Digital technology is a global megatrend which is transforming a variety of industries that includes the insurance sector. Insurance sector has been a bit slow to IT adoption due to rapid changes in technology and also because their distribution channels are still conservative, i.e., handled by agents and brokers and were in fact not ready to adopt new technology. However, digital technologies adoption by customers that include social media, smart phones, electronic transactions, etc., enabled by cloud service models, e-commerce and mobility are making an impact on the technical and commercial capabilities for many insurance companies. Insurers are quick to capitalize on this trend.
According to EY survey on ‘Global Insurance Market Trends’ the insurance sector is growing and offering potential markets for insurance companies particularly in the Asia-Pacific region. The current growth for insurance in Asia-Pacific region is around 39% of the total world’s economic growth. In the context of India, the insurance sector is having a market share of US$ 60 billion and is expected to increase four fold in the next decade. As per the Indian Brand Equity Foundation (IBEF), December 2015 estimates the general insurance business in India is expected to grow at 17% in the coming years. All this growth generates huge volumes of data and customer information.
EY Global Consumer Insurance Survey 2014 report highlights the need for strengthening customer relationships to achieving customer loyalty in insurance services. This is becoming a strategic imperative for insurance sector to encompass all product categories, geographies and to incorporate complete range of operating models. Growth in terms of increasing insured customers would need superior IT environment and platforms to respond effectively and engage customers with updated information and communication all the time.
Key business drivers for IT adoption in insurance:
- Engaging customers using multi-channels of customer interaction and include all age segments
- Devise strategies to include the growing investments in internet and mobile channel strategies for faster and instant communication
- Collaborate with partners to launch innovative products in areas such as micro-finance, wealth management, etc.
- Automate underwriting processes using data analytics and business intelligence (BI) and predict real time fraud analysis, risk analysis
- Leverage Bancassurance banking systems and regulations available in each country to explore cross-selling of insurance products, particularly in emerging markets like India
Digital technologies have the ability to intersect and establish interdependences with different insurance functions and enable collaboration. Based on the above business drivers, the following IT adoption trends can be currently found in insurance companies.
- Social media analysis: Insurers are turning to social media as a marketing medium and a platform for collaboration. Social media is widely used for networking with friends and business partners. The usage of social media is made easy by smart phones and mobile devices. Insurers are able to target new customers based on their life events and also use social media networks to communicate with internal and external stakeholders.
- Focus on SaaS solutions: Insurance companies are deploying applications by adopting SaaS solutions because it offers superior infrastructure, high levels of security and low risk. Insurance companies have the advantage of access to latest infrastructure and IT platforms at low cost. SaaS offers a perfect solution for insurance to improve their efficiency at minimal capital costs.
- Real time architectures for agility: Real time data sources are mobile technologies and social media which can be leveraged by insurance companies to become more competitive. Capturing real time data from online channels is proving a gold mine for insurance companies because they provide insights on customer behaviour based on which insurance products are strategized. Insurance companies are deploying data analytics tools, BI platforms and data visualization tools to derive full benefits of real time data.
- Data analytics and big data: The ability to capture real time data, big data and analytics play an important role for insurers in terms of potential customers. The recent trend is the adoption of sensor technologies named telematics used to monitor driving behaviours of the individual. These technologies help insurance companies to provide usage-based insurance policies.
The above trends offer immense benefits for both, the insurer and the insured.
Key benefits realized by IT adoption:
- Social media is proving to be an effective tool for insurers to garner more leads, remediation and retention of insurers along with targeting new potential customers.
- SaaS adoption significantly reduces cost and lead time for implementing IT systems and applications. Mostly SaaS is outsourced from data centers therefore insurance company can save cost in IT hardware and in hiring IT staff.
- Development of new products and strategies are possible from data analytics tools that provide customer insights. BI and data visualization tools enable competitiveness and agility.
- IT improves overall efficiency in operations, communications and instant information sharing with customers and stakeholders
Information plays an important role in the insurance sector in terms of product pricing, development, risk management, claim processing and fraud detection. These functions can be executed by collecting data from multiple sources and by using software tools to obtain meaningful insights from data. In order to effectively implement insurance operations, insurance sector needs to adopt IT systems, new technologies and networks to capture real time data and bolster their data storage capacity for analysis in order to capitalize more customers.