Where is the insurance technology headed in 2020? No one can correctly envision the future, but what fun is it if you don’t try. After everything the insurance industry has gone through in the first half of this decade, the possibilities certainly seem limitless.

To gain better insight in the future in areas such as analytics, claims, distribution, and mobility, ITA Pro turned to some people who are experts in these areas and asked them to give us at least some general guidelines as to where insurance technology will take us in the next four-plus years.

Offering their insight are Andre Nieuwendam, vice president of information technology with American Integrity Insurance Group; Stephen Applebaum, managing partner, insurance solutions group and senior advisor for StoneRidge Advisors; Ron Berg, executive director of the Agents Council for Technology; and Rob McIsaac, senior vice president with Novarica.

Risks Are Out of Focus Without Predictive Analytics

By Andre Nieuwendam

We are, by definition, creatures of habit. That being said, if you haven’t given predictive analytics a first look as it applies to your corporate strategy in the near future, it may be time for a second look. While many companies have yet to unravel the full value of what predictive analytics will bring, it is important to remember the hazy view in the crystal ball of analytics will become clearer as predictive analytics becomes a bi-directional interaction between the consumer and the business.

Eric Siegel, an expert in the area of predictive analytics, refers to the science in simple terms. Predictive analytics will put the power to determine if a single person will click, buy, lie or die in the hands of the analyst. Understanding consumer behavior and empowering companies through predictive analytics will enable them to gain valuable insights, which will drive operational efficiencies to a whole new level.

Commercial and personal auto carriers have a significant jump on the Property & Casualty market due to the interaction between telematics devices and a car’s onboard computer and diagnostic systems. These interactions have allowed auto carriers an unfettered view into the driving habits of every single insured and capture vast amounts of data from the car’s onboard computer and transmit them to the device.

As a result, drivers who drive responsibly will see significant discounts in premium while less responsible drivers will be penalized in the form of increased premium with decreases in coverage. But this data is barely scratching the surface of what we will see in the next five years and beyond.

As cars are being equipped with more “smart” technology and wireless broadband is becoming less of a luxury and more of a standard feature, cars will begin to collect meaningful information about a driver’s habits. These two way interactions will be recorded and run through complex algorithms to categorize certain aspects of a driver’s behavior. All this data will be available to the insurer and the cars manufacturer, all to the benefit or detriment of the driver or drivers. As an example, a parent may get notifications about a teenager’s whereabouts and how fast the teen is driving.

At the same time, homes are becoming increasingly intelligent. A large online retailer recently released its first interactive concierge for your home, a wireless and Bluetooth-enabled computer and sound system with a soothing female voice and an equally elegant name that interacts with the user through their web-enabled retail account.

The online retailer also created a line of “smart” home products that can interact with and be controlled by a central device at the command of your voice. These devices provide measureable analytics around a person’s home behavior, and as a person interacts with the controller, the controller learns more about their habits and provides the information to the retailer via the controller. They can now use these analytics to determine and ultimately predict every customer’s behavior as they interact with the many enabled devices in their house.

An example of this would be a family that has an alarm system, but never asks the controller to enable it. The controller will gather information about the human interaction through behavior it is able to monitor through these devices.

As more and smarter houses come online. Digital Trends, a technology blog, estimates the number of technology-enabled homes will total 70 percent of the projected U.S. homeowner’s market vs. Europe, where currently 2.7 million homes are fully smart-technology enabled.

Bi-directional interaction will provide instantaneous access to consumer behavior that can be used to influence a consumer’s buying choices, but will help carriers determine targeted rates, discounts, and premiums as well as offering ala carte do-it-yourself policies based on what the consumer needs instead of baked-in coverages.

While analytics will become increasingly more complex, cloud-based solutions and cheaper hardware are making predictive analytics a cost-effective method for accurately predicting consumer behavior and also analyzing trends in your book of business.

As data becomes increasingly larger and more invasive in our lives, companies need to be poised to start looking at cloud or infrastructure that will scale to meet the rising demands of the engines needed to run the analytics and crunch them into actionable reports and meaningful data that will ultimately decide underwriting, rating and product development.

In the next five years, bi-directional interactions with intelligent technology will increase 100-fold. It is clear that with the growth of technology, data will be more actionable than ever.

So if you are not thinking heavily about predictive analytics and data modeling as part of your immediate future, I only have one question. Do you feel lucky? Do you?

True Claims Transformation is in Sight

By Stephen Applebaum

While the insurance industry is experiencing an accelerating rate of change across the entire enterprise—much of it driven by technology and seismic consumer and market shifts—the area in which we expect to see the most disruption through 2020 and beyond is claims, including its information systems and vendor services supply-chain partners. 

