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This article was contributed by Jason Paau, senior director of program management at digital consultancy Publicis Sapient.

As with other industries, the pandemic has triggered digital acceleration in the insurance sector, enabling some insurance technology (insurtech) startups to benefit from their nimble and innovative digital-first offerings.  Lemonade, for example, has introduced a new auto insurance offering, supported by acquiring insurance startup Metromile. Instead of watching these smaller insurance upstarts continue to hustle, pivot and grow, traditional players need to take advantage of this moment to leverage the power of their brands and own the inevitable disruption of the sector. 

The big players need to adopt a more innovative and digital mindset — and fast. While they have their competitive advantages, including scale, resources and trust, incumbents need to improve their customer service and advanced data analysis and better leverage digital platforms. The insurance sector, especially in the property and casualty category, has not changed much in recent decades. We’re also seeing large amounts of capital continue to pour into insurance technology. The opportunity is massive for traditional insurance companies that embrace innovation — and potential irrelevance for those that do not.

Apps and platforms are the future

In our recent insurance survey, we found that the number one reason for switching providers was customer experience — this topped concerns about price or even the coverage itself. Specifically, consumers want faster claims, better digital experiences and more personalized offers. With more than 26% of people surveyed saying they switched providers over the last year, these concerns send a strong message that can link digital transformation with customer retention. Additionally, 48% said a particular incident of poor service motivated them to switch providers. 

Companies can improve customer service and satisfaction by modernizing their platforms and apps. Coupled with an innovative culture and robust digital partner ecosystem, key activities such as onboarding or claim-filing can be personalized, simplified and accelerated.  Seamless experiences, especially on digital platforms and channels, are crucial to retaining and growing business. In fact, we found that while only 55% of survey respondents currently rely on insurance company apps to carry out and receive updates on the claims process, 93% cite apps as their preferred future communication channel. 

Apps will need to allow for video and photo communications, as well as voice calls and messages, along with easy access to customers’ past communications, claims, data and coverage details in one place. For example, an insurance company app could give customers a list of nearby approved car repair shops after an accident, as well as provide regular updates from the garage as a car is under repair.  Some companies are building SuperApps as a controlled gateway to the customer-needs-ecosystem, particularly in Asia, where such apps are increasingly a part of daily life.  Companies need to constantly review their digital strategy to determine how best to meet the evolving needs and expectations of their customers, mirroring the easy and convenient experiences customers have become used to in online banking or shopping.

Using data to navigate instability for insurance reliability

At a time when customer behavior is changing so rapidly, when more users may be looking for insurance coverage they can trust, traditional insurers can benefit from their legacy of reliability. But at the same time, insurers also need to embrace new sources of data and ways of analyzing data to make sure risk is understood.  Leveraging telematics for driver habits, IoT sensors for home protection or weather data to inform localized risk in specific areas are all examples of using data to inform a higher quality assessment. Insurers that take advantage of this higher supply of data also need to be thoughtful about the value exchange for the end customer. Consumers expect organizations using these new types of data to provide benefits in return, like optimal and personalized coverage, and premium discounts based on personal driving habits or responsible uses of connected home appliances. When premiums rise, insurers will also increasingly need to provide data to justify the price change to consumers. This protects insurers but also ensures customers receive optimal coverage.

Data is also key to improving customer service, including the onboarding process for new customers and the claims process. Automatically importing approved customer information via APIs, or interfaces, from customers’ other online services, including their banking or social media accounts, can substantially improve pain points like manually entering information, creating user profiles or providing signatures and documents.

When it comes to improving the claims process, again, data will play a central role.  Organized and used well, data can help speed up the claims process. We found in our survey that delays in payouts were the single most frustrating aspect of the claims process. To speed this up, all of the claimants’ relevant data must be accessible in one place, similar to how Salesforce and Epsilon offer a one-stop-shop for data profiles. Insurers can also integrate other technologies, like replacement car part pricing databases, to avoid overpayment. 

Insurance company platforms will also need to absorb and use data in real time; for example, with the rise of connected cars, sensors in vehicles can immediately send information about damage for evaluation just moments after a crash or other incidents. Drones and video footage from mobile phones will also provide immediate and key data for evaluation, replacing some tedious and time-consuming human-led inspection processes now needed to assess damage. These new sources of data and data integration platforms will make the claims process more efficient, saving time and money for both customers and insurers. 

Humans and AI working together

In the race to leverage new digital capabilities and apps for competitive advantage, it’s important to remember that insurance remains connected to the physical world and human emotion. Technologies that can “read” the world, like AI and computer vision, are especially promising for the industry to speed up assessment and adjuster processes. By leveraging data sent from sensors, IoT devices, or other sources that store information such as a data lake, insurers can quickly create not just a damage report for a home or car, but an estimation of repair costs and an assessment on whether damages are covered by insurance. 

At the same time, insurers must not fall into the trap of relying on so-called black-box models of machine learning, where humans don’t fully understand how computers are arriving at answers.  Insurers must also ensure that the data is relevant and current, not stale, and understand its origins.  Data governance and understanding data lineage are essential to avoiding ethically or legally questionable practices.  After all, insurance companies’ decisions affect people’s lives, so the process must be fully understood based on proper and legitimate data sources of which both consumers and insurance companies are fully aware.

Many people also want reassurance and human support when filing a claim.  This, too, can become more efficient; behind the scenes, AI and data sorting can quickly identify and prioritize which customers are most in need of human empathy, along with service, and direct them to the right person, while sending other simpler claims through automated AI-assisted processes. Such a hybrid approach of handling claims and customer service will allow companies to maximize talent and technology while satisfying different customer needs with the appropriate resources. 

There is no question that implementing such technology and uses of data requires significant upfront investment, one of the main reasons digital transformation has been relatively slow in the insurance sector.  Teaming up with insurtechs that are often based on such AI technology can be an effective and immediate way for some established players to implement more data-driven processes and decisions.  Whether they partner with startups or expand their own operations, using data and AI, along with the appropriate guardrails, will add tremendous value by saving time and money and creating smoother customer experiences.

If there was ever a time for established insurance companies to evolve to meet customers’ needs, it is now.  With an uptick in loss events and the surge of insurtech companies, they can no longer rely on their resources, scale or trust to maintain the status quo.  They can build on these advantages to maximize the benefits of data and technology and take insurance — and customer experience — to the next level. 

Jason Paau is senior director of program management at digital consultancy Publicis Sapient.

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