The pace of technological change has continued unimpeded this year. Despite a worldwide pandemic, new developments in areas such as artificial intelligence and telematics continue to disrupt entire industries. Perhaps none as much as insurance.

As the new year quickly approaches, let’s take a closer look at five ways technology will continue to drive the insurance industry forward in 2021 and beyond.

But first — what exactly is insurtech?

Insurtech is technology that is designed to enhance the operations of insurance firms and the insurance industry as a whole. Insurtech is responsible for modernizing age-old processes that have plagued insurance companies for years, including customer service, underwriting, premium calculation, claims processing, and fraud protection.

Because it improves the efficiency of people and processes, insurtech makes doing business easier for customers and insurance company employees alike. Whether you’re getting a quote, to applying for a policy, or filing a claim, insurtech digitizes archaic processes to deliver a better all-around experience. This includes the ability to underwrite an applicant quickly, accurately, and fairly, and issue an offer for coverage in hours or days, not weeks or months.

Artificial intelligence

Artificial intelligence (AI) is improving a challenging experience that policyholders encounter with insurance companies: quickly connecting with customer service to find policy information. Many companies use chatbots to pick up the slack. A chatbot is a digital service that is capable of holding logical conversations in order to accomplish specific tasks, such as answering questions, giving basic advice, checking billing information, settling claims, and addressing everyday transactions and inquiries. Unlike humans, chatbots are available 24/7.

Insurers sit on a mountain of data, which is the main ingredient AI requires to be successful. AI can leverage this abundance of unstructured data to sell the right product to the right customer at the right time. While creating more personalized and meaningful messaging  for customer service and marketing teams alike is important, it pales in comparison to the value that automation brings to underwriting. By tapping into health records and other existing data sources, insurers can provide faster coverage decisions to eligible applicants for term life, long term disability, short term disability, and other types of personal coverage that may have required lengthy processes in the past.

A survey conducted by Accenture (News - Alert) revealed that four out of five insurance executives believe that AI will work next to humans in their companies as a co-worker, collaborator, and trusted advisor within the next two years. AI in insurance is here, and it’s here to stay.

Telematics

Property and Casualty (P&C) companies continue to reap the benefits of evolving telematics capabilities. Telematics systems collect information by using GPS and onboard diagnostics to record vehicle movements. This data holds immense value for insurance companies.

At its core, a telematics system is a vehicle tracking device which, when installed, allows the sending, receiving, and storing of vehicle movement data. Data captured includes location, speed, idling time, rapid acceleration or braking, fuel consumption, vehicle deficiencies, and more.

For example, a P&C company can use telematics to evaluate a vehicle’s propensity for traveling on highways with statistically higher accident rates, record speeds to discern when a driver is exceeding the speed limit, calculate how rapidly a vehicle accelerates and brakes, and monitor seat belt use.

With this data, insurance companies can monitor driver behavior, which allows them to more accurately determine risk factors and adjust the premiums for a particular vehicle and driver. With telematics, safe drivers are rewarded by having premiums lowered while higher-risk drivers have rates increased. Because that’s the way it should be.

Social media data

Insurance companies use social media for marketing and advertising, just like every other competitive industry. Besides purchasing ad space on popular social media sites like Facebook (News - Alert), Instagram, and Youtube, insurers are now interacting with policholders and fielding customer service requests and policy information inquiries. They, of course, aren’t allowed to publicly divulge policy information for a particular customer. But they can direct policyholders to the proper channels for customer service.

P&C companies have found unique ways to utilize social media when it comes to examining claims. For example, many people record their activities on social media, creating a record of their lifestyle habits and location on a particular day. A P&C company can determine that an individual was possibly impaired by what they posted on social media. The insurer may not be able to determine the state of the insured when they got behind the wheel, but they could evaluate premium calculations based on risk and red flags that were raised.

The Internet of Things

The Internet of Things (IoT) is a network of smart devices (the things) connected online. This includes many different objects and technologies, ranging from smartphones to self-driving cars and wearable fitness devices. IoT is exponentially increasing efficiency and adding capabilities throughout the insurance industry.

IoT now makes getting insurance easier than ever before. For example, through your smartphone, you can now evaluate insurance policy features and benefits, get pricing, complete an application, review an issued policy, and file a claim. This eliminates the need for an agent in the process, and their associated commissions, lowering the cost of business for the insurer and potentially lowering insurance rates for the consumer.

Insurers also can help prevent large claims by using IoT. For example, by placing leak sensors near potential accident areas, such as washing machines and water heaters, the sensors can raise alerts before a catastrophic event occurs. If a pipe or hose breaks, a sensor can command a smart valve to shut off the water, minimizing damage and notifying the homeowner.

Blockchain

Last but certainly not least, blockchain is revolutionizing how insurance companies do business. It helps insurers save time, cut costs, comply with regulations, improve transparency, and build better products and markets.

For example, blockchain reduces administrative costs through the automated verification of claims and payments data from third parties. Insurance companies can now quickly view past claims transactions for easy reference, promoting a higher degree of trust and loyalty between the customer and the insurer.

Key takeaways

Together, these five examples of insurtech are responsible for the modernization of processes that have slowed the insurance industry for many years. When done correctly, everyone stands to benefit from new-and-improved processes.

All technological innovations require proper due diligence before they can be fully leveraged. Fortunately, the insurance industry appears prepared to meet challenges and successfully implement new solutions as they’re presented — and that’s a win for everyone.

By Jack Wolstenholm

Jack is the head of content at Breeze, a digital-first insurance company that offers simple, affordable income protection for working Americans.