Claims is ripe for transformation because;

• In general, claims had not traditionally received its proportionate level of resources and has therefore lagged in adopting and leveraging new technologies, and is characterized by labor intense and inefficient processes
• Claims represents such a large and visible proportion of carrier cost that it is ripe for transformation through technology-enabled process redesign
• Claims is the one department that has the greatest opportunity to provide the type of customer service and engagement that can lead to customer retention—valued highly in the hyper-competitive insurance marketplace

Mobile claims self-service, advanced analytics, aerial inspection and automated as well as predictive estimating technologies have already begun to transform and compress higher-cost analog claims processes and more technology solutions seem to come to market almost daily.  Looking ahead, the rapidly emerging Internet of Things—including connected cars, homes, property, and people—is poised to further transform insurance claims, risk management, product development, and marketing as successful carriers leverage myriad opportunities to mitigate risk, respond to claims, and personalize customer product design and engagement in real time.

The Property & Casualty insurance claims ecosystem is still comprised of thousands of small local and independent firms as well as a few larger regional, national, and global vendors and business partners who provide mission-critical products and services to the claims operations of the Property & Casualty insurance industry.

Managing and interfacing with such large numbers of vendors by an insurance industry seeking to streamline, standardize and compress the claims process is counterproductive and therefore consolidation among these vendors—fueled by investors attracted by the promise of generous returns and enabled by technology—has already begun and will accelerate.

Personal lines claims operations, the largest segment in P&C, including its collision repair and property partners, primarily rely upon the products and services of a few large claims information providers, each of which have been expanding their technology-enabled offerings deeper into broader automotive, property, and casualty markets.

Over the next several years we expect these information providers to continue to expand in several directions through internal product development supplemented by strategic acquisitions.  This expansion will likely include:

• Deeper integration with claims management core software systems
• Introduction of new tools and services utilizing advanced analytics, Big Data (including the Internet of Things, which includes telematics) for use cases across the entire auto and property claims process
• Deeper and wider integration with third-party companies in the auto and property claims supply chain, specifically including collision and mechanical repair parts
• Use of massive amounts of claims and vehicle data to develop and support a large number of auto, property, and casualty claims underwriting and marketing use cases
• Further development of auto casualty and workers’ compensation medical management networks and services and related cost containment solutions
• Development of commercial claims information system and data management solutions, including integration with connected devices in the Internet of Things

However, the traditional insurer-repairer business model, which is based on an electronic estimate exchange process, is likely to be transformed within the next several years and supplanted by a process driven by mobile technologies coupled with predictive analytics. This will reduce and eventually eliminate the need for repairer-carrier estimate exchanges for an increasingly higher percentage of claims.

Another significant development in the supply chain is the emergence of electronic parts procurement and e-commerce solutions in the $15 billion U.S. auto repair parts supply chain. The collision repair parts industry, once one of the most fragmented of all and until recently characterized by numerous local, independent vendors and competing parts search and procurement platforms, will continue to consolidate in the hands of just a few well-capitalized, highly-experienced and strategically-positioned parts logistics, information, and software providers.

Technology Will Accelerate Distribution Channels

By Ron Berg

From all sides, we hear a great debate about how fast technology options are emerging versus the pace of technology adoption of the independent agency distribution channel. Make no mistake: Technology evolution will only accelerate in the next five years.

But at its core, the independent insurance agency distribution channel has always been, and continues to be, about the relationship. The primary change is how that relationship is best served. Our customers expect and demand solutions that deliver information, products, and services in an experience that makes their life easy, combined with providing security and peace of mind. Never have there been more opportunities for the independent agent distribution to show their value over direct writers.

In the next five years, the distribution channel will see the emergence and adoption of more driver-assisted and driverless personal and delivery vehicles; drone craft used not only for package delivery but also claims assessment, telematics and usage-based insurance moving from plug-in modules out to our smart phones and in-dash car platforms.

We'll see more use of 3-D printers to generate replacement automobile and home materials, and the ability to access a world of intelligence and analytics to make better business decisions. Most or all of these services will impact the relationship between carriers and agents in some form.

But how does the independent agency distribution stay relevant? By understanding and responding to the changing needs of their customers. The shift of leveraging the customer relationship has moved to robust agency website functionality, search engine optimization, mobile/adaptable agency websites, the ability to obtain quotes from the agency website, using e-signature to allow customers to complete documents, active engagement on social platforms, and proactive agency services.

All of this sounds like a lot—and taken as a whole it is—but the independent agent and broker can win in their markets by breaking down their current strategy and comparing it to the sales and service expectations of their prospects and existing customers.

One method agents and brokers can use to simplify their strategic roadmap is to look at the lifecycle of their customer—from the point a consumer becomes aware they have an insurance need, through their online research, the customer policy purchase process, and their renewal experience. Looking at each of these phases individually allows agency leadership to easily and accurately identify the steps they need to take that meet their customers' connection preferences.

Along with all the planning and implementation come benefits. What doesn't get focused on as often are the potential time, keystroke, and efficiency savings that are realized when implementing many of the technologies—including e-signature—providing customer policy access via an agency portal, real time rating, and download.

Independent insurance carriers and vendors are focused on staying current with emerging technologies, and have long-range strategic roadmaps to accomplish this. Agents and brokers have strategic growth plans, but a clear technology roadmap needs to be a part of this.

