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Jan 03, 2020 | 7 min read

Digital Transformation in Insurance Industry: Why It Matters

Pavel Kaplunou , Marketing Communications

“The only constant in life is change”, goes the famous saying by Heraclitus. For the insurance industry today that change is digital. The rise of telemetry, cloud computing, and machine learning influenced the insurance industry. Software solutions filled with progressive features have enabled insurance companies to completely transform their strategies. 

Advanced analytics, embedded in core insurance software, has allowed organizations to tap into the vast volumes of disparate customer data to produce actionable and coherent analyses. Now, insurers can better evaluate risks and make more informed decisions based on deep-data insights.

With the rise of technologies, Deloitte predicts the growth of the number of insurance software providers. The trend encompasses various insurance subsectors. For instance, carriers tend to partner with emerging insurtech startups to develop proper insurance carrier software

Innovations emerge also in other branches of the industry such as cars, pets, and health insurance. Software and applications allow driving new value for providers, helping fill growing customers’ needs. Therefore, insurance offers tend to take new forms due to innovations. In the article, we will showcase how the market changes along with new technologies. 


Insurtech startups

Insurtech startups gain momentum which we can see in the upward curve of industry investments. Compared with 2019, in 2020 total funding increased by 12%, while deal volume increased by 20%. 

The companies that are interested the most in startup advancement are insurance companies. They represent the majority that actively participates in startup investment rounds. That fact outlines the growing necessity of bespoke applications and state-of-the-art software for insurance agents.

The startups generally innovate two kinds of solutions: mobile apps and insurance software. Applications provide remote access to insurance services and make a customer journey more flexible. As an example, the UK-based insurtech Cuvva enables flexible usage-based insurance cover for drivers via mobile phone. 

A startup that focuses on health insurance, Oscar Health, tackles customers’ common points, like using a mobile app to connect with doctors anytime, and generates an insurance package based on customers’ budgets. Besides these ideas, there are a lot of fascinating use cases in the B2B industry.

Insurtech software helps traditional insurers transform into digitally mature organizations. For example, Shift Technology designed an AI-native SaaS solution that assists providers in defeating fraud and automating claims. Another insurtech company FitSense helps health & life insurance companies personalize insurance by using customer data from wearable devices.

Although startups in the insurance sector are less known compared to unicorns from other industries, investors still see a huge potential in insurtech. Software and mobile apps, indeed, become virtually determiners of an insurer’s relevance to the growing customer requirements. So, there are a lot of things to do in this niche.

Let’s discover other disruptors in insurtech. 


Anorak Life-insurance and Sterling Bank

Anorak is an emerging player in the insurance industry. The firm is known due to its life insurance software powered by proprietary algorithms and predictive machine learning. These attributes facilitate customization of insurance policy: software assesses a person’s expenses and income and then generates bespoke insurance offerings.

The company partners with Sterling Bank, the UK’s leading digital bank. The cooperation comes as the source of insights deriving from the customers’ data. The integrated APIs and a digital-first approach let Anorak deliver recommendations directly through digital channels, which found favor with tech-savvy insurance customers.

Anorak’s scope of services does not end there. It can also leverage its APIs to process data from customers’ money and personal finance apps, mortgage brokerage firms, and investment platforms to provide tailored options.


Health insurer Clover Health 

According to Crunchbase, Clover Health was in the top 11 insurance companies with the most investment capital raised in 2019. Ranking seventh, the health insurance startup supplies a personalized medicare advantage that caters to senior citizens.

Service subscribers receive tailored health coverage and treatment options through a proprietary insurance portal. The software behind the web platform analyses health data in real time. Then the platform provides medical advice to subscribers aimed at reducing out-of-pocket expenses on insurance claims.


Vehicle and self-driving car insurance

Even since 1998, car insurance companies have leveraged telemetry and trackers to keep a vehicle usage log and record geolocation data. The technology helped identify and penalize problem drivers with higher premiums, while at the same time rewarding law-abiding drivers with lower insurance fees.

The use of such IoT trackers never really took off until about 2016, when the number of cars connected to the internet skyrocketed to about a third of all the cars in America. Auto-insurance cars were now seeing more customers, who were willing to offer up their data and be tracked with the promise of bigger savings. Though, at the time, Pew Research Center findings showed that drivers were still skeptical of the way technology encroached on privacy and gave them a rating, similar to how banks determine creditworthiness. 

Come 2020, the auto-insurance segment is now facing a major change with the popularity of the automated vehicle. Mass-market adoption will mean that new and even more flexible business models will need to be implemented for risk-assessment. In essence, self-driving cars will entail a new way of determining accountability with a slew of new datasets, as well as insurance products and services.


Benefits of insurance digital transformation technology

When you decide to follow the loud voice of the technology revolution, you will notice not only the benefits but also the challenges on your way. Digital transformation is still an intricate initiative for an average insurance company. Software development, in fact, requires in-depth IT expertise. The situation becomes even more complex due to a common bias in the industry: person-to-person interaction is an essential component of the insurance customer journey. 

On the other hand, the rise of digitization across all major industries leaves insurers disconnected from a large digital-first customer segment. Insurers who do embrace digital transformation in their line of business can expect a plethora of benefits. 

First and foremost, the switch from legacy systems to innovative technologies will grant long-term savings by reducing operational costs. Manual claim processing can be automated, while face-to-face interactions can be supplemented by conversational AI. Insurance provider Lemonade has already managed to secure a loyal customer base thanks to its intelligent insurance application.

If there is anything motivating loyalty among customers, it is a high customer satisfaction rate. In claims-related scenarios, customers expect prompt responses and utmost care. In emergencies, they need contextually relevant advice and great customer service from providers. And that requires automated and optimized workflows.

What is more, by using insurance management software providers can increase operational efficiency through better claims management and customer care. For those who take up the path of innovation, the results will also reflect improved competitiveness and decreased employee turnover.


Digital transformation trends in insurtech

A business owner may ask what technologies insurance software development companies invest in. The consulting firm Accenture gives an answer: advanced data analytics, cloud networking, blockchain, and AI.

Another growing area considers mobile insurance applications, as mobile penetration nears 80%. According to market analysts, apps will become the norm for quick claims management and processing. 


Insurance Digital Transformation Trends

Key takeaways

Being slower than other financial services domains, the insurance sector will gradually move closer to introducing new operational practices. 

Insurance trends in 2020 have shown that clients expect more deep and personalized interaction with insurers to get more convenient insurance options. In order to rise to the customers’ wants, insurers will have to:

  • adopt new business models and practices;
  • offer digital insurance services for a digital-first customer base;
  • embrace digital transformation can expect to be the ones to capture a larger market share than that of their competition;
  • strike partnerships with existing insurance technology startups or establish new insurtech divisions in-house;
  • improve customer care and increase customer satisfaction rates.

Insurers who vote out of digital transformation plans risk losing relevance with a growing segment of younger customers accustomed to using technology. Straying from innovation could result in drastic market shifts as insurtech players score favors with insurance customers, while industry mavens begin to dissolve. Inevitably, new digital tools will significantly assist insurance companies and the customers they serve.


03 January 2020


Pavel Kaplunou, Marketing Communications

Pavel is Smart IT's Marketing Communication Manager. He oversees content creation and is in charge of the official Smart IT blog. Contact Pavel to learn about potential media and content collaborations. [email protected]