Despite the fierce competition in the market, Sri Lanka’s insurance industry has largely remained conventional in its business operations for decades. Earlier this year, however, signs of an eminent disruption appeared with online insurance aggregators and comparison platforms entering the market. Mr. Iftikar Ahamed, the Secretary of the Insurance Association of Sri Lanka discussed in depth the role of digital technology in the global insurance industry and the possibilities that come with digitalization.
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- The latest digital trends that have been introduced to the industry
- Artificial intelligence (AI). Here are a few cases of AI use.
- Facial recognition in underwriting –The app utilizes a combination of facial recognition technology to scan the selfie and use gamification techniques to detect life-threatening habits and predict the life span to calculate the premiums.
- Personalized Customer Experience – The AI-based chatbot provides a delightful automated customized buying experience for prospects, based on their geographical information and social data. It also offers a quick response to client queries.
- Robotic Process Automation (RPA)
- RPA automates the ordinary routine tasks of the insurance industry and thus reduces the workload (i.e Automation of Bank reconciliation etc) and cost of operations, and also saves time, money, and improves customer satisfaction.
- Claims Settlement – RPA reduces the claims processes by automating the data collection process. This can significantly reduce the average processing times.
- Data Management – Manual data collection and entry is an arduous task and could lead to inconsistencies and errors in data management. RPA automates and simplifies the data management processes, and that too at high speeds.
- Big data and Predictive Analytics
- Machine Learning (ML)
- Augmented Reality / Virtual Reality (AR/ VR)
- Insurance Policy Education – AR/VR simplifies the complicated insurance policy education with exciting and engaging AR/VR videos. The videos can be stimulating real-life situations to showcase the value of life, health, and various insurance coverage plans and help to boost insurance policy purchase rate.
- Virtual Driving Test – VR can be used by insurers to take practical driving tests that could help insurance providers while deciding the coverage for a new client.
- IFRS 17 and the challenges that come with it
- IFRS 17 is expected to be effective w.e.f 1st January 2022
- Financial reporting will change substantially with IFRS 17, up to 50% of the chart of accounts and financial statement positions will be impacted. Reporting efficiency and improved productivity within the finance closing process will be necessary.
- Internal KPIs will need to be adapted to new external measurements. Fast close for internal management information (MI) will be under even greater pressure to deliver the new figures efficiently. Consistency across products can spur productivity
- Existing models need to be adapted to the new regulations of Actuarial– new data flows/calculations/projections need to be implemented.
- New IFRS requirements need to be designed, implemented, tested, brought into production and maintained and operated in the field of operations and IT. Changes in systems must be planned at an early stage to minimize disruption.
- Planning / forecast processes have to be adjusted to the new metric arising from SLFRS 9 and IFRS 17 earlier than their release in the first public report. For analysis and planning purposes, it may be useful to perform simulations on the impact of the new IFRS’s on KPIs based on IFRS earnings/equity at an early stage.
- Greater external transparency (in aggregate) is expected to demand a more detailed audit trail and “historization” of financial and actuarial data. The interaction between finance, risk and actuarial will increase (cross-skills opportunities), offering the opportunity to integrate these functions.
- How can insurers set themselves on the path to complete digital transformation, avoiding the pitfall they will encounter along the way?
- On top of the changing and increasingly digital, mobile, channel-agnostic and demanding customer, InsurTech and certainly the moves of those GAFAA (Google, Apple, Facebook, Amazon) giants, other challenges for the insurance industry include: ongoing commoditization, easy to replicate innovations, regulatory changes, macro-economic uncertainties, decreasing loyalty, the need to find a different narrative in approaching today’s customer, challenges regarding digitization of business processes (e.g. insurance claims processing).
- Insurance firms are disrupted, disrupting and going through important digital transformation projects, which de factor often revolve around the need to optimize the end-to-end customer experience.
- The reaction of customers to the digital changes adopted by the insurance industry
- The customer experience challenge starts with the way policy holders communicate. They are used to communicate via email, text and a whole range of new channels and formats.
- Furthermore, if they’re not satisfied they use social media to tell the world. This challenge affects many industries, also in other financial services industry areas. However, in the insurance industry, dissatisfaction is easily voiced, as customers expect almost immediate accuracy and responsiveness. This is a huge challenge, especially as 84% of customers trust other consumer’s experiences.
- Today’s customers expect the same capabilities and experiences they have when interacting with retailers, entertainment providers, the travel industry, and retail banks. They want to receive service anytime, anywhere, through any channel and on any device they choose.
- The new trend towards digitization is unleashing the power to transform insurance with easier, more cost-effective, and socially acceptable processes. This is made possible by the proliferation of mobile devices, which have become the new basis for business for the millennial generation and others.
- Non-traditional players are entering the insurance market, challenging the status quo and bringing innovation to an industry that has been historically slow to evolve.
- Predicting the future of digital technology in insurance
- With the advancement in technologies, what is different now is, traditional insurance institutions can leverage technologies to acquire and process internal and external data at high speeds, and come up with sustainable and robust business models to compete with the digital natives. Dynamic technological changes evolve the customer expectations and demands for the simplified online personalized experience.
- The digital economy will make usage-based, on-demand and ‘all-in-one’ insurance lifestyle products more relevant. Customers will prefer personalized insurance covers instead of the one-size-fits-all products currently available. Flexible coverage options, micro insurance and peer-to-peer insurance will become viable options in the long run. Reinsurers will provide risk capital directly to digital brands, and regulatory frameworks will accommodate shorter value chains.
- Robotic Process Automation (RPA) and AI will occupy center stage in insurance, driven by newer data channels, better data processing capabilities and advancements in AI algorithms.
- Premiums will become highly personalized, enabled by new sources of tech-enabled data such as Internet of Things, mobile-enabled InsurTech apps and wearables.
- InsurTech firms have been showing significant growth in the areas of auto, home ownership and cyber insurance. Such strong growth will stimulate traditional insurers to either acquire technology capabilities or partner with InsurTech companies. With an increasing demand for innovative products and services from millennials, such collaboration will become a critical imperative.
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