In our digital world, cellular phones have become extensions to our arms and technology is as vital as air to survive. In our individual spaces as we navigate the digital world, we have to accept we can no longer live without technology.
Why should this be any different for businesses? If consumers have found convenience in a cellular telephone, surely businesses should find ways to bring services to consumers via cellular telephones.
Every industry which hopes to be of significant relevance in tomorrow’s market must, if they have not already, familiarize itself with the patterns and behaviours of digitally savvy consumers. It’s as simple as that. It’s an adapt or die scenario, a win or lose environment. The “how to” digitise and “what to” offer is up to the individual industry and its consumers’ habits and needs.
How then is the insurance industry faring in this regard?
It is no secret insurance companies have been behaving like paper-hungry dinosaurs since inception. Insurance brokers and big insurers have kept thick paper files of client history, much to their cost considering how much space is required to keep such large files of policy information.
Last year Forbes listed the top five digital transformation trends in insurance. These were: Self-service dashboards; easier and faster claims processes; comparison and purchase options; a more seamless experience; and insurance as a service that extracts consumer behaviour data and allows them to insure assets when in use.
This Forbes list has elements that point to the much talked about fourth industrial revolution and its digital features.
If digitisation is to disrupt the insurance sector, the fourth industrial revolution is the only way in. This revolution hints at how tomorrow’s consumer will likely behave or demand services.
To serve tomorrow’s consumer, this means today’s industry has to familiarise itself with digital elements such as Artificial Intelligence; Big Data; the Internet of Things; and Blockchain, among other elements that make up the digital world.
Once familiar the industry must ascertain the place and role of these elements in its market. Let’s look at the four elements mentioned above and their use in the insurance industry.
Artificial Intelligence (AI) has been defined as the theory and development of computer systems able to perform tasks normally requiring human intelligence. Within the insurance sector a number of tasks come to mind, but high on that list is processing claims. AI could revolutionalise this to the benefit of both consumers and the industry in dealing with previously undetectable fraudulent claims.
Big Data comprises extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations relating to human behaviour and interactions. Within the sector, patterns, trends and behaviour could assist underwriters and insurance product developers to conceptualise specific and targeted policies.
The Internet of Things (IoT) are networks, or interconnection via the Internet, of computing devices embedded in everyday objects, enabling them to send and receive data. Smart homes, self-driving cars and various fitness and health devices come into play here. All have implications for the insurance industry which the sector needs to navigate to answer questions such as how to insure self-driving cars? What is the implication of data extracted from health devices for medical insurance? What policies need to be developed for smart homes? The IoT is as futuristic as it gets, and grasping the needs within this element of the fourth industrial revolution can help illuminate the way forward to digitising the sector.
The Blockchain is probably the one element that will have the biggest impact on the industry. Blockchain in the technology on which cryptocurrencies are built (like hypertext markup language – html – is the technology on which Internet sites are built). A much bigger use of Blockchain is in the development of “smart contracts” which embeds immutable contracts in a blockchain which can then automatically execute when the conditions of the contract are met. It is defined as a decentralised digital ledger in which cryptocurrency transactions are recorded chronologically, unchangeably and publicly. Cryptocurrencies like Bitcoin have made waves in the digital world and in South Africa. For the insurance industry this has profound repercussions in averting a number of issues, some similar to what occurred in the Liberty hack, while it also helps establish authenticated, reliable and accessible transactions.
There are a number of implications that come with a digitised industry. Much of what digitisation offers eliminates person-to-person contact which can cause discomfort for some regarding job security. However, the flip side is skills enhancement where the industry is forced to become more savvy and equipped with in-job training and upskilling regarding technology. This will create more apt personnel for tomorrow’s market. The initial costs may be hefty, but in the long term the insurance industry will make savings and their customer experiences will be improved making it worth the industry’s while.
The industry also has to ask itself what their consumers struggle with most. After all insurance is about assessing risk, developing policies, getting premiums and paying out legitimate claims. Digital solutions need to address these fundamentals.
Reports from the Short-Term Insurance Ombudsman indicate that South African insurance customers are mainly frustrated with the claims process while the sector is also frustrated with fraudulent claims. Digital breakthroughs in the industry must tackle these frustrations first. Using the elements of the fourth industrial revolution and studying consumer behaviour and needs, more relevant policies can be developed for the consumer.
Most industries have started their trek into the digital space. One thing is certain, those who survive this space have to either be pioneers or have something special that sets them apart. The digitisation of the insurance industry locally will surely make a meaningful impact if and only if it uses digital elements to better understand the needs, behaviours and wants of local consumers. The trends are already out there — how we collect, dissect and use the data is what will set industry players apart.
By Thokozile Mahlangu, CEO of the Insurance Institute of South Africa