Business Sector Teetering at the Edge: Insurance Industry
In the world of insurance, a revolution is underway, driven by the integration of advanced technologies such as Artificial Intelligence (AI). This transformation, aimed at serving customers better, is reshaping the industry landscape, making it more innovative and efficient.
Prudential Financial is one of the global insurers monitoring the market for new tech tools, including third-party AI solutions, to stay ahead in this digital race. The desire for improvement, rather than just cost savings, is at the heart of their strategy.
The adoption of AI comes with challenges, particularly when integrating sophisticated new tools with insurers' legacy systems. However, the potential benefits are substantial. AI can analyze vast amounts of data to assess underwriting risks, spot fraudulent claims, and settle legitimate ones quickly, improving efficiency and customer experience.
AI can also automate billing processes, responding rapidly and intelligently to inquiries, leading to a more streamlined and user-friendly experience for customers. This automation has the potential to offer productivity improvements of 30% to 40% for incumbent insurers.
Few global insurers have realized significant productivity gains from their technology investments over the last two decades. However, this is starting to change. For instance, Alan, a French Insurtech firm that sells health insurance to corporate clients, has a valuation of over $4 billion and covers 745,000 customers. The company, which expanded into Belgium, Spain, and Canada, can settle 98% of customer claims within 24 hours, using AI across all operations.
The acquisition of Palo Alto, California-based Next Insurance, focusing on commercial insurance for small businesses, by Munich Re for $2.6 billion in March, could help implement AI tools across operations, showcasing the potential for deeper transformation of the insurance industry through collaboration between Insurtech firms and dominant incumbent insurers.
Insurtech companies have significantly changed the insurance market in recent years. Finanzchef24, a German Insurtech firm, partnered with traditional insurer Die Bayerische to create a fully digital application process for business insurance. The combination of Finanzchef24’s platform with Die Bayerische’s tariff expertise offers a seamless digital experience for customers.
Similarly, Allianz has collaborated with FinTech startups like VeroSign to launch cloud-based platforms for fully digital insurance offerings. These collaborations demonstrate the growing trend of traditional insurers partnering with Insurtech providers to embrace digital transformation.
James Ruotolo, senior director of Financial Services at software firm SAS, notes that innovation in the insurance industry is happening both within insurers and through collaborations with Insurtech providers. He observes that there may be an uptick in acquisitions of Insurtech firms as technologies gain a foothold and start to show real value in the market.
Insurtech firms like Alan and Next Insurance, along with collaborations between traditional insurers and Insurtech providers, are catalysts for an accelerated transformation in the insurance industry. As AI and digital technologies continue to evolve, we can expect to see more changes that will reshape the industry and improve the customer experience.
