The insurance industry needs a tech upgrade: Opinion

An analyst provides his insights on the state of insurance today, and why the industry needs to catch up with the latest in technology

Technology

By Lyle Adriano

An analyst from Deloitte Center for Financial Services recently shared his opinions on TechCrunch, saying that the insurance industry is in serious need of a technological update.

The contributor, Sam Friedman, listed a number of emerging tech trends on his opinion piece that the industry has only scratched the surface of. In his view, the insurance industry has yet to tap into the full potential these innovations offer.

The first innovation Friedman tackles is blockchain technology, which is essentially an unalterable “permissionless” public ledger for transactions that involve the use of cryptocurrency such as bitcoin. Friedman notes that a number of insurers have looked into using the technology to “help facilitate smart contract transactions, increase cybersecurity, reduce fraud and lower costs.” He surmises that the same tech can be used to help startups that offer alternative risk-transfer solutions since the tech offers a reliable, ready-made infrastructure that could be used in setups such as peer-to-peer insurance groups.

Insurance distribution is the next topic Freidman raises, mentioning the popularity of aggregator websites that allow consumers to compare prices from various carriers. He proposes that in the future, these websites could go beyond their current scope and help customer assess the actual value of the coverage being offered by competing insurers.

Friedman identified telematics monitoring as a tech trend to keep eyes on. The tech’s applications are currently being explored in usage-based auto insurance, wherein monitoring devices installed in either the consumer’s car or phone monitor vehicle or driver conditions. Friedman proposes that the tech can be used to take advantage of real-time GPS connections, allowing insurers to offer traffic warnings to their consumers, or tie-up with outside providers for promotions and discounts on related products and services. Telematics also have a promising future in monitoring consumer fitness and health levels.

Of the various tech trends listed, Friedman believes that the “driverless” car is the biggest game changer for the auto insurance industry, which essentially rewrites the rules on liability. He said that self-driving cars “may substantially reduce the need for personal auto liability coverage, while at the same time create a huge growth opportunity for product liability insurers.”

The Internet of Things (IoT) movement could revolutionize the way insurers work, said Friedman, since the tech gives insurers a more active role in risk prevention. IoT tech could potentially allow insurers, for instance, to detect imminent part failure and preempt an even costlier business interruption risk.

Friedman also mentions the role automated “robo-advisers” could have, helping customers make insurance decisions without coming off as too mechanical.

Lastly, Friedman points out the rise and proliferation of financial tech, or “fintech” companies. These ambitious startups have the tech-savviness that could challenge established companies that still rely on traditional methods. With more new blood entering the industry, Friedman thinks it is only a matter of time until the older companies wizen up and adopt newer tech as well.
 

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