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The Age Of Algorithms, AI, IoT And Telematics

The insurance industry needs to recognise changing customer behaviour and drive digital transformation in order to succeed

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Digital transformation and disruptive innovation for insurance companies have become immediate-term strategic action items instead of   being vague futuristic concepts. Factors including new competitive threats, ongoing cost pressures, ageing technology, increasing regulatory requirements, highly labour intensive and predominantly “product push” sales process, ‘one size fits all’ mind set, and lacklustre financial performance are leading to adoption of new business models by insurers.

In such an environment, digital transformation offers insurers an opportunity to “rethink” their business operations to ‘achieve the triple prize of customer delight, lower costs and higher profitable growth’ by reimagining insurance operations from a zero base, bolstering customer satisfaction, and reducing costs and errors.

This can be made possible by focussing on digital transformation across the insurance value chain with specific thrust on leveraging recent advancements in technology including:

Omnichannel: It is quite common for any consumer to start researching products online, recommending and talking about them with friends and contacts on social media, and then buying them via mobile apps or through agents or at brick-and-mortar branch locations. A better omnichannel environment may also enable insurers to place new products in front of potential customers sooner and more directly than in the past. Omnichannel is increasingly a baseline capability that insurers must establish to achieve digital maturity.

Predictive analytics: Advanced analytical techniques can help insurance companies optimise their business processes, customise products and increase customer touch-point effectiveness. Natural language processing based algorithms can convert audio streams of customer interactions to text based data, which can then be mined to build analyses around key factors affecting sales, customer satisfaction, complaints, etc.

Internet of Things (IoT), telematics and drones:  Many insurers in India have launched geo-location-based digital devices that track, record and transmit customer driving behaviour on a continuous basis. This data is then used by the insurer to assess the claims risk on a policy level and thereby offer differential pricing (via discounting) to lower risk customers. Few global players have already been using telematics and fitness data to offer customised products.  

While drones are being successfully deployed in the retail sector for logistics and goods delivery, in insurance these drones are increasingly becoming popular as surveying tools for capturing damage and loss information for properties (fire/catastrophe etc.), agriculture and motor (accident) claims globally.

Blockchain: This technology provides a foundation for entirely new business models and product offerings, such as peer-to-peer insurance, thanks to its ability to provide virtual assistance for quoting, claims handling and other tasks. It also provides a new level of information transparency, accuracy and currency, with easier access for all parties and stakeholders in an insurance contract.  

Due to the increase in internet penetration and changing demographics, the new age insurance customers demand products and services which are customised according to their specific needs and offer behaviour-based pricing.  The insurance industry needs to recognise changing customer behaviour and drive digital transformation in order to succeed. While a lot of Indian insurers have embarked on the digital journey, it remains to be seen how many of them are really able to ‘re-think’ their businesses for the digital age.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Magazine 28 April 2018 anniversary special insurance

Jasjeet Singh

The author is Partner, Analytics, EY

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Sachin Seth

Tha author is Partner, Advisory, EY

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