7. Week 7 Question - Answer

TECHNOLOGY IN FINANCE-LAQ-WEEK 7
EXPLAIN THE BENEFITS OF TECHNOLOGY IN INSURANCE.

InsurTech is a buzzword nowadays where a variety of technologies are set to
transform the traditional insurance industry. In the last two years, insurers have
already transformed themselves digitally to offer convenience, security, choice, and a
seamless experience to their customers.
1. Lower Insurance rates:
– Fitness apps or wearable devices:
Staying fit has many perks. Some of the fitness apps like Wysa and wearable devices
help maintain weight, and food habits and boost energy and mood. And most
importantly they can help save a huge amount of expenses related to health insurance
costs. Numerous insurance providers have tapped into wearable devices to keep
motivating their customers to stay fit and healthy and offer them discounts and
benefits based on fitness levels.
– Self Driving car:
Self Driving cars can help in reducing the chances of accidents and lower life
insurance rates. Since road deaths are a significant percentage of deaths in the entire
world, any slight downward change will ultimately lead to lower deaths and hence life
insurance claims.
2. Fraud Prevention:
Insurance fraud costs companies billions of dollars per year across the globe.
Insurance companies should establish a technology framework, tap into advanced
automation and analytics, and take steps to prevent it.
– Digital Signature:
Digital signature technology is without a doubt lowering fake insurance account
activation and hence a fraud. For example, a digital signature can prevent fraud-
insurance purchased after the accident can be brought down with digital signatures
verifying the actual date.
– Data analytics:
The technology involves data mining tools and quantitive analysis. Data analytics can
be applied to detect fraud. Predictive analytics is useful to improve the fraud detection
process, helping prevent claims payouts. Analytics on claims and fraud transactions
helps enhance risk management.
3. Lower underwriting cost:

–IoT
According to IoT Analytics, the global number of connected IoT devices is likely to
grow at 9%, with 12.3 billion active endpoints. By 2025, there will likely be more
than 27 billion IoT connections, which will have a significant impact on the
availability of real-time information that insurers can use for better
pricing/underwriting. Drones are satellites on steroids at least as far as underwriting is
concerned. Satellites have dramatically changed how home insurance policies are
written due to fire. Everything can be captured via drone footage even the houses that
get covered behind the trees. Captured data can be used for underwriting purposes.
4. Billing efficiency:
Billing systems are not only integrated but now can accept varied forms of payments
allowing ultimate flexibility to the customer and thereby making the billing systems
efficient. The automated systems inform and remind customers of approaching due
dates for premiums thereby lowering unintentional defaults.
Digital wallet has become one of the most widely used platforms for payment
systems. Insurance companies are leveraging payment gateways like Google Play to
sell insurance to users. Last year, SBI General Health Insurance launched Arogya
Sanjeevani on Google Pay Spot to offer standard coverage at affordable premiums and
improve the penetration of health insurance in the country.
5. Specialized insurance:
Each type of insurance is different from the other and the factors that are suited to one
are not suited to the other. This requires the insurance agents to have specialized
knowledge and the internet helps. however, Machine learning is vitally important
here. It has the capability to learn and analyze billions of patterns and identify suitable
underwriting clauses as well as identify specific customized plans for the customers
based on the data provided. This can change the customer perception of the insurance
company and provide an engaged customer who is likely to stay longer.
Dinghy, is a pay-by-the-second insurance provider that customizes coverage for
freelancers and businesses where customers may switch their policies on and off as
needed without any upfront premiums, interest, credit checks, or fees.
6. Smart and Faster Claim Processing and Settlement:
–AI-Powered Chatbots:
Claim settlement has been one of the pressing issues in insurance. With intense
competition looming in the market, delay in the claim settlement gives a bad
experience to the customer who prefers to switch to another brand. Insurance
providers worldwide have been investing in AI-powered insurance chatbots to
enhance customer experience.
Metromile can validate 70% to 80% of claims instantly using AVA, an app based-claims
assistant.
7. Data-driven pricing
–Telematics:
Innovation has become one of the top priorities for insurers today due to rapid change
in customer demand. The usage-based insurance market is projected to hit over $190
billion by 2026, telematics is allowing carriers to capture user data and create
personalized usage-based insurance products.
For example, auto insurance was based on a pay-as-you-drive model where customers
use to pay a premium based on the distance covered. But with technological
innovation, insurers are working on a pay-how-you-drive model where customers can
get discounts based on their driving skills.
Rise in demand for innovative solutions, intelligent experiences, and speedier
processes has led to technological disruption in the insurance industry. According to
IDC, IT spending in the insurance industry will increase globally at a CAGR of 6.0%
by 2024, touching $135 billion. With continuous investment in technology, insurers
are working on improving customer experience and operational efficiency to
maximize profitability in the long run.

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TECHNOLOGY IN FINANCE-LAQ-WEEK 7

EXPLAIN THE BENEFITS OF TECHNOLOGY IN INSURANCE.

3. Lower underwriting cost:

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