Mobility Matters Personally and Professionally

By Rob McIsaac

Mobility has become the key ingredient to supporting both our personal and professional lives. If there's any doubt to that truism, simply try to go a full day without touching a smartphone or other tablet device. It's akin to doing penance for no good reason other than to see if it is possible. Stepping back to a pre-mobile state of mind is simply hard to imagine, let alone embrace.

I was reminded of this on a recent coast-to-coast flight. While walking the aisle (back to front) it was the rare seat that wasn't warmed by the glow of a touch screen. Regardless of preferred operating system, the smart devices were out from gate to gate and it was surprisingly rare to see a true laptop from an earlier era being used. In fact, I've been to conferences where the organizers have loaner iPads just to keep participants from the embarrassment of toting around a brick. How times have changed.

The implications for insurance carriers are significant and profound. The personal and professional lives of the people carriers need to touch in order to remain viable have gone digital ... and mobile. Carriers need to take note: While the blacksmith trade didn't evaporate the day Henry Ford rolled out the Model T, the writing was on the wall. What was once a necessity to support horse-based mobility became a high-priced luxury that few needed other than to support a hobby. So it is for non-mobile apps.

Consider the retail experience long ago landed in this zone. Big-box stores suffer from, and worry about, being "showrooms" for Amazon. Banking also has gone this way, with impressive mobile capabilities (remote image deposit by picture) now replacing dedicated trips to a branch. Branches have survived, but by reframing what they do and who they do it for. That trend will clearly continue as self-service increasingly means better service at a preferred price point.

For insurance companies, these user experience expectations are critical. Customers now understand what good to great service looks like. Going at them with technology perfected a century ago may seem quaint today; the blush will wear off that rose quickly, however, leading to increased frustration, heightened disaffection and ultimately poor sales and persistency.

The time to act is now. But what's a carrier to do?  Some key steps to consider include focusing on the touch points that are most likely—and most important—for clients.  For example, P&C carriers have moved aggressively to incorporate documents that are key in the life of a contract (e.g., proof of insurance) to be accessed via mobile apps.  Other lines of business should include similar types of access to future capabilities in order to maintain parity with other aspects of the lives of clients. 

In addition, carriers should consider how mobile applications can become integration points that link together with other capabilities to support an effective omnichannel capability.  Starting a transaction on one channel should be easily transferred to another, at a time and point when the client (or prospect) chooses.

Allowing for pre-work to be done, potentially in concert with planning tools that can illuminate product options/features available, can make the entire process seem more responsive to client needs and paced to allow them to do things when and where they want.  In effect it can be self-service right up to the point when an expert’s advice is really needed. At that point, the effort to consummate a complete transaction can become a collaborative effort.

For some lines of business, claim filing can leverage the mobile capabilities inherent in smart-devices. For example, some P&C carriers now allow for the filing of property damage claims through the devices, leveraging both phone and GPS capabilities.  One challenge with this, of course, is that it requires customers to learn how to use a new tool (the app) at a time that may be particularly stressful (i.e., immediately following an accident). 

That’s a different use case than the one that allows customers to deposit checks via a smart phone, which can be practiced routinely and without the stress of a material life event hanging in the balance. USAA has found a remarkably creative way to address this. When a client calls into a claims center to report an incident, the CSR is able to work with the client to use the smart-phone to capture pictures of the damaged property. By so doing they leverage the technical capabilities in a manner that requires nothing of the client in terms of a learning curve and yet can actually lead to funds being deposited in a targeted bank account in less than an hour. This kind of user experience produces both a halo effect for the brand and makes for a high bar that others must cross to achieve parity in the marketplace.

Moving toward a “mobile first” model also encourages carriers to deploy more “test and learn” capabilities, which can support both client needs and increased customer engagement, potentially segmented by demographic factors. For example, gamification of capabilities has allowed some carriers, including Allstate, to engage targeted customers (e.g., young drivers) in a way that is both interesting and allows them to learn things that can alter behavior, which ultimately can positively impact loss experience.

Mobile capabilities can also be a pivotal component in the deployment of an Internet of Things strategy, where wearable and other sensor-based capabilities can support a two-way interaction between insured and insurer. Heath insurers are already deploying premium discounts based on a willingness to connect Fitbit and other wearable devices to the carrier to verify activity based goals. 

In reality, two way communication based on these broadly available capabilities could allow carriers in the near term to make suggestions that could positively impact both behavior and loss experiences. By connecting the exchange of information with positive financial outcomes for their clients, carriers can use these capabilities to literally weave their way into the fabric of client lives. That’s both compelling and hard to compete against with technical capabilities tied to an earlier era.

Things are moving fast in the evolution of customer expectations. Failing to effectively respond to this can leave carriers across many lines of business in the position of, at best, being unable to compete for the best business within a specific segment. At worst, they could begin a death spiral that will have an unfortunate, but predictable outcome. Carriers should consider these alternative scenarios carefully.