Automation will be the biggest differentiator in the insurance industry – ETCIO.com

By Saurabh Tiwari

The year 2020 has been a landmark year. It was a year that saw a small virus transform almost every sector of the economy. Most of the financial institutions had to undergo digital transformation because people's propensity to do online transactions grew rapidly. The insurance sector has been no exception as most insurers had to digitally transform their businesses at a much faster pace as lockdowns dramatically changed consumer habits, their needs and expectations, and how they consume services.

This has, however, been a boon for the sector as there had been a long-standing agreement for years that digitisation, and specifically automation, is the differentiator that the insurance industry needs in the evolving digital world.

The industry would see a major shift not only in the way insurers reach out to prospective consumers to sell their products and services, but also a much more seamless and automated processes to ensure a seamless consumer experience right from purchasing and renewing policies, reviewing claims and handling grievances.

Albeit in a nascent stage, many of these changes are already making their mark in the insurance industry. In time to come, we would see more applications of emerging modern technologies in the insurance sector, like software robotics, machine learning, artificial intelligence and cognitive solutions to automate the entire consumer experience while improving profit margins for insurance companies.

In a bid to make the most of first-mover advantage, many insurers have implemented automation strategies already in areas like claims processing and consumer onboarding. The intention is to speed up operations, differentiating their products from their competitors and also provide seamless services to their consumers.

The biggest benefit of automation in the insurance industry is AI-enabled claim processing which reduces the turnaround time drastically from weeks to hours and even minutes. In some cases, it has even been reduced to seconds like in the case of New York-based insurance startup Lemonade which established the record of paying out the claim in just three seconds, the fastest claim settlement in the history of the insurance industry. This may seem like an exception today, but there is no doubt that this would become the norm over the next decade or so. In terms of customer service, automation has already proved to be a game-changer with highly sophisticated chatbots addressing most of the queries of the consumers without any human intervention required.

These chatbots are expected to become even smarter in the coming years and address an even wider range of queries from customers and provide them final resolution instantly. This not only reduces the human resource cost for the insurance company, thereby improving their profit margins, but it also ensures round the clock support with absolutely no waiting time for the customers.

Another area where automation is likely to play an even bigger role going forward is the underwriting process, which involves gathering data from multiple sources and then analysing it to determine risk. Through this underwriting process, the scope of coverage and premium is determined for the policyholder. The process, which used to take several days, has already been automated to a great extent by leveraging digital technologies and one can now get a premium quotation instantly by providing their basic information.

Through a combination of big data analytics and artificial intelligence, this process would become even more sophisticated in the coming years. The data from different sources would automatically be collected, and the claims history and health history of the prospective policyholder automatically analysed, to arrive at a personalised quote for each individual. This would also mean fairer premiums, and hence more faith in the insurance industry.

Since the type and level of risk which needs to be covered by the insurer is different for different individuals based on their age, medical history and lifestyle habits, automation of this risk assessment would rule out any possibility of human error, and even human bias, thus making it possible to determine ones vulnerability to specific ailments and accurately measure the risk.

So those who eat healthy, exercise daily, get regular medical check-ups and maintain an overall healthy lifestyle would be able to lock in a lower premium than, say, one who has a family history of serious ailments smoke or just has a sedentary lifestyle. Some insurers have taken small steps in this direction where they offer discounts to those who achieve specific health goals like walking a specific number of steps over a given period of time. This, of course, is just the beginning.

The author is CTO, Policybazaar.com.

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Automation will be the biggest differentiator in the insurance industry - ETCIO.com