Drivers of Digital Trends in the Insurance Industry
May 10, 2021
In many ways, the digital revolution is more transformative to the modern age than the industrial revolution was to its own point in time. The exponential acceleration of digital technology continues to metamorph every industry, and insurance is no exception.
Insurance businesses – from price to availability – used to be summarized by location, location, location, but today’s view is more like data, data, data. From justifying decision-making with more than a gut feeling to indicating unforeseen trends, data is the real driving factor behind all of these trends – something we at AgentSync understand both from our work with cutting-edge insurtechs and legacy insurance organizations alike.
If you’d like to see how we use data to help our partners grow their distribution and lessen their compliance risks, check out our MGA demo.
We’ve rounded up a few factors that are driving rapid technology adoption in the insurance sector. They are poised to completely transform the industry, from underwriting to sales to claims processing.
How the Internet of Things is changing underwriting
Your watch and other wearable devices tell you how much sleep you’re getting and what your resting heart rate is. Your car says how far you drive and how hard you hit the brakes. Your TV records how much time you watched. Your bike gauges how often you ride and how hard you work out.
This data of course can be used to inform people about their own behaviors, giving them feedback that rates their health, driving habits, medical risks, etc. If they have this data in context, it very well could help them make changes for healthier decision-making.
Aside from affecting consumer behavior, though, this data is invaluable for underwriting risk, making it easier for insurance companies to determine risk for a specific person or steer them toward insurance products that are best suited for their lifestyles, health, or properties. For instance, one study showed millennials are more likely to share driving data to get a more personalized quote, which in turn may encourage them to be more conscientious about their driving habits.
Big data and identity-driven trends lead to risk pooling
Similar to the Internet of Things, our social media habits can give deep insights into our risks and insurability. Using what someone shares on social media – think gym selfies on Instagram and a few Facebook groups about rafting – an insurance company can not only underwrite to specific needs and risk profiles, but can also target sales advertising for certain policies to individuals who fit into that risk profile.
Imagine being able to pool life insurance risk amongst 45-year-old rock-climbing enthusiasts with moderate-activity 20-something readers. Or P&C insurers seeking consumers who own a certain security system. Targeting like-minded customers can be a somewhat controversial idea, so those looking to leverage big data should be wary of running afoul of both the letter and the spirit of the law. As an example, New York issued guidelines for considerations for using artificial intelligence algorithms in a way that doesn’t discriminate against protected classes of people.
Using big data doesn’t have to present an ethical quagmire. Insurers can also use predictive analytics to identify niches for new products. Or insurance carriers could target policies intentionally to people with divergent risk profiles and make some kinds of insurance more inclusive while diluting everyone’s risk.
M&A grow demand for no-code and opensource APIs
Application programming interface (API) is the fancy way of saying “a doorway to let different applications talk to each other.” Many legacy technologies have complicated codes to build these connections, which means getting multiple applications to talk to each other takes a lot of time and energy on the part of a programmer who understands the language of both systems.
As insurtechs and new MGAs jump into the market and older or larger companies snap them up, having a tech stack that is flexible and that smoothly integrates with others’ can make a significant difference in the experience of joining enterprises.
- No-code APIs are tech doorways that are built so an operator doesn’t have to be a programmer to set it up.
- Open-source APIs are tech doorways based on a code that is publicly available, so anyone can understand how to best integrate software.
Either “doorway” is a more flexible approach to integrating digital tools and allowing them to operate off the same information as opposed to having staff members take the information from one system and manually enter it into the next. As insurance giants look toward growth through acquisitions, tech integration can make a significant difference in the ease and speed of transition and lower the operational costs, in turn affecting the market value of a business. The direct impact of easy-access APIs on M&As will continue to propel this industry trend.
Convenience pushes self-service and point-of-sale insurance
Most Americans – 85 percent, actually – own a smartphone. So it should be no surprise that the convenience of having a supercomputer in your pocket has driven options for self-service and internet-based insurance services.
Self-service models abound in purchasing. There’s quite a bit of appeal to being able to look around at options without feeling pushed by an insurance agent’s timeline or commission demands. But self-service has also risen in the claims-filing process, with the insureds taking photos and documenting damaged property in some cases.
The demand for convenience has also led to the rise of point-of-sale insurance. More than ever, Americans are comfortable with buying car insurance from their car dealer, or tacking a personal data security and property policy on to their monthly plan with their phone carrier. Using mobile apps to help consumers compare insurance policies in real-time is a game-changer in customer experience and can give businesses a competitive edge.
While location is increasingly less relevant to consumers, it has everything to do with the regulations those in the insurance policy distribution channel have to follow. For more on how AgentSync helps keep industry partners on the leading edge of new technologies no matter what states and territories they are working in, see how our software works.