Insurance is still the old bastion where the ‘old boys club’ rules the roost and presides over the legacy technologies of an era bygone. While it is a stretch, humor me in imagining the erstwhile Titanic First Class Smoke Room (see here for more) where only the most privileged were allowed to enter.
The digital lifecycle may have other drawbacks like high claims ratio (think moral hazard). Still the cost of sales is much lower due to relying on digital experience. The Lemonade example (“Forget Everything You Know About Insurance.”) is a worthwhile mention. While the pundits have already written their epitaph, one thing is for sure; Lemonade demonstrated how quickly you can sell directly to the Consumer with an awesome digital experience.
Think about that for a minute. If they and some others like Root have solved the selling cost challenge, it is highly probable that they or someone else will solve the high claims ratio issue as well. More than likely, the solution is going to be based on high tech. Think big data Underwriting, predictive Underwriting and so on. It is no wonder that the combined ratio of digitized insurance lifecycle is far more optimal than traditional baseline insurance lifecycle.
- Using big data in underwriting, that is risk pricing
- Digital marketing (including social media) and direct online sales of insurance products
- Predictive underwriting based on AI
- Data analytics and AI models (related to above)
- Self-managed claims
- Technology for fraud prevention including geospatial analytics, Symantec/social relationships
- Telematics, wearables, and mobile apps that voluntarily track
- Automation of underwriting, claims, payments, Renewals and Compliance