The multibillion dollar digital insurance industry is huge and growing rapidly, as new technological innovations accelerate development. Insurtech companies have found a multitude of ways to disrupt the sector, powered by technologies like blockchain, AI, data analytics, and cloud computing. Legacy players in the sector will have no choice, in the coming years, but to adapt — or lose their footing to savvy startups.
Today’s customer increasingly doesn’t want — or even understand how — to negotiate with a human agent on a call. They want to click a few buttons, compare a few policies, and instantly purchase a policy. As in other sectors, the expectation is speed, convenience, and an absolute bare minimum of interpersonal interaction. Here are some of the main reasons digital insurance is on the rise and how it’s making insurance easier for just about everyone.
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1. Price Transparency
The most obvious advantage of digital insurance is that the customer can quickly compare a number of different quotes. They can check multiple websites one after the other, or in some cases compare rates all at once with an insurance quote aggregator. Once upon a time, they might have had to make a dozen 15-minute phone calls back-to-back just to get basic information. Now, however, they can get dozens of car, flood, and home insurance quotes in just seconds.
In addition to being faster to access, online quotes are far more transparent. The customer doesn’t need to put their trust in an agent who has a personal investment in at least one company. They also don’t need to worry about an agent upselling them or being biased toward a specific plan. With online insurance, the customer sees an objective quote based on data they’ve entered themselves. They can also take their time and explore all the options without any sales pressure.
2. Customer Convenience
The speed of digital insurance is also a huge asset when it comes to centering the customer’s needs. After choosing the plan and quote that works best for them, they can request to have an agent reach out. Of course this doesn’t — as many millennials and Gen Z would like — completely eliminate all human interaction from the process. It does, however, eliminate the hassle and social anxiety around making all those research-focused calls.
Another advantage to digital insurance, from the customer perspective, is the ability to submit claims online. A customer can log into their portal, file a claim online, and submit all their documentation electronically. If they’re not sure what to do, they can simply follow the written instructions, avoiding the embarrassment of having someone walk them through it. They can also do it any time, day or night, working around any scheduling challenges.
3. AI and Predictive Analytics
So far, this article has talked about reasons for digital insurance adoption from the customer’s perspective. There are also many advantages to digital insurance as far as insurance companies are concerned. One such advantage, and a major reason for increasing adoption, is the rise of artificial intelligence and related technologies. These advances make it much simpler, faster, and more cost effective to calculate premiums and enable better underwriting decisions.
AI uses massive amounts of data to evaluate a customer’s personal data (age, location, health, etc.) against historical information from similar customers. It also looks at external data — for example, crime rates or weather where they live. AI then uses predictive analytics to determine each customer’s level of risk and how likely they are to make a claim. Once those factors are taken into account, AI can calculate the right premium, deductible, and coverage limits.
4. Better Security
Another benefit to digital insurance from both the provider and client side is the adoption of better cybersecurity technologies. Legacy technologies may have once made it too risky to consider obtaining an insurance policy online. As insurtech grows, however, more companies are investing in what’s called “trust architecture.” They’re prioritizing their customer’s comfort and safety in sharing their personal information online.
Advances in data protection technologies like encryption, threat detection, and multifactor authentication are making it easier to keep information private. These innovations have boosted customer confidence in buying insurance — and just about everything else — online. Yes, individuals may still have more trust in legacy insurance companies than in new startups. That perception is changing, however, as startups continue to prioritize their customers’ data privacy.
5. IoT and Predictive Maintenance
The Internet of Things (IoT) and predictive maintenance are driving increased adoption of certain types of insurance. These technologies are particularly relevant when it comes to car insurance, home insurance, and healthcare. Smart devices installed in cars and homes — or worn as wearables on customers bodies — collect thousands of data points. These can be used to continuously and accurately assess risks and predict problems before they happen.
By spotting malfunctions, failures, health issues, and more in advance, IoT can reduce the cost of claims. IoT devices can alert individuals when it’s time to make a small repair or replacement (or get a certain treatment). Insurance companies are thus less likely to wind up covering the costs of catastrophic problems down the line. They can also use the data they collect from customers to offer more accurate (and affordable) quotes on premiums, deductibles, and limits.
Digital Assistance for the Physical World
As technologies advance, there are a multitude of ways in which digital insurance could continue to evolve. A few years down the line, you could be buying an insurance policy from an autonomous AI agent. For the time being, however, new technologies are supporting human agents in their roles. They’re making it easier for agents to create customer-tailored policies in just seconds. The end result is more speed, convenience, and affordability on both sides.