#19-Data-Based Premiums, AI for Claims, Platforms for Selling: Digital Insurance Maturity Model
THE INEVITABLE DISRUPTION IN INSURANCE IS COMING
The insurance premiums related to health and life will be determined by the data rather than old traditional demographics.
Travel, motor, goods, property, and other kinds of insurance premiums will also be calculated based on multiple data points.
The insurance products will be customized, personalized, and artificial intelligence will be used for claim settlement and customer service management.
The insurance sales channel will become more and more digital.
The ecosystem partners and new technology plug-ins will play a vital role in the growth of insurance companies.
Insurance is a risk management tool. As the world moves towards a digital, wealthy, yet uncertain future, there will be a greater need for insurance products. Global gross premiums will continue to grow across all categories like Life, Health, Property and casualty, and reinsurance.
Think about the current state of customer satisfaction and speed in the auto insurance industry. The customer has to buy the insurance online/offline and the inspection agent has to come to visit and verify the claim before it can be processed. The pain points also exist for the insurance companies as well. The premium is determined by the condition of the vehicle, rather than the driving mannerism of the person behind the wheels.
Digital Maturity Models- Frictionless Customer Experience and
Optimal Value Creation
- Insurance is a necessity as humans and businesses always feel the need to minimize and cover risk. There will never be a time when people or businesses will not need insurance. Newer categories like cyber-insurance, Digital, AI, and autonomous assets insurance categories will get popular.
- Consumers will like to research the insurance product online, and it will be conveniently sold on multiple online channels. Customers will use online marketplaces to check for the best insurance product that suits their needs and budgets. These AI-enabled platforms will also make the best recommendation based on the customer’s online footprint. Superior customer experience and speedier claim management is the key to success.
- Real-time data will play a key role in determining the risk assessment and hence the premium. Data privacy and cybersecurity-related regulations will ensure that companies become digitally agile. Human involvement in pre-insurance assessment and claim management will reduce. Artificial intelligence, surveillance drones, voice, and chatbots will play a key role in customer engagement.
- Mediators, agency intermediaries will become less relevant as they add to the commission cost. However, those who bring in “new business” will always stay in business. Agents need to learn from how digital influencers support the value chain on social media. Insurance brokers represent and protect the buyer’s interest and help them navigate the complex insurance products, and they may remain relevant.
Insuretech space is heating up
As per CB Insights report, over 1.2 billion USD funding was raised in 2018 in over 50 deals in the insurance tech deal space. The largest deals of 2019 included Lemonade, Hippo, CoverHound, and Kin Insurance. These companies were responsible for 42% of 2019’s funding
Lemonade became the first US insurtech unicorn to go public
Definitely, this will give a boost to a lot of interesting startups that can disrupt the insurance industry by removing the inefficiencies. The vehicles and on-demand apps are generating so much data that can revolutionize the business.
Imagine a scenario in 2025–2030 when the world has two major modes-
- pre insured autonomous vehicles or cabs,
- or the owned cars.
- Autonomous vehicles- In 2019, as per the conservative estimates there are over 70–100 million riders who daily use on-demand cabs like Uber, Lyft, Didi Chuxing, Grab, Ola, etc and the number can be as high as 100 million. Didi Chuxing alone clocks over 30+ million rides daily. Imagine a scenario in 2025–2030 when about 25–30% of these vehicles are autonomous vehicles which would be mean that about 25 million-plus autonomous vehicles would be there at very conservative estimates. Every trip in a self-driving car will come equipped with an option to choose insurance on a per-ride basis at a very minuscule amount. Users will feel much safe with insurance products that may compensate delay or car break-down in addition to other scenarios etc. The adoption rate may go up too for the autonomous vehicles, thus everyone wins.
- On-demand cabs — Imagine the other 70% non-autonomous vehicles driven by usual cab drivers. It will be fair to let the insurance premium is determined by the ratings of the cab driver and not just the age of the vehicle. Data generated from the app, sensors on the cab can give a good idea about the driver's safety records. The user benefits by paying a very small amount of premium included in the cab ride, and the cab company can pass or share the premium burden entirely depending upon the state of the competition.
- Owner vehicles- The number of auto insurance product choices available will go up significantly and the insurance burden may come down to pay per use basis. You may not be required to pay the insurance for a parked or unused vehicles. Also, the driver's safety record will also play a crucial record along with the average of city drivers safety records patterns and the number of vehicles. If you live in a city where the rate of auto-related accidents is high, then the premium may be higher.
Claim management and Artificial Intelligence
How will the claim process gets transformed with the advent of AI/machine learning and shared-economy: Imagine a hypothetical event, Angela and her friends get in a minor auto accident on a freeway.highway. As per the current claim situation, an inspection agent has to verify the claim before sending the car to the service center, but this may soon change.
As soon as there is an accident alert a series of processes will kick in automatically-
- The first priority will be to ensure the safety of passengers by sending data to nearby hospitals, Angela’s friends/family circle, and police station. The passenger of course can control the situation by pressing an option -” no help needed” or “marking safe” kind of messages. An alternative transport will be arranged for the passengers for their original destination or any other place they prefer to go for medical aid.
- Instead of an FTE who plays an insurance inspector, maybe an Uber driver dropping a passenger nearby can be trained on the inspection mechanism. The person immediately rushes to the point of hypothetical accident and follows a procedure of taking necessary pictures/videos of the situation. There could even be some pre-installed sensors on the car, that can give some data to the insurance company to accurately study the reasons that led to the accident. The data and pictures are then sent to an AI system/algorithm, that already has been trained on thousands of data points/pictures to assess the damage. Within a few minutes, it is able to generate the approved insurance amount, which is then texted to the customer. Imagine the level of customer satisfaction in such a scenario. An inefficient process that takes, few days currently will come down to a matter of a few minutes. The cost of claim processing will also go down significantly for the companies.
Best in Class in AI Claims (Ping An is the lighthouse in insure-tech)
Check Ping An- best in class claim models: At present, AI technology has been applied to the whole process of car insurance claims settlement, including initial reporting, submitting digital pictures, loss assessment, and handling documents, etc.
Among them, smart human-machine interaction offers round-the-clock service to handle the reported cases. The smart scheduling engine and smart grid technology can provide timely surveying within 5–10 minutes for 95.5% car accident cases occurred during the daytime, in which 30% of cases have adopted AI image recognition technology to complete the loss assessment. The accuracy rate is as high as 95%, and the compensation can be received within seconds through the face recognition.
The best thing about digital ecosystems is that they generate value by removing inefficiencies and delays that exist in any industry. The digital ecosystem playbook is all about using the technology stack and forming the right partnerships that complement your business (auto-tech and insurance).
The platforms (e-commerce, mobility, fintech, health-tech) and super apps will emerge as key digital channels for selling insurance.
Digital Ecosystem and Transformation expert
Connect with #SidharthaSharma on Twitter- https://twitter.com/Siddhartha_monk
