By FINTECH Books Contributor, Visesh Gosrani
Increased data availability will change non-life insurance to a greater degree than life insurance. New tools will change insurance from financial indemnity and service transactions to a partnership. There will be more focus on the reduction of claim events, both the frequency and the severity.In the 1600’s insurance mainly catered for exploration and cargo transportation.
Minimal data availability made trust between partnerships of policyholders essential. All parties benefited by sharing knowledge in risk reduction techniques as this improved the outcome of the pool.Insurance has since become a transaction at both purchase and event.
The importance of relationships has diminished, it’s now more about risk and pricing analysis. Insurance has consequently been commoditised and there is very little trust. New tools will enable insurers to assess risk more accurately for pricing, while building relationships and trust. Insurers will be able to help policyholders avoid events or reduce their impact.
Key tools include IoT, social media platforms, open source information and artificial intelligence. Each tool will be considered against the main potential uses, such as a data source, analysis, behavioural modification and education.
Highlighting user onboarding and customer engagement as areas of the value chain, insurers should start to differentiate themselves, hence reducing the price elasticity of insurance and increasing retention.
This will increase the speed, ease and tone for the onboarding process and the implementation of a sustainable and positive relationship. Insurers who do not change will under perform in the long term. Successful differentiation will reduce the extent of underwriting cycles and a stronger relationship should reduce propensity for direct and indirect fraud.