Insurance is one of the world’s largest industries, but it’s historically slow to adopt new tech. Insurance software development trends have lagged other industries, and consumers have grown accustomed to their providers feeling archaic.
In today’s market, though, innovators and disruptors are legion, and the needs of the customer are rapidly changing as millennials come into their own.
In 2018, the industry verges on a complete transformation. Tech R&D budgets in the sector are skyrocketing, having nearly doubled in the past five years.
Below, we’ll look at the 5 most important technology trends in today’s insurance market. With each one, we’ll also look at how innovators can tap this rapidly changing market.
- How big data will lead to a complete rethinking of premium calculations.
- Why every insurance company needs to migrate to the cloud, or lose out.
- The case fintechs must make for large-scale upgrades of legacy systems.
- The features today’s millennial consumers want to see from their insurance companies.
- How you can get started in the modern insurtech space.
Big Data Analytics
Risk assessment is at the core of a successful insurance business model. Accurately determining the cost of covering a customer base is the single greatest determiner of an insurer’s success or failure.
Over the decades, the means to calculate a potential client’s risk of property loss, illness, injury, accident, or death have been refined to a science. Statistical analysis is shockingly accurate, at least when amortized over an entire population segment.
However, it’s not perfect. Statistics can only tell so much, and they’re more applicable to groups than to individuals. As a result, rates are often too high.
Individual risk assessment has been financially impractical, an unreachable ideal. Until now.
The advent of big data coupled with powerful analytics means that insurers can now develop risk indicators targeting individuals, rather than demographics.
With the right algorithms, insurers can set rates based on hundreds of data points rather than dozens. Weather patterns can aid in setting property insurance premiums. Social media posts can predict reckless driving behavior.
There are privacy issues to be worked out, but the first insurer to the finish line will reap huge rewards, as customers flock to them for accurate, fair premiums.
Insurtech also promises to reduce insurance fraud. Presently, about 10% of insurance claims are fraudulent. New analytics can help reduce that share through the same predictive modeling techniques used to set rates.
More than any other insurance technology, big data promises to completely reshape how companies do business.
Another technology that has already taken hold across the insurance industry is cloud computing. Hosting insurance software in remote data centers, rather than on local servers at the insurance offices, benefits both insurers and their clients in several ways.
- Cost-Effective – Maintaining local servers represents a significant outlay of resources, both for the initial installation, and for ongoing maintenance and repairs. By offloading these costs to a dedicated data center, insurance companies can save money and offer lower rates.
- Scalability – The other cost advantage of an offsite data center is effortless scaling. Dedicated hosting providers can allocate more or less server capacity as needed with a simple phone call.
- Unified Updates – With the software hosted in a single, remote location, update management becomes a thing of the past. Everyone accessing the cloud-based software will have the same experience, and be working from the same version.
- Remote Management – By its very nature, cloud-based software can be accessed and maintained from anywhere. Ongoing insurance software development can easily be outsourced to remote workers, offering a significant cost savings in both salaries and travel costs.
- Customer-Centric Experience – A cloud-based system can allow for end-users, the insured, to safely access systems via the web. This empowers insurers to offer a convenient online portal to manage their own profiles, access information, and even file claims.
A cloud-based architecture also enables greater efficiency in the insurer’s work.
Adjusters and other field employees can securely access the same systems they use while in the office. Vendors such as auto shops and medical professionals can submit bills and job status reports online, without tying up valuable phone time.
The SaaS Model for Fintechs
On the other end of the transaction, innovators in the fintech space stand to gain a great deal from developing cloud-based solutions. The insurance industry is starting to see the benefits of software-as-a-service (SaaS), and is more than willing to pay a recurring fee for quality software.
Using the subscription business model, developers can position their wares with a relatively low cost of entry, even offering a discounted or free trial period. This is especially attractive to startups, who are typically looking to use big-ticket features on a shoestring budget.
Multiple insurers can subscribe to the same software package, with additional features or customizations coming at an additional fee.
Developers in other sectors have already found that SaaS is an excellent way to build a long-term, mutually beneficial relationship with clients.
Fintech analysts predict that SaaS will continue to grow in the insurance field. It’s the de facto standard in much of the technology world, and insurance is finally catching up.
Core and Legacy Program Modernization
Meanwhile, there are still plenty of insurance companies still using legacy systems.
