The outbreak of coronavirus (COVID-19) has disrupted the world’s economy, and with it brought significant changes to every level of society. Because of the massive disruption it had brought, every industry is now at a crossroads, with the outlook of the next few months, or even weeks, uncertain.
This uncertainty has been keenly felt by the insurance industry. Insurance is all about covering risks, and with their margins coming from a degree of predictability (which is used to determine coverage, premiums, etc), COVID-19 has been especially tumultuous for insurance companies.
Through forward-thinking nature, the insurance industry was already undergoing changes on several fronts before the outbreak of COVID-19. The pandemic will only speed up these innovations.
Digital Transformation in Operations
Insurance companies have been gearing towards integrating more technology in their operations and service delivery in several ways:
Use of A.I.
As the industry relies on predictive models in order to assess risk, analyze behaviors, and process user data, artificial intelligence and algorithms have taken over many aspects of operations. These algorithms reduce the risk of fraud, which can be overlooked by human error, and increase efficiency while lowering cost.
The increasing sophistication of bots over the years has also given rise to their use in both front- and back-office operations. They are now able to talk to customers and process claims. These provide true 24/7 customer service, greatly increased processing times, are prone to less error, and can resolve customer issues and provide information faster, which in turn improves customer satisfaction. This is true even when customers know they aren’t speaking to a person, although recent advances in the way chatbots behave and react during customer interactions can make them harder to distinguish from their human counterparts.
Leveraging Blockchain Technology
With a trend towards consolidation, insurance companies are getting fewer and larger, although this has also had an additional effect of pushing more companies towards captive insurance company formation. Insurers now handle massive amounts of sensitive data, shared across far-flung locations, across different organizations with varying stakeholders.
Being able to keep this data both safe and reliable is made possible with the use of blockchain technology, the same secure data management technology that makes cryptocurrency possible.
Blockchain manages, shares and monetizes data for insurance, and drives administrative costs down by automating the verification of claims and payments. Insurance companies can easily access transaction records without compromising on data security, not only making operations faster and more efficient, but also creating better trust between the insurer and their customers.
Digital Transformation in Marketing
The shift to digital will not only affect the way insurance companies operate, but also the way it engages with customers and drives business development efforts.
Social Media
Social media is now part of the everyday life of most people, with current estimates put social media penetration in the U.S. at 80% or almost 250 million Americans. While insurance companies have been one of the larger spenders for traditional, outbound means of marketing like TV ads and print, it has also gotten into social media on both micro and macro levels.
Both insurance agents and carriers are now engaging with both existing and potential customers online, going on platforms like LinkedIn, Facebook, and Instagram to be where their customers are.
Social media also has the benefit of being an educational tool, allowing companies to provide helpful information that can influence a buying decision, or even conduct market research with surveys. Social media analytics have also been useful in analyzing user behavior, giving today’s insurance companies data and insights about their customers that in the past they used to spend millions of dollars in acquiring.
The pandemic, by all indications, is set to impact all industries, not just months but years to come. While it has caused untold economic damage, it has also forced innovation and development in many industries. It will be interesting to see what insurance will do next, as these moves may indicate a trend not just in the industry but in the way big businesses will operate in what will be the new normal.