Who will benefit as insurers accelerate innovation efforts?
COVID-19 has impacted every sector of the economy, and insurance is no exception. The pandemic has highlighted inefficiencies and created new friction points for carriers and customers alike — but the experience has also validated carriers’ efforts to innovate and invest in a digital future. Insurtech is sure to play a vital, ongoing role in bringing digital innovation to the insurance sector overall. However, in the short term, many insurtech companies may face significant challenges.
Insurance companies stay the course on innovation
As countries begin to ease COVID-19 restrictions and reopen their economies, insurance carriers will continue to focus on stabilizing their businesses, adjusting to new ways of working, and meeting their customers’ needs while protecting the health and safety of both customers and staff. For many carriers, the crisis has further fueled their innovation ambitions, and accelerated efforts to adopt a digital-first approach to customer and worker interactions, to modernize technology infrastructure and improve data capabilities, and embrace touchless, digital underwriting and claims processes. And insurtech companies will play a key role in helping carriers achieve these longer-term ambitions, whether as partners or acquisition targets.
Insurtech companies should be encouraged by the fact that these carriers are choosing to stay the course with their insurtech providers — and even speed things up. In our conversations with insurance leaders, we found zero inclination to either pull back on existing insurtech relationships or switch from an insurtech company to a larger, more established technology provider. Insurance carriers continue to see opportunity and value in their insurtech relationships.
However, while carriers are committed to the innovative projects and insurtech partners they’re already involved with, they are less likely to take risks on new, unknown insurtech companies. For new B2B insurtechs trying to build relationships and get a foot in the door with potential customers, it’s likely to be a highly challenging business environment and an unbalanced market in the near term.
Operational enablement a key focus for insurers and their insurtech partners
In discussing the challenges of doing business in a COVID-19 world with a number of insurance leaders, it became clear that operational enablement is a key focus of carriers’ innovation effort. And they’re eager to work with insurtech companies that can improve and enhance their operations.
Carriers are accelerating work in such areas as digital customer interactions in distribution, customer service, and claims. They’re working to augment their underwriting through the use of new data sources and decision models. They’re investing in improving data capture and ingestion, especially with regard to unstructured data such as audio and video. They’re looking for ways to improve how data is accessed and shared among different business units and teams, which has become even more important now, at a time of widespread remote work. They’re also looking to leverage remote data capture and analysis to support claims submissions and decisions.
The property and casualty insurance leaders we’ve spoken with feel the COVID-19 situation has been a powerful accelerant to their innovation efforts. The pandemic has validated digital-first strategies, but it’s also led to some new perspectives. Where efforts to develop digital-first customer service and touchless claims processes were once seen entirely in terms of speed and efficiency, they’re now also seen in terms of protecting the health and safety of customers and employees — a powerful way to build trust with both groups. At least one carrier is focused on making the vast majority of their claims touchless in the near future.
For commercial insurers, remote risk identification is getting a lot of attention. Carriers are not only looking for ways to make more — and more effective — use of remote imaging to assess underwriting risk and evaluate claims, they’re also ramping up efforts to harness the power of Internet of Things-connected sensors and devices for the same purposes.
Life insurers are, not surprisingly, in the current environment, especially driven to find “fluidless” solutions for underwriting — such as health data from connected devices or algorithm-based approaches. However, life insurers are also looking for ways to improve the profitability of their underwriting and operations overall. The low interest rates we’ve seen for the past several years, and which seem likely to continue as the world recovers from the COVID-19 situation, have greatly dampened life carriers’ investment returns and profits.
In many cases, the initiatives and projects carriers are focused on aren’t entirely new: insurers have made efforts to enable customers to connect with them over digital channels and submit claim information using their smartphones, for example. Yet what is different now is the scale and speed of these initiatives. Carriers are emboldened to move well beyond pilots, proofs of concept and small-scale rollouts. Now, their intent is to move these innovations into the mainstream of their business — they want to “go big,” fast.
The excerpt was taken from KPMG Thought Leadership, Insurtech’s place in a COVID-19 world.
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