In this Opinion piece Piotr Piękoś, Client Engagement Manager at Future Processing, takes a look at increasing automation and how it help insurtech to evolve and transform the industry.
Since its inception in 2010, the insurtech industry has proliferated, and its reputation has only gotten stronger. According to Grand View Research, the market for insurtech, which is employed to improve business efficiency, process large amounts of data, and personalise services for customers, was valued at $5.45 billion in 2022 and is expected to grow at a CAGR of 52.7% from now until 2030.
Many people believe that this astounding growth is the result of technological advancements, such as automation. Through the development of software and systems, the goal of robotic process automation is to eliminate repeatable processes and reduce manual intervention. By automating manual processes that previously required human intervention, IT infrastructure and applications can be delivered and scaled more quickly. According to McKinsey & Company, 31% of organisations currently have at least one automated function.
Automation can support functions ranging from underwriting and risk assessment to data management and security in the insurtech sector. Furthermore, automated communication software ensures that customers receive the correct information at the right time. The insurance industry is seeing significant growth in this area. With an increasing number of businesses providing greater value and a better user experience (UX) to customers, it is a shift away from solely focusing on generating sales.
The New Superpower for Insurance Companies
Automation is now not only prevalent, but it is also what allows many people to obtain insurance, whether on the application side, with automated underwriting in Europe, or on the benefits side, when obtaining Paid Family and Medical Leave (PFML), or short-term temporary Disability Insurance (DI) in the US, or Personal Accident Insurance in Australia. The onboarding process is naturally the first point of adoption, with its data collection, management, distribution paths followed, and the underwriting philosophy applied.
In brief, automation simplifies the customer experience while increasing accuracy. The simpler a process is, the more market traction it has. Automation technology is an operational necessity. The amount of information available about customers has reached unprecedented levels, and humans are incapable of processing it alone. Artificial Intelligence (AI) allows insurers to detect subtle patterns in data, providing human insurance agents with insight into emerging trends, opportunities, and threats. Though the benefits of these massive data sets are numerous, the most notable advantage is that they allow insurers to offer hyper-tailored and flexible products.
Aside from the UX and onboarding process, automation helps to improve efficiency in claims departments, assists in integrating legacy systems common in the industry, reduces human error, detects fraud, and prevents losses.
Insurance Software Development Challenges
Insurtech is the industry’s big push to combine insurance and technology. New start-ups and rising customer expectations are all driving innovation in the insurance sector. Insurance companies face numerous challenges in advancing their software development programmes. The first hurdle is to provide the best customer experience possible. Users want as little interference between an insurer and the product as possible, so developers must keep this in mind. As a result, investing in a well-thought-out, user-friendly app interface while simplifying business logic pays off handsomely. A clean layout and simple navigation will be appreciated by customers, and a satisfied customer is the best form of marketing, through the power of word of mouth.
Another critical factor for insurance providers to consider is omnichannel distribution. The development of mobile and web solutions ensures a consistent cross-platform experience. Smartphone apps can provide an unparalleled onboarding experience and act as a supplement to web portals. While insurance products are the foundation of innovation and attract more users than a mobile app, making websites mobile-friendly aids in the establishment of a larger user base. These apps, on the other hand, require consistent uptime. Cloud-based insurance platforms reduce the cost of setting up and maintaining insurance software. As 24/7 customer support is required in the insurance industry, choosing the right infrastructure for the app back-end is critical. The reputational damage that can occur in an emergency when there is a system outage cannot be overstated.
Dealing with personal customer data is a delicate subject. As a result, cybersecurity is critical for any insurance product. Fortunately, industry regulators keep a close eye on this aspect of the insurance industry. Companies must ensure that their custom insurance software is fully compliant. Industry leaders use blockchain technology and AI algorithms to improve the security of their insurance products and combat fraud. On the user end, technologies like biometric authentication and two-step verification are extremely useful. GDPR also strengthens several factors for insurance administrators (who use applications to collect and process data), including the obligation to inform current and prospective customers of all the data collected and the purpose for which it will be used, beyond contract management. Therefore, they must obtain their formal and explicit consent.
Shaping the Future of Insurance
The increasing adoption of predictive analytics and the increasing shift towards Cloud computing are key factors driving the insurance market’s growth. Industry experts predict that by 2038, the industry will be fully automated, with AI-assisted end-to-end processes. The successful insurers of the future will undoubtedly be technology companies that are at the forefront of digital innovation. Insurtechs are the quickest and smartest way to achieve that goal. Ranking algorithms will ensure that product recommendations are precisely tailored to the needs of policyholders. As natural language processing will be used across data sources to support initial risk assessments, very few questions will be asked during the onboarding process. Processes will be streamlined, reducing repetition and human data transposition errors during the application process and beyond.
In terms of user experience, automation can speed up interactions between the insurer and the insured, guaranteeing that nothing is missed or delayed, and preventing the policyholder from being asked for the same information multiple times throughout their journey. Some examples include exact risk scoring, streamlined claims processing via computer vision, and best-in-class customer success experience via natural language processing.
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