Jason Paau
The demand for more and enhanced automated experiences in our daily lives is growing, and the insurance sector is no exception. In recent years, a new crop of insurtech startups has embraced this approach to improve efficiency and experience for the customer while better calculating risk for the business.
But it has not been an easy process, and digital transformation in this sector is far from complete. Consumers are constantly looking for better options with more efficient and easy-to-use services.
In fact, a recent Publicis Sapient survey found that 100% of consumers who have switched providers over the last year cited a reason pertaining to customer experience. That is greater than the 70% that cited pricing as a driver for switching.
This points to a changing market where consumers have higher and different expectations for insurance experiences, based partly on the ease with which they now do other tasks digitally, like shopping and banking. But at the same time, they are hesitant to rely too much on automated processes, given both the emotional nature of the events that lead consumers to file insurance claims and growing concerns about ethics and privacy when it comes to data.
There is no question that on many levels, consumers are moving toward digital insurance experiences, and this is poised to increase. According to our survey, people would prefer a mobile app instead of phone or in-person conversations for receiving updates on claims.
Consumers are also looking for what they perceive as better digital services. In fact, 15% said they switched providers in search of better digital experiences. Among the tasks that could be improved with technology were filling out forms and providing information, and understanding policies and the coverage provided.
Insurance companies are finally responding. Investment in insurtech soared to reach $15.4 billion in 2021, nearly double the amount raised in 2020. And the money was not just from a few large investors, but from a variety of sources and aimed into a variety of insurance providers, indicating the increased role of technology throughout the sector. This clearly shows that the sector is on a path of change.
This also comes at a time of other changes impacting and challenging the insurance sector, like the COVID-19 pandemic, increased severe weather events and the rise of self-driving cars.
The growing role of data and the need to understand it
Smooth digital experiences alone are not the only change happening. The way that insurance companies, and consumers, are using data is also rapidly evolving. New products such as usage-based insurance (UBI) leverage data to incentivize policyholders for “good behavior.”
For example, in the auto insurance sector, drivers with safer habits behind the wheel or who drive less than the national average can receive discounts on their insurance plans. Such approaches may become common in more insurance products.
In addition, with connected cars and connected devices in homes, accidents and damage can be automatically and immediately reported to insurance companies. For example, many connected cars record not just video but are basically computers that have knowledge of each component, creating a scenario where not just a collision but also the damage could be reported automatically.
As 5G infrastructure becomes more prevalent, the opportunity for tapping new sources of information will also grow. The potential benefits — accompanied by clearly written policies about how the data is being used — could go a long way in making people feel more comfortable sharing their personal information.
At the same time, with more data at play, and much of it coming from the customer or with the customers’ consent, insurers will also need to be ready to use that data to justify and explain decisions like price increases for coverage or payouts on claims.
Insurers themselves will need to understand how their algorithms work and be able to respond to customer inquiries —these shouldn’t be black boxes. Rather, companies need to understand exactly how they arrive at such conclusions in order to communicate that to customers.
People are, and will remain, key to customer service
Amid these changes, it is also clear that people continue to play a key role, especially when it comes to customer service, where they can provide the empathy and care that data and AI cannot. When people are in an emotionally charged situation, like a car crash, they often want to talk to a real person.
Our survey showed that the majority of respondents switched plans because of unsatisfactory customer service, signaling a strong need to keep the human touch present, when appropriate, in the industry. Moreover, we found that 29% of consumers will continue to prefer interactive conversations (online messaging, phone, in-person) with insurance providers to discuss updates on claims, another sign that human involvement will remain key in some situations.
That said, AI and other tech solutions will increasingly be used to quickly sort out which claims need to be handled with more human intervention and which can be automated. In-house data platforms that give insurance company employees a dashboard view of everything they need to know about each customer will also become more important in providing efficient service.
When it comes to detecting fraud, AI is also emerging as a powerful aid. For example, insurtech Solera has a database of the average costs of repairing each part of a car, helping to ensure that no one overpays or overclaims.
Another continuing role for people is that despite the increase in direct digital channels when signing up for insurance, 49% of consumers still bought life insurance from independent agents in 2020. But this demonstrates how many customers prefer independent brokers over captive brokers.
This audience is important enough that as insurance providers increase their reliance on digital processes, they need to make sure they have platforms that cater well to independent brokers as well. Like consumers, independent agents also increasingly gravitate toward and use insurances that offer the best agent experiences. These include quickly providing the information agents need to make sales, efficient processes for onboarding, renewing and processing claims, fast agent reimbursements and quality customer care.
Digital transformation in insurance is still in its early stages, and brings plenty of challenges, including improving customer experiences, and balancing the role of humans, data and automated processes. But there is no doubt that the combination of data, automation and massive investments in the sector is a powerful driver for change.
Given the significant role that trust and transparency plays in insurance, established players can and will leverage their long track records of consumer trust to continue to dominate the field. It won’t be just about the new insurtech startups.
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