How will insurance digital transformation trends change the industry?

Sensor data is enabling insurers to accurately assess risk

As sensors become cheaper and more widely available, insurers can use them to better understand a customer’s risk profile and quote more accurately. This can result in lower premiums more flexible coverage, and more usage based models.

What it looks like now: A driver who wants to reduce her car insurance premiums can agree to have a telematics device fitted to their car which measures a range of factors that influence an individual’s ratings. How smooth her braking is, what time of the day she drives, how expert her cornering is, and other such data can all be taken into account. Favourable data which shows that she drives better than the average driver will result in lower monthly premiums - as she is deemed at less risk of an accident.

What it could look like in the future: A farmer who uses IoT devices and sensors to improve crop yield could share the data with their insurance company. The insurer can understand how well they manage their crops, and ensures that the farmer receives the right, flexible coverage for the current conditions - be it one of drought, flood or typical weather.

IoT devices are allowing insurers to influence customer behaviour

All insurers want a less risky customer. IoT devices offer not just a way to monitor customer risk but also a way to nudge customers towards behaving in less risky ways. This, in turn, can lower premiums for the customer.

What it looks like now: Vitality offer health and life insurance customers subsidised Apple Watches with cheaper monthly payments the more activity the user racks up. More activity not only results in lower watch payments but, in the case of life insurance, lower monthly premiums. A more active customer is less likely to get ill and is, therefore, less of a risk.

What it could look like in the future: A fully smart home could work with your insurer to actively monitor - and take action on - risky situations. For example, by using sensors, your home insurer could notice that your kitchen tap has sprung a leak and turn the water off before your house gets damaged by flood. Similarly, they could let you know that you’ve left your smart- lock enabled window open after you’ve gone out, and prompt you to shut it.

Insurance is becoming on-demand and is being bought just when needed

Insurance is no longer one-size-fits-all. It has become more flexible, with customers able to purchase cover for just when it's needed. This is enabled by the ability to purchase cover on mobile and by faster underwriting - which when taken together mean that cover can be extended in minutes rather than days.

What it looks like now: Cuvva offers flexible, on-demand car insurance from one hour to 28 days. The application process is fast and done via mobile. This reflects drivers’ changing needs - borrowing a friend’s car for a short trip for example. Meanwhile, Revolut offer pay-per-day travel insurance which is enabled by geolocation to ensure travellers only pay for the days in which they are abroad.

What it could look like in the future: A passenger orders a driverless car to take her to work - then decides she feels like actively driving today. Not to worry - she is offered on-demand insurance in the background, which shifts its risk profile according to the route she takes.

Claims are becoming faster and on-the-go

When customers need to claim, they want to get an answer fast to put their minds at ease. Insurers also want to sort through claims as quickly and efficiently as possible. That’s where new technology like conversational interfaces, pattern spotting and machine learning come in. Technology like this can be used to speed up the claims process and reduce fraud risk.

What it looks like now: American car insurer Allstate insurance allows customers to submit photographs of crashes through their app to get a fast repair quote. Customers are guided through three stages, taking photos of the damaged area, the entire vehicle, and the odometer. Meanwhile, mobility fleet insurer Trōv uses a chatbot UI to expedite the claims process.

What it could look like in the future: In the event of a car accident - whether driverless or human-driven - internal car diagnostics could be used to assess the damage and cause of the crash. This data could be sent straight to the insurer without the customer having to do anything else.