Information Technology in Insurance: How to Make Your Business Smarter?

Pretty much like any industry out there, the $ 4.5 trillion insurance sector is being forced into digital transformation. The change in customer expectations pushes the non-tech industry to adopt telematics, the Internet of Things solutions, enterprise-level apps and Cloud computing in order to improve customer engagement, cut operating costs and offer new types of insurance services and products. In this article I’ll try to estimate the impact of the Information Technology on insurance business and define insurance tech trends for the nearest future.

Information Technology use cases in insurance

Internet of Things

Smart Homes/Building Management Systems (BMSs). By 2022, the global Home Automation market will top $ 121 billion. Over 30 million US households either use a Smart Home solution or plan to install one within 12 months. Connected commercial buildings currently boast the largest Internet of Things’ devices installed base within Smart Cities (733.7 million units). The data generated by temperature, water, air quality and noise level sensors helps tenants, managers and property owners reduce building maintenance expenditures and save on office space; can insurance companies use it, too? American Family Insurance offers a 5% discount on the Proactive Home Insurance plan to customers who install the Ring home security system. AXA, a multibillion French insurance company, uses the data collected by Hive Smart Home system to mitigate multiple domestic accidents including burst pipes and gas leaks. Thanks to environmental sensors which detect mold, smoke and toxic fumes in commercial and residential buildings, insurance agents can significantly improve risk evaluation and loss ratios;

Telematics and self-driving vehicles. Telematics solutions measure several parameters including mileage, speed, braking and turning patters, thus providing insurers with invaluable insights on driver behavior. By 2020, the number of “telematics-friendly” auto insurance providers is expected to reach 36%. The immense popularity of telematics trackers has given rise to usage-based insurance (UBI) policies which offer discounts for safe behavior on the road. There are several high-profile brands that leverage sensor data for policy underwriting including Progressive (Zubie Key), Metromile (pay-per-mile car insurance which saves customers $ 500 a year) and Erie Insurance. The latter, in fact, has gone beyond IoT trackers and now uses drones to assess damage after an accident. According to Cognizant, drones can boost insurance adjusters’ workflow efficiency by up to 50%;

Wearable tech. The global wearable tech market will reach $ 51.6 billion by 2022. Consumer interest in wearables is primarily fueled by the increasing adoption of healthy lifestyle habits; it’s no wonder insurance companies take advantage of the new data channel! John Hancock distributes Fitbit trackers among its consumers and awards Vitality points to users who pursue physical activities on a daily basis; consumers who score enough points to upgrade to Bronze, Silver, Gold or Platinum Vitality Status receive significant discounts on premiums. Another example comes from Beam Technologies, a dental insurance company that monitors customers’ oral hygiene habits via a connected tooth brush. Healthy customers means less doctor visits — and that’s why forward-thinking insurers jump on the Internet of Things bandwagon!

Enterprise Application Software (EAS)

Today the enterprise software term can be applied to any application used by a company, be it Facebook Messenger or a complex document management system. The major reason to address a custom Java/PHP development company and build high-performance enterprise software is to increase productivity and boost revenue through effective data management.

With EAS solutions, insurance companies automatically acquire customer data in real time, transform it into actionable insights and develop new types of insurance products and services (like black box car insurance based on a person’s driving history, on-demand insurance implemented by Uber or Metromile’s pay-per-mile auto insurance we’ve mentioned above).

Artificial Intelligence

Although we’re still a few years away from trusting our jobs, security and lives to smart computer programs, IBM Watson is already 40% better at detecting cancer than experienced doctors. The success of AI development projects can be attributed to the massive amount of data generated by users, sensors and enterprise software. Unlike humans, Artificial Intelligence algorithms do not fail to detect data patterns — and get smarter over time.

Insurance companies can leverage Big Data for case-based claims handling, smart pricing and damage assessment. Lemonade, a NY insurance startup, employs the smart AI Jim bot to reduce paperwork, root out bureaucracy and settle claims in mere hours. Oscar, a promising insurtech company co-founded by Jared Kushner’s younger brother, fed tons of electronic medical records and insurance claims/doctor directories data to an AI algorithm and now uses the software to match patients with the right doctors. In fact, AI-powered insurance data analytics can be a business of its own; provided you address a reliable vendor with a solid AI/IoT portfolio (make sure to check ours at r-stylelab.com while you’re at it), your project may disrupt the entire insurance industry!

Closing thoughts

By investing in information technology, insurance companies can reduce the number of intermediaries (as of now, brokers receive $ 45 billion in annual compensation), increase the transparency of insurance transactions and get a better insight into customer needs.

According to Gartner’s 2016 report, 64% of the world’s top 25 insurers have already invested in insurance technology start-ups. The firm also claims 80% of property and casualty insurance companies will enlist the support of “insurtech” start-ups to secure their positions in the competitive market. The digital transformation of the insurance industry has officially begun — and it’s up to you to join in.