Three Disruptive Technologies Poised to Shake Up the Insurance Industry

Disruptive technologies
like blockchain and artificial intelligence (AI) have entered our society’s collective consciousness over the last couple years, but for all we’ve heard about how much they’re going to change everything, many of us have yet to see it in the workplace (if you have, kudos to your organization!). You may doubt that it’s going to happen at all, but the reality is that you’re probably already using some form of a disruptive technology in your daily life, as applications of these technologies are expanding beyond the bounds of Silicon Valley to companies all over the country. Soon, they’ll likely be part of normal operations in the insurance industry, so let’s talk about what this means for you before new tech takes over. 

The role of data analytics
Insurance companies amass huge amounts of data when underwriting and processing claims, but to add value, you need to be able to make sense of it. Data analytics — analyzing raw data for patterns and behavior trends — enables you to do just that, and technologies like AI can help you analyze the data and automate the decision-making process.  

Data analytics stands to make a major impact on several areas of the insurance industry; one of the biggest could be through fraud prevention. Within an insurance company’s data, you could find duplicate names or addresses, multiple claims that are suspiciously similar, specific identities that have raised eyebrows in the past, or any other data points that might indicate fraud. Advanced data analytics technology means earlier detection of fraud and major cost savings for insurance companies. This also demonstrates one of the many ways disruptive technologies have positive effects on customer service — alerting customers early to potential identity theft can save them from a huge hassle that could take years to resolve if they find out too late. 
Analyzing data collected during the underwriting process could also lead to significant benefits for the insurance industry. With the right technology, you can better predict a customer’s risk and select rates that are competitive in the industry but still in line with your target income. The more this is done over time, the better data you’ll have to analyze and the better decisions you’ll make. 

Artificial intelligence in the insurance industry
AI can be summarized as technology that imitates the human decision-making process. An AI system tracks information and makes selections based on specific data it receives. If you have a smartphone or regularly use the internet, you’ve probably already interacted with AI — whether via notifications from your GPS app that tell you how long it’ll take you to get home from the office, playlists curated by your music-streaming app based on what music you typically listen to, or even the autocomplete suggestions that pop up when you type into a search bar. 

Insurance companies can expect to start seeing AI used in claims processing, customer service, and fraud detection. For claims processing, using AI to reach claim decisions based on specific questions can mean claims can be processed much more quickly, with higher quality and fewer errors. Some car insurance companies are already improving their claims processing by putting trackers in cars to ensure they get the most accurate information. Improved processes and reaching claims more quickly mean savings for the company and a better customer experience. 

Customers can also benefit from AI-enabled phone answering programs and chatbots. Putting up with automated answering services while waiting to speak to an actual person has been source of frustration for consumers in the past, but these programs are advancing to the point where your customers may not need to speak to an actual staff member at all. If your customers can handle more of their basic insurance needs with AI alone, they’ll get much faster service, and your staff will be freed up to address more complex customer issues.   

What about blockchain?
Blockchain, or distributed ledger technology, is a decentralized database where users can access the same piece of information at the same time. Because the information isn’t locked away in one specific company’s computer system, it’s a big step forward for transparency. People can add to the blockchain, often in the form of a transaction, and once a “block” is added to the blockchain and verified by one computer system (also known as a “node”), all of the related computer systems are forced to accept it, meaning that every related system will have the exact same information. For an insurance company, using blockchain for payments would mean claims get paid out much faster and tracked more easily, with higher accuracy and full transparency. 

The industry could also start seeing blockchain used with smart contracts, peer-to-peer insurance, and parametric insurance. With peer-to-peer insurance, an underwriter does the risk analysis, and a group of peers with similar attributes goes into a pool. Blockchain can help with the payment of funds, and whatever isn’t used in a period is refunded to those members. With parametric insurance, a payment is made at the same time the need for it occurs. For example, if there’s a disaster like a flood that damages a customer’s home, the claim is paid immediately without a review process. With blockchain, the payments can be easily tracked and analyzed for future use.

Considerations for insurance companies
Your competition may already be investing in these technologies — they may have already saved a ton through AI-driven fraud prevention, and are reinvesting in more disruptive technology. But don’t let the urge to keep up with the competition override your common sense. Put a strategic IT plan in place to make sure you’re investing where you’ll get the most benefit, rather than throwing money at whatever is the most exciting. You’ll need to make sure your procurement methodology takes into account the feasibility and relevance of any new technology, as well as whether or not your current technology environment can even support some of these advanced technologies. If your environment can’t support it, it may be time to reevaluate your IT strategy.

If you do decide to invest, you’ll also need to account for insurance industry-specific cybersecurity issues and the relevant regulations. For example, if you’re a health insurance company, any new technology will need to be in line with HIPAA requirements. If you work with clients in the European Union, GDPR compliance can’t be overlooked. Services like penetration testing can help you make sure your environment is secure and up to date with current regulations. With any new technology is a new opportunity for hackers to find their way to your data, so working with a cybersecurity team can help you protect your clients while you advance your company. 

Questions? 

Contact Natalie Pintar, natalie.pintar@plantemoran.com, 248-223-3369; Sarah Pavelek, sarah.pavelek@plantemoran.com, 248-223-3891; or Terry Olejnik, terry.olejnik@plantemoran.com, 248-223-3388.