Smartphones, telematics, advanced analytics, the Internet of Things (IoT), and cloud computing are just some of the many breakthrough innovations set to bring forth massive transformations within the insurance industry. Besides enabling the development of new business models, products, and services within the industry, these technologies are also providing new ways to improve efficiency, cut costs, engage with customers, and expand insurability. Carriers now have access to better methods of measuring, pricing, and controlling risk and have technology to thank for it.
Advancements in technology provide traditional insurers with opportunities to reinvent and modernize themselves, and that’s a good thing. But there’s more. These breakthroughs have paved the way for the emergence of nimble software-based providers with solid financial backing. These companies are focussing on unmet customer demands, offering new products and services, and reducing the cost of insurance.
As a result, traditional insurers are forced respond to these new sources of competition spurring fundamental changes within the industry. This primer seeks to examine how various technological innovations are initiating directional changes within the insurance industry.
Wearable Devices, Artificial Intelligence, and Health Insurance
Algorithms, implanted sensors, and wearable devices using artificial intelligence are rapidly changing the industry’s status quo. The effects of this change will be more pronounced in health insurance. Smartwatches and the new biometric sensors can monitor glucose levels, oxygen, and blood pressure and transmit real-time data at the same time. Some healthcare providers in the United States are already using this technology to improve the quality of their services.
Patients can measure parameters such as stress, physical activity, and sleep quality at home. Usually, there is some kind of a reward or incentives for patients who meet their daily targets. Carriers are still trying to figure out how to capitalize on this. Artificial intelligence-based algorithms can be run on customers’ health data to discover any correlation and long-term implications. Health insurers can, in turn, use the data to determine risk level.
Telematics, Driverless Cars, and Auto Insurance
Telematics provide insurers with an accurate way of monitoring a customer’s driving habits which leads to better risk profiles and pricing. Driverless cars reduce the occurrence of accidents, redefine the type of auto insurance required, and reduce the overall need for car insurance. Insurance companies will in turn pass significant rewards for people using such cars. What this means is that when shopping for insurance, you are more than likely to get cheap car insurance online if you are using an automated or driverless car.
IoT, Smart Homes, and Property Insurance
The Internet of Things (IoT) and home automation allows insurers and homeowners to exercise a level of risk control in property insurance. IoT is the most disruptive technology when it comes to property insurance. These series interconnected home automation devices can detect threats and transmit data in real-time. This reduces the number of claims and helps insurers mitigate losses and at the same time, improves the protection of a customer’s property giving them greater peace of mind.
Insurance providers can offer more personalized services because these technologies give them a better way to understand risk on an individual basis. A recent Accenture report indicates about 80 percent of consumers prefer personalized insurance products. These products should be tailored to their preferences, behavior, and usage.
In the light of new technology, the insurance industry is ripe for disruption. There haven’t been any major changes in the insurance industry for decades. There is more than enough room to accommodate changes brought about by telematics, driverless cars, AI, the Internet of Things, et cetera. Moving forward, consumers can expect the emergence of new providers using cutting-edge technology to offer alternative insurance products more affordably.
by: Vincent Stokes