The Inevitable Digital Transformation in Insurance

The Inevitable Digital Transformation in Insurance


Pavel Kaplunou

“The only constant in life is change”, goes the famous saying by Heraclitus. The same is certainly true for traditional industries like insurance. The insurance space has long been on the cusp of a digital revolution. The time of digital transformation culminates now, with the disruption caused by insurance technology.

The rise and consolidation of telematics, cloud computing machine learning and overall insurance software development has enabled companies to transform the vast volumes of scattered customer data and transform it into actionable and coherent analysis. The resulting decision support systems and frameworks enable insurance companies to better evaluate risk and make informed decisions based on deep-data insights

Deloittepredicts a practical matter-of-fact digital disruption to sweep the insurance industry as technological penetration finally becomes a given. Otherforecasts show that large companies will form partnerships with emerging insurtech startups to collaborate on data and number crunching to develop sophisticated data-driven solutions. Innovations has been rife in narrower verticals, such as financial insurance, car insurance and healthcare insurance and has gained impetus in larger ones, such as Nationwide.

Anorak Life-insurance and Sterling Bank

An emerging player currently cooperating with financial services companies is Anorak, a company founded in 2017. Anorak’s software suit forms a life insurance recommendation platform that is powered by proprietary algorithms and predictive machine learning to assess the best life insurance plan to individuals regardless of their net worth. In other words it can run an evaluation of a person’s expenses and income to generate a number of insurance coverage options by factoring in relevant financial data.

The company is currently a partner of Sterling Bank, UK’s leading digital bank, where it gains insights into customer’s data, who are eager to share it in exchange for personalized advice based on their stats. Moreover the integrated APIs and digital-first approach allows them to deliver their recommendations straight through digital channels, which finds favor with the many generations of bank clients.

Anorak’s scope of services does not end there as 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 life insurance options.

Google-backed health insurer Clover Health

According to Crunchbase, one of the top 11 companies with the most investment capital raised in 2019. Ranking seventh, the health insurance provider startup Clover Health supplies a personalized Medicare Advantage that caters for senior citizens.

Service subscribers receive personalized health insurance coverage and treatment options through an in-house built platform that collects, organizes and analyses health and behavior data in real-time. It then goes on to provide medical advice to subscribers that is aimed at reducing out-of-pocket expenses.

The healthcare insuretech space seems ripe with companies that are taking advantage of AI and Machine learning, technologies that have only slowly permeated other industries. Companies like Aetna have put it to good use to settle health insurance claims. The technology has allowed the company’s employees more room to focus on the manual processes that truly deserve their attention.

Vehicle insurance and self-driving car insurance

Even since 1998, car insurance companies have leaned on the use of telematics and trackers that record a vehicles movement stats and geolocation data. The technology helped identify and penalize problem derives with higher premiums, while at the same time rewarding the 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 at the promise of bigger savings. Though, at the time, Pew Research Center findings showed that drivers were still skeptical of the way technology encroached upon privacy at the time and gave them a rating, similar to the one used by banks to 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 systems will need to be implemented for risk-assessment. In essence, automated vehicles mean the reduction of risk will entail a new way of determining accountability with a slew of new data points, as well as insurance products and services that will be fit for the job.

The future players of Insurtech

It is easy for large insurance companies to assume that insurtech startups come readily equipped to tackle all the technological challenges that lie on the path to digital transformation. The assumption is often based on the prior experience of the founders and backers of such small companies, who possess the technical talent and know-how in adjacent fields. While often true, it can also lead to the false assumption that all startups possess an in-house team, despite a significant share of the work being outsourced to offshore centres of expertise, who may have untapped expertise in the related field.

However, whatever the talent behind them, one thing remains arguably true — the application of agile product development methodologies in insurance. Be it  API-driven or cloud-based solutions in conjunction with data mining and machine learning, the insurance space is surely morphing into the insurtech space on the whole. The expansion in the use of technology is all but imminent and in order to stay relevant and competitive traditional insurance companies will need to adapt to be remembered in the coming decade.