This post is part of a series sponsored by AgentSync.
The evolution of technology in any industry follows a similar pattern. Transformation does not happen overnight. Rather, we see a progression from infancy to maturity in the way an industry uses the technology at its disposal. At the same time, the actual capabilities of technology continue to progress so that what was once “state of the art” soon becomes standard, and there is room for the next innovation to take its place as the latest and greatest.
According to AgentSync co-founder and CEO Niji Sabharwal, the insurance industry is at a tipping point. Since the main players in the industry have reached a moderate basic level of digitization (accelerated by the need for a more distributed remote workforce thanks to COVID-19), the next wave of insurance technology (insurtech) may begin to take hold. We’ve seen this progression happen faster in other industries (hospitality is one example), as insurance technology has thus far only scratched the surface of what’s possible.
There are a few reasons why insurance lags behind industries like hospitality in terms of technology adoption.
- The well-established nature of the insurance industry (after all, it has a history that goes back thousands of years!).
- The fragmented nature of the industry and how it is regulated, primarily on a state-by-state basis.
- Lack of standardization on best practices across the industry – There are an almost infinite number of ways to “get things done”, as long as the end result is that they are done in compliance with regulations.
- The aging (and shrinking) population of the insurance industry workforce, coupled with the skills and knowledge gaps that appear as an entire generation of industry experts retire.
But the times are changing! At least from what we can see from the point of view of a fast growing insurtech with the same focus on ensuring effortless compliance for insurers, agencies and MGAs. Y creating a modern digital experience to meet the needs of the emerging insurance workforce.
We sat down with our co-founder and CEO, Niji Sabharwal, to discuss the waves of insurance technology, where the industry is right now, and where it could be headed.
Wave No. 1: Digitization of existing processes
“The first wave of insurtech is mostly about digitizing processes that already exist. There are a few reasons here.
First, digital processes can incorporate redundancies and monitoring to make it easier for new and inexperienced users to integrate into the process.
Second, basic efficiency gains mean being able to do the same processes with fewer staff if necessary.
Third, a digitized insurance process, from underwriting to claims payment, can be repeated even between carriers, agencies or MGAs with less need to access in-house legacy knowledge bases.”
There are thousands of carriers, agencies, and MGAs, and there is no single comprehensive process or system for how they all do business. The insurance industry is incredibly regulated, but notoriously inconsistent in these regulations from state to state, which means that each of these thousands of insurance organizations follows different rules and creates unique processes to achieve the same goals.
As Niji points out, simply digitizing existing insurance industry processes has been transformative. For one thing, the adoption of digital processes inherently standardizes the way an organization works. Daily tasks can go from “the way Martha has done it for 25 years, but no one knows why” to a standardized, repeatable process that anyone, even a new employee, can follow and perform. This becomes even more significant with the knowledge that the the average age of insurance agents is almost 60 yearsand industry faces a shortage of millennial and Gen Z talent.
“We are already beginning to see significant changes in the industry simply by digitizing current processes, from exchanging faxed documents for signatures to emailed PDFs and one-click agreements.
If taking the existing process and putting it on a computer can have such an effect, just imagine what the second wave of insurance technology will look like.”
Wave No. 2: New use cases, transformative innovations for digital insurance applications
As the InsureTech Connect Conference (ITC) 2022 emphasized, insurance technology companies are largely ready to start riding out the first wave. However, since this is an emerging era, to understand its implications is to enter a realm of speculation, where we are launching ourselves into the future.
“For a second wave of insurtech, things are starting to get really interesting. To hazard a guess, this is where the industry can see and feel the impact of artificial intelligence (AI). Some insurtech companies are already doing this, using huge data sets that are publicly available or purchasable to train AI models and automate things like underwriting and contract recommendation.”
Insurance companies that use business intelligence as part of an algorithm can act like a large insurer but with a small and efficient workforce. Again, this forecast may seem far into the future for insurance companies that still rely on manual processes, but early adopters are not far from realizing the benefits of AI, automation, and application programming interfaces ( APIs, which are like a coded door to an application).
“The second wave of insurtech will likely involve discovering new use cases for existing technologies, experimenting, and realizing that what can work with 10,000 policyholders can also work with 1 million policyholders.
The development of scalable technology and the union of tools through the ‘chaining’ of APIs will make all these solutions more effective and efficient”.
Often the business models within a line of authority are not too far apart, at least within the same state or territory. All life or property and casualty insurance companies doing business in Ohio have the same solvency and reserve requirements. They often operate with the same data to subscribe and create new products. And, depending on the state, those businesses may also have similar fees or, as in the case of Connecticut health insurers, insurers may be subject to the same maximum limit for profit margins. Under these traditional regulations and data sets, the business models necessarily look very similar.
As a result, much of business marketing, at least today, in the insurance space is about differentiating a business through its brand, its internal culture, or the non-insurance services it offers in addition to its core product. But essentially, many of the underlying possibilities of insurance remain the same. However, as Niji says, the second wave of insurtech will likely start to change this, giving companies a different advantage based on how they build their contracts and use the data available to them.
“The second wave of insurtech will likely be a long process due to the fragmented nature of insurance. It’s hard to reach consensus among so many companies that are regulated by so many different authorities, and building something simple and comprehensive may not be an easy proposition. .”
However, imagining the number of areas that could be affected by emerging technology is an interesting proposition. Onboarding, commissions, compliance… there are so many possibilities.
Wave No. 3: Mega insurance?
Given that insurtechs are just entering what we might consider the second phase of innovation, throwing projections that far into the future of a third wave is really just a shot in the dark. Who knows where insurance technology will take us?
One speculation could be that once chained APIs (multiple applications, linked together and feeding information to each other in real time) become commonplace in different companies or in different lines of business, there may be some mergers and acquisitions. larger, with traditional long term. long-term operators aspire to smaller insurtechs. It seems likely that smaller pieces of technology will come together to create a few monolithic titans of the industry.
Alternatively, it could be the opposite, where smaller, more aggressive companies have the tools to compete at a high level while still being tough and nimble.
Regardless, to some degree we are of the opinion that a rising tide lifts all boats: the insurance industry as a whole will continue to benefit from technological innovations and digital transformations of its processes. Even as we keep an eye on “Big Data” and are wary of protecting vulnerable populations from harmful digital disruption, we can remain excited about the ways insurtechs can improve the industry for both those working in insurance and their consumers.
If you’re excited to ride these waves with us, take a look how AgentSync Manage can help you Turn a roadblock into an asset with our insurance license compliance system. We’re here for you if you’re just starting to automate once-manual processes, or if you’re ready to imagine the future of Wave 3 together.
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