The insurance industry is evolving rapidly, and technology is playing a crucial role in driving this change. Insurance companies are adopting new technologies and digital tools to improve efficiency, enhance customer experience, and streamline operations. As we move further into 2023, several emerging trends are expected to shape the insurance landscape. From artificial intelligence to IoT and telematics, insurance technology (insurtech) is set to transform the industry and bring new opportunities for growth. In this blog post, we'll take a closer look at some of the key insurtech trends that will dominate the insurance market in 2023.
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As the world becomes increasingly digital and connected, the management of incumbent insurers companies faces mounting pressure to undergo a digital transformation to stay competitive. Over the next ten years, emerging digital technologies will impact insurance so heavily that the fully tech-enabled insurance organizations will bear little resemblance to those we know today.
To keep their competitive edge, companies from the insurance sector must keep a sharp eye on the emerging technology trends that could potentially disrupt the entire insurance business. As technology advances, it opens up new opportunities to improve operational efficiencies, increase cost savings, and offer more personalized experiences. Though adopting innovative technologies and developing digital channels seems inevitable, the question of where to focus remains. With technological advancements progressing so rapidly, insurers' essential skill becomes their ability to accurately analyze, evaluate, adopt, and implement the right technologies.
At the beginning of 2023, we can already see some trends that will have a strong impact on the insurance business models and technology in the year ahead and beyond.
The increased levels of customer data make the insurance business more complex than ever. The traditional approach in which insurance companies collect scattered data across siloed business units significantly slows down business operations as decision-makers don't have immediate access to accurate data. Additionally, handling huge amounts of unstructured data using manual processes makes analysis time-consuming, expensive, and prone to errors. On top of that, information disconnect might cause insurers' compliance issues and lead to hefty fines.
These are some of the reasons why we expect to see an expanded role of artificial intelligence all over the insurance industry. Data-heavy industries, like insurance, are in an excellent position to leverage the power of artificial intelligence (AI) to increase speed, efficiency, and accuracy, derive customer and market insights and reduce risk. The possibilities for applications of AI stretch across the entire value chain, from the back-office operations to the front.
Fabian Schramm, customer engagement manager at Unit8, forecasts that AI capabilities will be critical for developing modern insurance offerings in the future.
"Popular insurance industry AI applications range from risk management, fraud detection and prevention, personalized offerings, and customer churn (attrition) reduction to climate change impact prediction. On-demand and usage-based insurance (UBI) offerings will be driven by AI's ability to aggregate disparate data sources and ultimately deliver more flexibility to customers."
Schramm also identifies four key areas where the impact of AI will be most noticeable:
Dynamic changes in the insurance market and the pace of business growth mean that manual processes have to be replaced. To embrace robotic process automation and provide better experiences for clients, partners, and employees, insurers are implementing AI capabilities across their entire value chain. By incorporating AI-based tools and solutions into their operations, they will be able to face uncertainties and efficiently compete with threats coming from insurtech startups and other new market entrants.
The cloud is one of the most transformative technologies that revolutionized the way modern businesses operate. Though this technology has been around for over a decade, companies from the financial services industry were initially slow to adopt it. However, the obvious benefits of improving efficiency, customer centricity, and becoming a data-driven organization have pushed insurers to increase the adoption of cloud computing over the years. As insurance carriers begin to embrace digital tools and solutions extensively, cloud computing becomes the critical element of their IT strategy. Today, according to a research report from Novarica, over 90% of insurers are ta
king advantage of cloud technologies to various degrees.
Nevertheless, in 2023, we can expect that the cloud adoption trend will experience a significant surge. Besides the traditional benefits of cloud technology, embodied in reduced operating costs, simpler solution architectures, higher processing speed, and (almost) unlimited scalability, emerging technologies pose another good reason for shifting data to the cloud platform. With the rise of the importance of new technologies for the insurance industry, like artificial intelligence, machine learning, smart data analytics, telematics, IoT, and others, efficient management and utilization of incredibly huge data sets becomes necessary. This demands immense computing power that only the cloud can provide.
Additionally, the appearance of new business models in the insurance industry and faster product innovation cycles demand an agile, flexible, and scalable digital infrastructure. As cloud computing remains the key driver and enabler of digitization and innovation, finding and partnering with the right cloud providers becomes imperative.
As a technology that connects the physical and digital worlds, the IoT has become a rapidly growing trend that will change the insurance industry as we know it in the upcoming years. The increased number of IoT devices enables insurance companies to significantly expand the amount of data from various sources connected to the internet and improve insurers' efficiency, risk assessment, and pricing modeling.
The dense network of sensors and connected devices shared across the ultra-fast 5G infrastructure, analyzed and processed using distributed edge architecture, creates the foundation for real-time data exchange.
