Digitalization has been revolutionizing the insurance industry in recent years. Whether it's underwriting, claim-filing, or even renewal, they are all on the cusp of a major upheaval. Today at Kwiksure, our experts will explore how the use of technology will shape the future of car insurance.
What is digitalization?
Put simply, digitalization is the conversion of traditional text documents, pictures, product lists, customer information, and more, into electronic files, which are then stored in computers or over the cloud. Basically, scores of insurance companies have already digitalized the steps of the underwriting process, and started accepting electronic versions of insurance documents, which saves companies the time it takes to process physical documents. What's more, some insurers even opt to market their products through social media.
Having said that, these are not all there is to digitalization. Quite a few multinational corporations are currently using big data, machine learning, and other fintech (financial technology) to speed up the industry transformation for an improved user experience. With the accelerated rate of adopting new technologies in recent years, coupled with demographic changes and climate change issues, technology companies have also hugely disrupted traditional companies. Several examples include driverless cars impacting traditional fuel cars, Uber affecting taxis, and Airbnb impacting hotels. As for the retail industry, plenty of brick-and-mortar stores laid destroyed in the wake of Amazon's progress.
The insurance industry's transformation
On that note, if the insurance industry stands still and refuses to incorporate the use of technology, it will be left behind. Here, Oosga compiles a list of several new technologies that accelerates digitalization.
1. Big data and cloud computing
Traditional car insurance relies only on the age of the driver and their accident record to determine their risk coefficient. As a result, young drivers are usually required to pay a comparatively high premium. To save up on premiums, most people end up registering their vehicle under their parents' names.
In the West, a number of innovative insurers rely on big data and cloud computing to push out UBI (Usage-Based Insurance) car insurance. Here, data such as the way a driver like yourself starts your vehicle, mileage, and the number of minutes the vehicle is being used, are aggregated and analyzed from sensors within vehicles or infrastructures to evaluate your insurance risk. This formulates smarter underwriting policies.
Are you are the type of driver who speeds often? Related risks will be reflected in the cost of your premium. On the other hand, if you always drive safely, you can enjoy relevant premium discounts. Aside from your driving behavior, environmentally-friendly driving habits will also impact your premium. For instance, you can decrease your premium by lowering the mileage and avoiding driving during rush hours.
To sum up, the rules of premium calculation are being shaken up. The data used for calculating risk coefficients will be even more accurate since companies no longer rely only on the driver's identity to calculate the premium.
2. Machine learning
As the application of machine learning becomes more widespread, a McKinsey report predicts that by 2030, the manpower for handling claims-related procedures will be reduced by 70% to 90%. Also, for individuals and small companies, claims settlements will be almost fully automated. This includes the recognition of handwritten claims applications. Not only will machine learning enhance efficiency, but it will also protect customer privacy.
In addition, it is fantastic at computing unstructured data, and can view thousands or even tens of thousands of data points at a time. This makes it more effective at identifying insurance fraud than traditional statistical models.
Combined with artificial intelligence, machine learning can produce automated insurance consultants. Imagine: 24-hour service, extreme personalization, low cost, and low error rate.
3. Internet of Things
Smart cars are the epitome of the Internet of Things (IoT) application. Besides their ability to sense driving behavior data, such as speed and brake timing, you can receive even more indirect data. Gas temperature and tire pressure are just two such examples. In the event of a traffic accident, an app can instantly detect and notify you how to handle a traffic accident. For instance, guiding you on which spots you should take photos of. Then, it will automatically handle the claims-settling procedure.
4. Cloud computing
Cloud computing saves insurers from having to spend money on new equipment, all types of software licenses, and services. Naturally, it saves money on equipment maintenance and human resources as well. With the cloud, insurance companies can dive right in instead of needing to invest in initial investment and maintenance costs.
Contact Kwiksure for your insurance solutions
Kwiksure has over 20 years of experience in the car insurance industry. Aside from car insurance (third-party and comprehensive), we also provide home insurance, motorcycle insurance, Voluntary Health Insurance Scheme (VHIS), Hong Kong-Zhuhai-Macao Bridge (HZMB) insurance, and other products. Get a free quote with our online quotation tool now, or contact our team of expert insurance advisors for tailored advice!