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5 ways why technology is changing the insurance sector

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Not many years ago people had to run from pillar to post to claim health insurance benefits. The entire process is hassle-free now, with cashless transfers and minimal documentation. The rapid evolution of technology has helped insurance companies bring radical changes in their business models. Customers on their part are demanding easier access, simpler processes, and transparent products, which can be made possible only through technology deployment. Insurers have embraced digital transformation with open arms and services like artificial intelligence-powered chatbots have become common. Technologies like the Internet of Things (IoT), telematics, drones, the blockchain, and artificial intelligence (AI) have opened a whole new world of possibilities for the insurance industry. The future of the sector is likely to be radically different from the present, so what are the technological trends sweeping the industry.

Connected Devices

The regular stream of data from devices connected to the internet is helping insurers make a better risk assessment and price policies based on credible real-time data. Internet of Things, sensors and telematics are playing an important role in the transformation. Customers gain lower premiums as companies plan to incentivize disciplined behavior by policyholders. Connected cars and wearable devices are a prime example of this trend. Insurers are taking into account metrics like braking pattern, speed and time before selling auto insurance. Similarly, data from wearable devices can give a better picture of a policyholder’s health. Some health insurers have started using the data from wearable devices to remind customers to stay in shape and are offering discounts and benefits to healthy policyholders.

Fraud Prevention

Bogus claims are a huge headache for insurers, but the application of technologies such as blockchain and data analytics is making fraud detection easy. Data mining tools and quantitative analysis are applied to detect fraud. Predictive analysis uses tools like predictive modeling and machine learning to analyze historical and current facts to make predictions and reduce frauds. Blockchain, which uses a distributed ledger technology, makes identity thefts and frauds nearly impossible. People estimate that fraudulent motor insurance claims cost around 50 billion rupees every year to insurers in India.

Faster Processes

Automation of crucial steps like validating identity, health and police records can lead to better customer experience.  A distributed ledger technology like blockchain can be used to store police, health and identity records without concerns of tampering. It can make the experience hassle-free and eliminate the need for multiple KYC documents. Decentralized blockchain also makes it easier to authenticate customers, policies, and transactions. 

Modernization of Insurance Legacy Records

Large insurance companies have operations in multiple states and countries and years of operations have left them with tons of physical records and legacy systems with high maintenance costs. The advent of cloud computing and mobile technology can be used to change the way insurers function. Better and faster sharing of records can make the system agile and responsive. Digitization of data and better sharing mechanism can reduce the response time for customers and decrease chances of frauds. Insurers have started using the huge base of mobile users in India to increase the penetration of insurance. Mobile applications have made locating an insurance agent, calculating the premium and getting policy quotes very easy.

Tailor-made Insurance

With several players operating in the insurance sector, companies have devised differentiated policies to attract new customers and retain old ones. The strategy works at two levels. On the surface, insurers are using digital touchpoints like web portals, mobile apps, and social media to engage with customers. At the backend, companies are using machine learning to analyze patterns, identify suitable underwriting clauses and offer customized products based on the data provided.

Conclusion

The speed of technological change has disturbed the pecking order in several sectors, and insurance is no different. Insurers who fail to adapt to the change will fall by the way. Nimble and innovative companies with new products are chipping away at the customer base of traditional insurers. The main beneficiary of this technological revolution has been the customer. Many nascent technologies are being tested and are expected to improve customer experience significantly.   

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