The increased frequency and amount of data collected on customer behavior, risk profiles, and usage patterns allow insurers to get a clearer picture of the actual risks associated with specific customers. Using these results and advanced analytical capabilities, insurers can design policies that specifically address the needs of these customers. But IoT can provide so much more. The insurers can use the collected data to detect and prevent fraud, get notifications about the occurred incidents, reduce claims processing time, lower actual risk, and mitigate losses.
Telematics presents a great opportunity for insurers to enhance customer experience and streamline business operations, thanks to the usage-based insurance system that enables them to calculate and alter policyholders' rates based on real-time data. Although initial attempts to implement IoT were a couple of years back, insurance firms still haven't adopted this technology. However, it is predicted that widespread adoption of IoT solutions will occur in 2023.
Matteo Carbone, the founder and director of the Connected Insurance Observatory believes that the capabilities of IoT-based solutions, mobile devices, and mobile apps will be shaping the insurance industry's future.
"The opportunity for telematics will only grow. Consumers love to interact with their smartphones and digital tools, and large tech companies are addressing consumers' needs based on the collected data with highly targeted offers, which consumers seem to like. Carriers' experience will mature, and the cost of technology will keep dropping, making it even more accessible. Data sources will increase, too, letting carriers create a powerful mix of elements and better assess driver risks."
One of the most noticeable trends we expect to see in 2023 is the broader adoption of low-code/no-code methodology. With advancements in technology, speed has become the name of the game for modern insurance companies. To stay on top of their competition, modern insurers need the ability to manage insurance platforms, deploy updates, and develop new products as fast as possible.
The low-code/no-code methodology enables companies to manage their software and applications with minimal coding, using an intuitive, user-friendly drag-and-drop functionality instead. Taking advantage of this modern methodology allows insurers to increase the number of non-technical employees capable of executing critical technical tasks. Gartner predicts that by the end of 2024, 75% of large enterprises will be using at least four low-code development tools for both IT application development and citizen development initiatives.
The rising fame of this idea stems from its ability to allow insurance companies to act quickly. At the same time, the new approach helps insurers to offload stretched development resources to non-technical resources, which results in decreased backlog, automated insurance processes, a substantial cost reduction, higher productivity, and better customer experience. However, the most vital quality of this methodology comes from the ability to significantly accelerate the time to market for new products compared to traditional development. Thanks to this, business users can independently configure and design, and rapidly launch new insurance products without the involvement of technical staff.
While the adoption of low-code technology is predicted to experience a significant increase in 2023, insurance companies need to be aware of its limitations. As Kevin Crawford, Global Head of Insurance at Endava, explains:
"Keep it simple! These (low-code) tools are designed for creating reasonably simple applications, such as quote-and-bind functions. Trying to extend them further will become quite challenging both from a configuration and maintenance perspective. These tools are not meant to replace complex applications like an ERP system, for example."
It is crucial for insurance companies to accurately assess their technology needs and weigh the pros and cons of low-code technology to determine its suitability for their unique demands before implementing it.
Digitalization is having a significant transformational impact on companies across all industries. Fierce competition and changing customer demands are raising the bar on customer satisfaction. Modern, digitally empowered customers look for personalized and customizable products and services delivered in a fast, transparent, and convenient format.
Thanks to advanced technology, insurers today gather massive amounts of customer data. When adequately processed and analyzed, this data uncovers valuable customer insight and enables carriers to offer highly individualized insurance products. But to expand their reach, they need to connect with the right partners that provide capabilities that extend their offerings and enhance customers' digital experiences.
The rise of the API (Application Programming Interfaces) technology enabled insurance companies to create partner networks and design, develop, and connect various products and customer services on a single insurance platform to provide frictionless buying experiences. Being part of digital ecosystems gives insurers an opportunity to expand their market, stay on top of current trends, and embed their insurance products in a complimentary product (or a digital service). Through digital ecosystems, insurance companies can easily reach customers, offer comprehensive products, and exceed customer expectations.
The focus of insurance ecosystems is to improve efficiency and increase customer value, and all the participants in the value chain must strive to deliver them consistently. As stated by Mike Connor, the CEO of SVIA:
“Within these ecosystems, there is a continual race to provide ever greater value to customers with ever greater efficiency. That means continually updating user engagement and experiences, distribution avenues, product and business models, and business processes as new, more effective partners, solutions, and value-added components emerge."
Fast technological advancements will become major disruptors of the insurance sector. Though these disruptions will create significant opportunities for insurers to increase competitiveness, productivity, and efficiency, enhance customers' digital experiences, and reduce risk, they will also pose a significant threat to traditional players. To readily embrace a digital future of insurance, forward-looking firms must continuously track and evaluate emerging technologies and trends and their business implications.
The technology trends highlighted in this article will profoundly impact reshaping insurance market as we know it. In the uncertain and ambiguous world, adaptability, resiliency, and the capacity to innovate become critical for navigating ambiguity and uncertainty. Those companies that embrace modern insurance technologies, build digital infrastructure, and acquire the right digital capabilities will be better equipped to achieve these goals.
Find out how we can help you to stay ahead of the curve and remain competitive with Adacta.