Forty-year-old business processes are not out of the ordinary, but even the most staid players in the game are realizing that it’s time for a change.
Of course, any change carries some degree of risk, and the insurance industry is by nature a risk-averse business. Fortunately, the benefits of upgrading to a modern system speak for themselves.
- Reduced Cost – a modernized platform quickly pays for itself with increased throughput and reduced errors.
- Improved Efficiency – By leveraging the latest software, an insurer can afford to serve a much larger customer base without significantly growing its payroll. Agents and adjusters can work faster, handling more clients than ever before.
- Reduced Time-to-Market – The market is changing as a new generation of customers come of age. Upgrading the core system to a cloud-based architecture will allow insurers to keep up with shifting demands as fast as they happen.
- Happy Customers – Most of all, today’s tech-savvy customers expect a modern interface and features. An insurance company that doesn’t offer an online portal and other digital conveniences is simply leaving money on the table.
For fintech pioneers, there is an obvious opportunity to competently and effectively perform these upgrades. Migrating a legacy system to something more modern is a large task, involving every aspect of the business.
- Application Processing
- Claims Processing
- Regulatory Compliance
- Vendor Management
- Administrative, Payroll, and Cost of Business
Fintech companies who earn a reputation for doing the job right, without painful delays or errors, will find themselves swimming in business as more insurers seek them out.
Designing the Modern Insurtech System
So, what specifically goes into a cutting-edge platform for the technology-savvy insurance company? It depends on the specific client, but there are a few things that are universal.
Robust Online Access for End Users
Many insurers already offer some basic features for their customers to view and edit information online. It’s a simple necessity these days, and even the most old-school providers have seen the need.
However, to truly compete in today’s market, basic features aren’t enough. Millennials, who now represent the largest market globally, have little patience for a limited customer interface. They expect to receive a fully personalized experience online, at any time.
- Comparison Shopping of Plans and Features
- Claims Filing
- Specific Rate Quotes for Adding and Removing Features
- Requests for Mailed Paper Copies
Today’s customers are looking to do for themselves everything an agent would have once helped them with. They want to do it online, from home or anywhere else, and at any time of day or night.
Luckily, modern technology is more than up to the task. A few solutions have already hit the market, and the time is right for innovators to make their move.
In the end, insurance industry software trends are headed in the same direction as every other field: Towards empowering the customer.
Many insurers, even those who dive into the extensive upgrades needed to stay ahead in the modern market, overlook a simple fact of life.
Mobile is taking over the world. In 2017, studies found that mobile device usage surpassed PCs in Internet use. The average consumer is simply no longer interested in sitting down at their desk to shop, surf, or pay bills. Or even to handle their insurance needs.
An app, or at least a mobile-friendly website, is no longer optional for an insurance company to compete. Everything customers want to do online, they must be able to do from their phones and tablets.
Finally, an up-to-date insurance technology platform should integrate automation. Although it might not be obvious to the insurance companies, the industry lends itself well to the practice.
By necessity, most functions of an online customer portal should be handled by automated processes. Customers expect fast results, at speeds not possible with a human overseeing every interaction.
In addition, the back-office operations of any insurance company can benefit from automation. Just like any industry, an insurer must deal with payroll, purchasing, calendars, and so on.
Automating these tasks will result in a much smoother operation, allowing management to focus on strategic development, and employees to focus on the customer experience.
Finally, automation is a boon to regulatory compliance. Requirements at both the federal and state levels change constantly, and keeping up with them is an ongoing challenge for any insurance company.
By leveraging automation, fintech firms can help make the process less painful.
How Ignite Can Help
It’s clear that the insurance industry is undergoing a transformation. The shift to modern technology is changing how the industry works at every level, from customer interactions to government oversight.
The insurtech field is growing just as fast, as insurers look for help in managing this difficult shift. If your firm hopes to serve this booming market, then a competent and knowledgeable technology partner is key to your success.
With six R&D labs across Israel and Europe, Ignite is perfectly positioned to help you bring your ideas to reality. We’ve completed over 150 successful projects worldwide, in health insurance software development and a slew of other fields.
Best of all, we leverage outsourcing to provide top-tier service at a substantial cost savings. If you would like to discuss your ideas, then contact us today for a free consultation.