The insurance sector has always been an active user of data, wringing out insights from demographics and actuarial models to develop products that protect customers across multiple areas of risk. Insurers have also tapped the cloud, leveraging software-as-a-service (SaaS) programs to run business functions.
What the majority of insurers have not done as effectively, until recent years, is leverage the power of both data and the cloud to truly drive strategic improvements in the overall business. But now a growing number of insurers are using advancements in data analytics and artificial intelligence (AI) – fields that are greatly enabled and enhanced on the public cloud – to power a next generation of value in their industry.
These insurers are generating value by both expanding product lines to meet new market needs and by using cloud-based apps to better interact with their customers during the education, purchase, and consumption of those products. Further, new cloud and analytics capabilities are also powering greater external and internal efficiencies within the companies themselves.
Insurers Embracing New Technologies and Business Models
Insurers have been comparatively late to the cloud because the industry is, by nature, risk averse and conservative. Legacy insurance applications have invested heavily in data centers over the years to store troves of data and run big, enterprise applications often serving millions of customers. Many of the applications that support old-line business functions, such as life insurance policies, were written 20 to 30 years ago. Rearchitecting many of these applications to run on the cloud has generally been cost and time prohibitive.
But executives are now being pushed by the marketplace to embrace new technologies and new ways of doing business. On the front end, they are using cloud to enable digital business models that improve business agility through speed to market, flexibility and a more customer-focused approach. On the back end, cloud is enabling greater IT efficiency, with systems that are highly automated and event-driven, enabling a higher quantity and quality of releases.
Customers are comfortable using on-demand, consumer-friendly applications in their daily lives, so they are pushing for mobile apps to serve their insurance needs. Executives at established insurance companies are seeing startups get up and running quickly with cloud technology creating an on-demand approach, and they realize they will lose market share if they do not follow suit.
The numbers show that executives are buying into the cloud transformation trend and the larger digital disruption movement. A study by independent analyst firm Ovum revealed that 67 percent of insurance industry CIOs believe SaaS will completely transform the insurance industry in five years or less — and 20 percent believe it will happen in less than two years.
There are many ways insurance companies are using technology to respond to the threats of digital disruption. Here are a few examples of how skillful uses of cloud and data are positioning companies to compete strategically in the coming years.
A Focus on Innovation
What would the insurance industry look like if it were not tied to so many legacy systems and processes? A fleet of startups have answered that question in recent years by creating cloud-first business models that attempt to streamline the delivery of insurance services.
One innovator, Lemonade, describes itself as an “insurance company powered by artificial intelligence and behavioral economics.” Homeowners and renters simply click on the Lemonade app and talk through their claims with an AI-driven bot. AI processes the information and replicates the tasks a claims agent would go through. The company says mobile users generally get insured in 90 seconds and get paid for claims in three minutes.
Another innovator, Oscar, built a cloud-first health insurance business on AWS. One of its co-founders, CEO Mario Schlosser, is a data scientist who studied AI at Stanford. Another co-founder, Josh Kushner, is White House senior advisor Jared Kushner’s brother. They used the cloud to create a mobile app that lets members quickly schedule appointments, pay bills and check histories. More than 40 percent of Oscar’s members use the app and website to manage their health every month, and 43 percent of members’ first visits to a doctor are routed through Oscar.
Suncorp Group Limited, based in Australia and founded in 1902, is a good example of an insurer using new, digital-inspired applications to streamline its business. Five years ago, it overhauled its insurance claims assessment process, implementing a digital application-like form that allowed customers to make claims online. It later automated the process, using IBM Watson to analyze the circumstances of each claim and determine liability. Results were so accurate that the company now processes half of all claims using this “zero-touch” methodology.
Experimenting on New Products
Insurers have used the cloud’s strength and flexibility to do more than develop and deploy consumer-friendly apps. The cloud has also allowed them to experiment.
Rather than spending months, if not years, creating a product that may or may not fit the insurer’s needs, IT teams can develop a prototype for a new product in days. Perhaps an old-line insurer wants to try out features for a new customer pricing portal for an existing project. Teams can spin up options, present them to a small set of customers for instant feedback and tweak the portal until it meets the insurer’s specifications. Then, when the customer feedback function uncovers preferences for new click-flows or sharper descriptions, developers can update the portal on an ongoing basis.
Insurance companies pride themselves on their ability to execute efficient business strategies that serve customers and maintain a healthy bottom line. For a long time, that meant staying conservative with technology and business tactics. Today, insurers are facing increasing competition – from their own ranks and from new entrants into the market. By using the cloud to streamline processes and make better use of the data they already collect, insurers can position themselves better to compete over the long haul.