The Technological Disruptions That Will Shape the Future of Insurance

In the landscape of insurance, tech disruptions have played a pivotal role, shaping growth patterns and influencing market dynamics. This impact has been particularly pronounced in developing markets, where the pace of penetration has been comparatively slower. An underlying reason for this trend is the trust deficit between customers and insurance providers, compounded by limited disposable income among the population in many of these emerging markets.

Over the last decade, a remarkable surge in insurance trends has occurred, catalyzed by the advancements in technology. Experts within the industry anticipate that the trajectory of growth will be increasingly propelled by tech disruptions, superseding other traditional drivers. While the transformative changes and progress might not unfold in an instant, the winds of change are undeniably sweeping through the sector, primarily driven by technological innovations and creative disruptions.

Looking ahead, the landscape of insurance is poised for a paradigm shift as tech disruptions take center stage. Future insurance enterprises are expected to be intricately woven with technology, with automation expected to define their operations comprehensively. Those companies that embrace this imminent change and adapt promptly are positioned to reap substantial rewards. On the flip side, those who adopt a wait-and-see approach might find themselves applauding the proactive pioneers. The horizon holds the promise of transformative tech innovations that will potentially disrupt the industry, offering insurance companies a chance to leverage these disruptions for significant and lasting impact.

Artificial intelligence (AI)

AI is an umbrella term that is used to refer to four different classes of Artificial Intelligence namely Cognitive, Data Science, Computing, and Machine Learning. AI is expected to play a fundamental role in helping underwriters unlock their potential in terms of value addition to their back and front office operations. Data science and machine learning, for instance, is expected to take center stage in implementing these processes because they are the most understood and the most used forms of AI. The advancement in AI and machine learning is already making it possible to leverage unstructured datasets and companies are already using this development. Companies like Zhong An, an online-only insurer in China have implemented AI in all their processes ranging from product pricing to consumer trends prediction. Companies are expected to make use of the information such as credit histories and online usage trends of clients to come up with algorithms that would customize products for customers. But more value will be achieved by insurers seeking to use AI to improve and automate all back-end processes to be seamless and error-free because, in this industry, perception is everything.

Blockchain and Chatbots

Blockchain technology is closely related to AI and Machine learning. Insurance distribution channels especially those directly related to micro-insurance products are expected to be modified and in some instances re-engineered completely to adapt to the changing and emerging trends in technology. More and more companies have already adopted the USSD approach which is considered a low-touch approach in terms of consumer connectivity. While it has worked very well for most firms, the jury is still out on the viability of this channel as an ideal distribution channel especially in a market where trust in the industry is still an issue to be discussed. Other high-touch channels such as agents and brokers are considered more viable because they provide a certain level of consumer understanding and trust, even if this may not always be the case. Chatbots create an important balance between these two channels and seem to bridge the gap between the tech-savvy consumers and the traditional consumers who still believe in a conversational approach to purchase insurance. Some industry players such as Spixii are already using chatbots to spice up their customer experience while at the same time offering seamless processes that are almost instantaneous. Companies such as Lemonade have already implemented their virtual assistants who can settle claims in a matter of seconds, the fastest being 3 seconds.

Peer-To-Peer
P2P insurance is a term used to describe products such as rotating savings and credit associations that normally group people into pools and then offer insurance. While this is not necessarily a new concept in the insurance industry, we expect to see companies leveraging on technologies such as social media and taking advantage of smartphone penetration to create new group structures. These groups will benefit from more transparent transactions, secure payment gateways, and a more personalized connection. First movers in this space such as Friendsurance and So-Sure are already registering increased customer numbers and saving between 30-80 percent of their administrative finances.

On-Demand Insurance (ODI)

The current crop of consumers has varying consumer needs that insurers will have to adapt to. For instance, the new generation of consumers would prefer to buy items several times in small quantities as opposed to bulk buying periodically. This trend is mostly informed by the irregular income streams that intertwine with competing needs. The solution? “Sachet marketing”. Insurers will be compelled to come up with short-term products that require periodic or regular payment either weekly, daily or monthly. This means that insurers will sell their products on-demand and will either turn a policy on or off depending on the consumer’s needs. As expected, first industry movers such as Kenya Orient’s “Safari Bima” are already enjoying the benefit of this kind of arrangement where consumers can purchase scratch cards or simply relay an SMS to activate their cover when they are ready to do so. As the smartphone penetration Index continues to rise, we expect that more and more firms will get innovative and introduce diverse micro-insurance products for some of the low-income consumers.

Insure Tech

According to FinTech Weekly, InsureTech or Insurance techs are Technologies & platforms that help optimize any of the principles for success or requirements of insurance. By extension: any company that provides insurance through the engagement of technology in a user-centric way. Insurtechs are here to stay and it is expected that they will define the insurance industry in a big way in the next decade. The developed markets have already recorded an upward of 46 percent increase in the number of InsureTechs entering the market every year. While the developing markets are yet to reach this number, the future is dotted with more and more Insurance Technology companies that will disrupt the industry fundamentally. These companies will offer better insurance services and processes that will entice customers to shift from the mainstream Insurance providers while at the same time riding on the backs of these insurance firms.

Conclusion

The future of insurance growth hinges on Tech Disruptions, with success relying on how effectively industry players embrace and apply this technology. The trailblazers at each stage are the ones crafting the path, while others reap the rewards of their innovation.