A Snapshot of the Digital Revolution in the Insurance Industry
By: Keith Krach
The concept of insurance policies, or the protective coverage of property, health, and life, is an ancient one. Babylonian law included what was called Hammurabi’s Code, which enabled debt forgiveness if a catastrophe prevented repayment. Similar models have since surfaced in conjunction with the revolutions in agriculture, industry, and technology.
Each revolution has created new risks and associated needs, and insurers have responded with new offerings to meet market demand. Not only have products and services evolved, but the ways in which businesses and consumers engage with one another and complete transactions have also shifted.
Customer expectations in the digital age
The digital age has disrupted the way people think about buying goods and services in nearly every industry, and insurance is no exception. When searching for greater stability against potentially life-altering risk, such as a car accident or a house fire, consumers look for the same transparent and simple experience they have come to expect when making less-consequential purchases.

Creating this type of experience involves, at minimum, two important steps. First, an insurance company must digitize its operations so that front-end and back-end operations are seamlessly connected. This allows the business and the buyer to decrease the amount of time needed to process estimates and claims. Plus, it also opens up opportunities for offering self-service features online and on mobile.
New technology will only accomplish so much, which is why insurers must institute a digital culture in addition to modernizing their systems. Achieving this environment requires hiring the right staff and implementing a program for regular trainings. Pairing digital tools with digital culture is the best way for insurance companies to succeed, but the transition poses several obstacles.
Making the digital transition
Going digital is an appealing option for insurance companies for various reasons. Along with the baseline benefit of staying relevant in the marketplace, it can reduce administrative costs and help lower the total number of claim payouts. Venture capital firms are showing more interest in digitizing the industry — between 2014 and 2015, funding skyrocketed from $740 million to $2.7 billion.

Yet even with these prospects on the table, roughly half of insurers have not yet developed a comprehensive plan for making the transition. Perhaps the biggest obstacle to going digital is that it requires a significant overhaul of resources and operations, as well as a commitment to see the process through. Some businesses have tried to incrementally develop a stronger digital presence, but they have encountered more difficulties than improvements with this approach.
The problem is that adding a smartphone app here and a social media page there leaves holes in the operation. As a result, it’s difficult to integrate separate digital components into a non-digitalized framework. Not only does this negatively affect the way the business functions, but it also confuses consumers who expect a seamless experience across different channels. When people sense disorganization, it interferes with the desired user experience and pushes customers away.
Digital tools thrive on connections. This means that without key pieces in place, the system will fail to reach its potential. This is why people refer to the digital revolution as a “revolution” instead of an “evolution.” An evolving market transforms slowly and steadily, whereas a market undergoing a revolution changes — relatively speaking — overnight.
Insurers that want to digitize should strive to determine how they can go all-in and set up the proper infrastructure to start out with. Transitioning will require capital and an initial learning curve, to be sure. However, the alternatives often prove more costly in the long run. More importantly, going digital sets the foundation for future growth.
Insurance companies that have digitized are continually incorporating existing technologies and experimenting with new digital tools. One trend in the digital age that has considerable promise for helping businesses and their clients insure against risk is the Internet of Things (IoT).
IoT increases safety and reduces claims
The IoT industry comprises the development of computing devices that collect, transmit, and often analyze data in real-time. Applied to insurance coverage, this technology can help protect property and possessions while simultaneously reducing the number of claims filed. Two key examples are found in housing and automobiles.

Innovators have begun developing sensors that measure water consumption in homes. With this data, homeowners can detect with greater accuracy and speed when a leak has occurred. Responding to these types of incidents right away can prevent flooding and the associated damage and costs.
For cars, multiple technological advancements are underway. IoT systems, integrated with insurance policies, will soon help vehicle owners know when to check their breaks or have their tires replaced. Additionally, IoT will help assess vehicular accidents, notify proper personnel, and recommend repair shops.
Consumers will also benefit from the ability to record 3D images on their smartphones for submission to insurance providers. This technology will save time for everyone involved and increase the accuracy of services rendered.
