of business. What the AI adds to the mix is the capacity for personalization of offerings. Historically, insurance pricing was calculated based on the non-personalized datasets. Nowadays, an average customer uses one or several devices connected to the Internet along with smart gadgets collectively known as IoT.
When collected and processed appropriately, this data can provide valuable insights. These can then be used to personalize services to better suit customer needs while at the same time obtaining a more accurate risk assessment to create attractive offerings. For instance, the data from personal wearables can help estimate the customer’s physical condition, whereas their social media engagement can reveal behavioral patterns like risk tolerance. On top of that, such insights can be updated with little to no delay thereby adding to the flexibility of services.
Blockchain and the Peer-To-Peer Model While data streams can benefit from a centralized pipeline, other business processes in the insurance segment move in the opposite direction. The most notable example is the peer-to-peer insurance model, which is gaining momentum as the underlying technology matures. In simple terms, the P2P model allows insurers to create and manage a finance pool without an intermediary – in other words, they get insured without an insurance company.
The key technology behind this and similar decentralized solutions is blockchain – essentially a way of managing data and contracts in a transparent and tamper-proof manner. In a blockchain-based system, retaining the decision-making power the insurers can discuss and vote for desirable conditions. All of the agreements are then executed automatically once all of the conditions are met. Admittedly, the technology is in the early phase of development, with many issues still to be resolved, including ethical considerations and the lack of trust between peers. Nevertheless, it already offers significant advantages over the traditional approach in terms of speed, cost, and transparency.
Workflow Automation with Machine Learning and RPA As was mentioned above, the bulk of operations in the insurance sector still involve routine tasks that can be performed by machines. In fact, a report by McKinsey predicts that 25% of the jobs in the industry will be replaced with automated solutions by 2025. On the one hand, this would allow for a more efficient human resource allocation, freeing up employees for more creative tasks. On the other hand, it introduces considerable savings, both due to increased performance and customer retention. The two main ways to achieve this are machine learning (ML) and robotic process automation (RPA). The former is capable of processing tasks without predefined parameters but still it requires more time and resources to operate. The latter has less flexibility and adaptability. However, it is also simpler and cheaper, making it a good fit for repetitive and routine tasks. With a powerful RPA tool, both businesses and end-users will save time and effort.
Digitalization of business has already proven to be a worthy investment in many domains. Insurance, which has a tremendous potential for improvement through digital transformation, is catching up with the trend. Admittedly, many examples are still in the experimental phase and are yet to see mainstream adoption in custom software development. Nevertheless, it is clear that they are a core component of the customer-first model and a viable direction both for innovative startup companies and major industry players.
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