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Nine key domains of change in the Insurance sector

DEC 16, 2021 | Jim Morrish
 
region: ALL Finance & Insurance technology: ALL

The Insurance sector is amongst the most susceptible to digital transformation-enabled change of all industries. At the core of insurance is the concept of risk-transfer (from an insured party to an insurance carrier), and the availability of more high-quality information about a risk, and enhanced analysis of that information, can result in more accurate pricing and a more efficient market overall. Concepts such as IoT allow insurance offerings to be extended to support new propositions (such as insurance for servitised assets) and enhance services in already-established markets (with, for instance, usage-based insurance and new types of parametric insurance). Artificial Intelligence can play a significant role both in automating processes (for instance claims processing), and also in terms of assessing risks at a level of granularity that might not have been feasible before.

9 key domains of change for insurance

Overall, we have identified nine key domains of change in the insurance sector that are enabled by digital transformation. We analyse these in more detail in our recently published report Digital Transformation in the Insurance Sector. The list comprises:

  • Claims Automation, which considers the digital transformation of claims processing using a range of technologies.
  • Associated Services considers the augmentation of a core insurance offering with associated services such as connected monitoring devices or monitoring services, potentially in association with a channel partner.
  • Parametric Insurance, which is an emerging type of insurance that offers pre-defined pay-outs based on trigger events, rather than the more traditional approach which is to compensate for actual losses.
  • Usage-Based (Automotive) Insurance tracks driving behaviour via telematics devices installed in the insured vehicle and potentially rewards users with a subsidised premium, based on their driving behaviour.
  • Improved Front Office Operations, which has been a focus of the insurance industry for many years and has now evolved to use AI (and RPA) to improve operations.
  • Improved Analytics, including the analysis of better information and improved analyses applied to available information.
  • Servitised Asset Insurance covers a range of opportunities related to servitised assets, including policies covering repairs for those assets, and also insurance for consequential losses in the case that servitised assets malfunction.
  • Supply Chain Insurance considers opportunities related to insurance services for ‘connected’ supply chains and also related risk-management services.
  • Smart Contracts exist to ease the contracting process between an entity requiring insurance and an insurance carrier.

Collectively, the concepts listed above will bring significant changes to the insurance industry. Importantly, many of the concepts listed act to increase the efficiency of risk-transfer (from the insured party to the insurance industry) and so result in insurance premiums that are more closely aligned with actual risks for an insured party, and a decrease in overall risk for the insurance sector. Other areas from the list above (e.g., claims automation) are focussed more on enhancing the overall efficiency of operations in the insurance industry, and still others relate to new emerging opportunities for insurance services related to changes that are underway in different (non-insurance) industries.

IoT and hyperconnectivity are key drivers of change

From a technology perspective, the Internet of Things and Hyperconnectivity emerge as key drivers of change in the insurance industry, alongside Artificial Intelligence and the related technology Robotic Process Automation. Other key technologies include Data Sharing, Distributed Ledger, and Edge Computing. Human Machine Interface and Product Lifecycle Management make fleeting appearances in support of Claims Automation and Servitised Asset Insurance respectively.

Read more about digital transformation in the insurance sector in our recently published report Digital Transformation in the Insurance Sector.

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