COVID-19’s global impact has hit the insurance sector as badly or in some cases, worse than the pundits expected. Many insurance companies have experienced a demand deficit with new business premiums at an all time low, claims at an all time high, an increase in policy cancellations, volatile and falling interest rates, interrupted operational continuity and a crisis-related increase in workload.
Insurers have been encouraged to build holistic resilience across their business by adopting emerging tech, at every stage of the insurance lifecycle. However, the challenge here is that many insurers have been laggards in the application of digital when compared to other industries.
Source: Cicero Research, UK
The consequence of this is clearly demonstrated in the widening gap between insurer readiness and customer expectations, published in The Digital Insurer as recent as April 2020. At a time when the industry is already behind the curve, insurers risk being left even further behind as their own customers and partners are prioritizing digital modernization.
Source: TDI POV: Industry warning - digital tipping point is approaching insurers faster than expected, April 2020.
The COVID-19 crisis has propelled the insurance sector towards digitization like never before. Organizations are transforming to build robust business continuity, enhanced customer connection and ease of interaction.
Given the sector’s new understanding of how valuable a move towards digital is, we’ve put together a blueprint to help insurers prioritize their digital transformation journey.
We’ll explore the various stages of the insurance value lifecycle and identify use cases and recommendations for digital interventions which should ensure value to both the customer and the organization.
Distribution channel and sales
The pandemic hit during the insurance industry’s high season - disrupting offline sales and affecting insurers’ Q1 sales targets. This put insurers’ cash flows under tremendous pressure. Additionally, at this stage in the insurance lifecycle, agents typically engage in face to face appointments with prospects at the latter's homes or offices - but, under lockdown, this is no longer feasible. Here are a few technology interventions that can help augment severely affected distributed sales -
Remove distributor oversight: Call centers are in abundant use during the lockdown - insurers leverage it for sales and customers use it to clarify their queries. The hike in call volume plus the pressure to increase sales has contributed to instances of distributor oversight.
This challenge can be met by training bots, powered with ML tech, to accurately transcribe voice to text and also pattern-match. This approach enhances operational efficiency, compliance and the overall productivity of call centers and tele-channel distribution.
The AI based Allganize tool automates responses to questions after going over complex text documents using AI-backed Natural Language Understanding (NLU) technology. Using Allganize, customer support reps can let the AI answer simple requests dealing with insurance policy sales, while they focus on the more complex tasks requiring human mediation.
Personalize customer experience: Hyper personalization is directed by and for the customer. They should get to choose from tailor made products and coverages which encourage transparency through the purchase journey. Ideally, buying insurance should not feel like an impersonal transaction but an intuitive, proactive and continuous conversation or exchange.
We are seeing emerging tech like blockchain resolve identity and transparency issues while mobile payments are removing barriers in the adoption of insurance offerings. AR tech can explain insurance plans and products in as much (immersive) detail as required by a customer. Below are a few examples of the novel tech in action -
Behaviour-based pricing: ‘Insurance-trained AI’ can generate personalized premium rates based on clients’ lifestyles. Dynamic factors like travel history, health status, financial stability and more can result in customized policies. For instance, insurers charge as per the perceived risk which means, the safer you drive the lower your motor insurance premium.
Tailor made insurance: That’s the thinking behind Allianz1, an Italian web interface that allows buyers to design and tailor made policies by mixing and matching 'building blocks' from Allianz’s thirteen distinct business lines like P&C, life and health insurance.
Selfie insurance: Life insurance startup, Lapetus made headlines for offering a service where people buy life insurance using a selfie. Lapetus uses facial analysis to rapidly assign risk scores without a lengthy or onerous medical examination.
Underwriting insurance policies
Underwriting is a key aspect of purchasing insurance policies with services like revival, sum cover increase etc. Due to COVID-19, medical underwriting becomes a challenge because those seeking insurance hesitate when in need of medical tests available at hospitals.
Technology solutions can help to overcome this issue by providing other means of testing -
UDoTest simplifies and personalizes at-home testing for high risk diseases such as HPV and STD. During this pandemic, UDoTest quickly developed at-home testing for COVID-19 and helped insurers conveniently conduct medical tests for medical-underwriting.
Claims processing is a manpower-heavy function. And, as COVID-19 increased claim volumes, resolving them becomes that much harder and time consuming. Additionally, claims investigation which requires travel and contact with people is impossible under the lockdown which further delays the process.
Claim notification, processing and settlement via chatbots: Chatbots powered by industry insights and pertinent customer knowledge can ramp up the claims management function’s productivity. Low-level manual tasks such as registering a claim, checking its information for fraud and passing the claim on to banks for further processing - are being relegated to intelligent chatbots.
Wright Flood, a flood insurance company was the first to implement a claims bot, CLOE. The fully automated and encrypted chatbot helps policyholders quickly and securely open claims over mobile or desktop apps. Other popular insurance chatbots include Geico’s Kate and Lemonade’s AI Jim.
Claim fraud detection: COVID-19 witnessed an increase in insurance claim frauds. Pattern recognition tech is a welcome approach to identify previously undetected anomalies when investigating claims. AI tech can sift for authentic medical claims and analyze medical applications to identify health insurance fraud or under-utilized services. Additionally, blockchain networks can provide a way for competitors to safely and securely share data, gain visibility into criminal patterns and prevent future losses.
As Wayne Xu, COO of Zhong An, an online-only insurance agency explains: “We have been using ML to do fraud detection, to process hard copies and digitise information.” Zhong An’s business model does not encourage face-to-face meetings with clients which is not unlike what’s happening during COVID-19.
Claims payments: PWC, a global network of firms delivering assurance, tax and consulting services, estimates that blockchain tech can alleviate the reinsurance sector of 15 - 25% in expenses. This will deliver an industry-wide savings of $5-$10 billion. Here’s an illustration of how blockchain could work; ‘smart contracts’ is a term used to describe computer code that automatically executes all or parts of an agreement and is stored on a blockchain-based platform. The blockchain powered smart contract can self execute when specific contract criteria is met.
The current crisis has rewritten digital expectations and priorities across industries. And, the insurance domain is no different. Today, there is a sector-wide push towards going completely digital. With every insurance function and capability coming under the scanner, we believe Charles Dickens words, “It was the best of times. It was the worst of times,” ring true. This is simply because digital capabilities and emerging tech are both disrupting and building the insurance ecosystem of the future to bridge the gap between customer expectations and the current state of the insurer.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.