Swiss insurers forced to take action
Digitalization of the insurance industry
The insurance industry is facing major challenges – but the coronavirus pandemic is only part of the problem. Mounting margin pressure, new players and changing client needs are making things difficult for insurers, which are having to focus even more on innovation and digitalization as a result. Only then will they be able to offer their clients a new experience while simultaneously achieving greater efficiency.
Despite the fact that value chain optimization in the insurance business hinges on digitalization, the insurance industry has paid little attention to this mega-trend over the years. Mounting margin pressure, outdated IT infrastructures and new competitors – referred to as insurtechs – are causing quite a bit of trouble for long-established insurers and the coronavirus pandemic has accelerated this trend even further. Changed client needs and life plans are some of the factors forcing the industry to realign. KPMG’s most recent publication “Clarity on Insurance” shows how insurers can optimize their value chains and gain greater proximity to their clients by leveraging digitalization and artificial intelligence.
Insurance policies from one source
For most insured people in Switzerland, their experience with insurance looks something like this: Once a year, we receive an invoice for our insurance premium, which we then pay through our e-banking app. We file the invoice away in a binder with policies from multiple in-surers, each of which covers one specific aspect of our lives or assets. Then, with a little bit of luck, the rest of the year passes by without any further interactions with those insurers.
Accelerated digitalization and changing client needs mean that this process is increasingly in flux. “The insurance client of the future no longer wants multiple policies through several different insurance companies. They want a single contract with one insurance company that integrates all the elements they need in a simple, understandable way and covers the entire range – from prevention to protection to support,” explains Thomas Schneider, Sector Head Insurance at KPMG Switzerland.
The interface will probably be an app on a mobile device and accompany clients all day long – with automated information and helpful tips. At the same time, these types of models will allow clients to protect themselves dynamically against risks – depending on their lifestyle and based on their current needs or activities. That is the case, for example, if the app automatically includes travel insurance as soon as the client leaves his or her home country or even warns drivers that they’re driving too fast.
Artificial intelligence in underwriting and claims management
Before they can offer this experience to clients, however, the companies first have to invest in digitalizing their value chains and making smart use of their data. That also includes modern-izing outdated IT systems and making increased use of both cloud services and artificial intel-ligence. According to Schneider, “the primary focus is on adopting smarter approaches to un-derwriting and claims management, because these constitute the core of the value chain.” New solutions are needed to completely redesign the customer experience and transform a boring insurance product into a lifestyle product.
A series of different data points gives insurers access to a growing volume of internal and external information. Making smart use of these copious amounts of data offers a host of advantages. Artificial intelligence helps modern-day underwriters take massive amounts of data from several different sources and analyze, structure and process it both swiftly and simultaneously. Not only does that permit more efficient service provision, but also tailored solutions and an improved customer experience. At the same time, artificial intelligence makes it possible to develop new business areas and models because it is capable of identify-ing newly arising and changing client needs.
Modernized infrastructure is essential
“We’re already seeing that insurers are sounding out the possibilities in that regard. Some of them are cooperating with insurtechs and existing technology partners to develop innovative solutions. At the same time, we’re also seeing advances in automation and process optimization, particularly in the area of smart underwriting,” explains Schneider. Nevertheless, legacy issues like outdated IT infrastructures still present huge obstacles because having a robust yet flexible IT platform is pivotally important for making use of all the potential offered by these new possibilities. The vast majority of insurers do not currently have this kind of infrastructure. “But the pandemic has shown that swift changes are possible. And that’s what’s needed, because insurtechs and other players will be edging their way into the Swiss insurance market with growing frequency,” says Schneider.