Technological innovations are re-shaping insurance landscape globally

1 Aug 2016

Increasing investments in technological innovations is proving valuable for insurers to refine their risk models and pricing methods. It also offers innovative approaches to handle claims and engage with customers. However, new challenges around data security and customer expectations are forcing market players to adapt to technological trends faster than ever.

The latest survey from Timetric’s Insurance Intelligence Center (IIC) has examined these technological trends, analysing which innovations and potential dangers are seen by insurance professionals as the most impactful in the short and long term.

Improving loss ratios through technology

Return of investments in new technologies is intended to strengthen combined ratios and those surveyed are confident that innovations in the sector will ease pressure on insurers’ loss ratios - 86%   of respondents believe new technologies will reduce the value of incurred claims over the next five years. 60% of respondents felt that incurred claims may drop by 6% or more, 14% even expect a remarkable 16%+ decrease in claims.

Technology allows insurers to collect a large amount of data through, for instance, telematics, smart homes or wearables. This data plays a key role in identifying risk patterns and price policies accurately. Correctly analysed, it enables insurers to refine the underwriting process decisively, improving existing products and create new policies tailored to specific customer segments.

These are reasons for the fact that the vast majority (88%) of the survey’s respondents expect a “significant” or even “extreme” impact of big data and analytics on insurance in the next five years.

Looking ahead for operational efficiencies

According to the survey, the Internet of Things (IoT) and the trend to automation will impact significantly the industry in years to come.

“Interconnected devices and sensors collecting and communicating data – the Internet of Things –renders data analytics truly efficient and insightful,” Steffen Mueller, Senior Analyst at Timetric’s IIC, explains.

Regarding the impact of automation, he comments:  ”Automation is expected to impact the industry as it will change the nature of transport, job roles and work routines, both inside and outside the insurance industry. This can eventually lead to a changed risk environment, where, for instance, liability is shifted away from persons towards technology or software providers”.

Increasing risk of cyber attacks

Amongst possible downsides of technical progress in the industry, insurers are most wary about cyber-attacks. The survey revealed that 65% of respondents considered it a potential brake to innovation in insurance. The potential damages hackers can do in a business environment that includes interconnected devices and much confidential data is significant.

A cyber-attack can lead to very large claims as it often causes a combination of data liability, business interruption and reputation damage.

A cyber-attack can lead to very large claims as it often causes a combination of data liability, business interruption and reputation damage.

This information is based on the Timetric survey: ‘Technology in Insurance: Impact and Disruption’. The survey was conducted by the Insurance Intelligence Center in May and June 2016, and posed questions to approximately 130 industry experts around the globe.

Source: Company Press Release