What is Digital Insurance?

What is Digital Insurance?

In this article, we'll review the benefits of digital insurance, the tools and applications of digital insurance, and why digital insurance is important.

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Key Summary

The term “digital insurance” casts a wide net across different technologies, operational processes, and customer experiences, but is a technology-first model that directly refers to insurance products delivered and managed entirely through digital channels, such as: 

  • Cloud platforms

  • Mobile apps

  • Data-driven analytics reporting

  • Other digital components

Digital insurance allows customers to manage their insurance policies, claims, and billing online, without the need for traditional in-person appointments or document filing. It also allows insurers to digitally manage insurance operations from handling claims, underwriting, billing processes, and sales, all while having a direct line to better customer service.

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What Are the Benefits of Digital Insurance?

There are several benefits of digital insurance for both insurers and their customers. Here are some examples of how digital insurance provides outcomes:

  • It makes insurance more accessible: In any industry, cost reduction is a key goal, but it must come without sacrificing quality and quantity. Digital insurance takes an omnichannel approach to reduce inefficiencies and support inclusion. Particularly for underwriting, it combines big data, AI, predictive analytics, and expertise for cost savings that are passed on to both insurers and policyholders. Further, for insurers, digital channels can help reduce the cost of sales and distribution, as well as other administrative tasks. For policyholders, digital insurance can offer more competitive pricing due to the reduced overhead costs insurers normally pass on with legacy systems. 

  • It exceeds modern customer expectations: Thought leaders who continue to push for digital innovation center their developments on the customer experience. With the increasing use of digital technologies in everyday life, consumers have come to expect convenient, easy-to-use online services. Professionally designed digital insurance exceeds these expectations with personalized experiences through online portals, live chat, self-service application and platform features, and many other services that provide automation and ease. 

  • It improves security and fraud prevention: Initiatives to prevent fraudulent activity and heighten security measures in software have been underway for years. With digital insurance, these applications take a modern approach as these tools use advanced analytics and machine learning algorithms to analyze massive amounts of data. The result? Informing insurers about customer expectations, but also providing excellent insights into patterns and anomalies that may indicate fraudulent activity. This information ultimately helps insurers protect their customers, reduce losses, and build stronger infrastructures.

  • It encompasses low-code/no-code design: Digital tools don’t have to break your current business models. Digital insurance platforms often have low-code and no-code capabilities, which means they can easily be customized and configured without the need for extensive coding or technical skills. Even in areas where coding expertise is helpful, developers and IT professionals can benefit from low-code scenarios to focus on critical solution requirements. This allows insurers to quickly create new insurance products and features, bringing them to market in less time. It also assists with waste reduction by creating reusable components that benefit cost and time reduction.

  • It improves experiences for employees and companies: Digital insurance can help improve the employee experience by streamlining processes and reducing the need for manual work. Optimization in product development and integration means less stress and more time to focus on innovation, such as examining and leveraging data analytics and AI to make informed decisions about pricing, risk assessment, and product development. This can help insurers attract and retain top talent, as well as improve overall employee satisfaction. Additionally, insurance companies benefit by focusing their employees on the best outcomes. They also often need to rely less on in-house support and can instead provide employees with software as a solution (SaaS) applications, dashboards, and more for daily operations.

What Are the Tools and Applications of Digital Insurance?

There are several key tools and applications used within digital insurance and many digital insurance platforms are closely linked to an insurtech ecosystem and marketplace of partner resources and solutions:

  • Artificial Intelligence (AI) Systems: The use of AI in P&C insurance encompasses a wide range of areas and is constantly evolving. However, some of the most visible uses of AI allow systems to automate many of the processes involved in underwriting, claims processing, the customer journey, gaining new business, and retention of existing customers. AI is not an end all solution – it is a tool to be used to improve internal and customer-facing operations as a means of supporting human engagement. 

  • Machine Learning: Machine learning algorithms work hand in hand with AI but with a direct focus on data analysis and processing. In digital insurance, it can be used to collect and curate large amounts of data to identify patterns and trends that can be used to improve underwriting, risk assessment, pricing, and more. It is also a key tool for informing security decisions by combing through extensive data to determine when and where fraud may exist. 

  • Big Data and Analytics: It’s not just about collecting and distributing data and analytics; it’s about targeting the right data and analytics when more and more data sets are created every day. Big data analytics tools can be leveraged in digital insurance for a comprehensive analysis that takes machine learning a step further. By combining trends and patterns with extensive information from a variety of systems, insights turn into real-world examples and scenarios that global insurance companies can use to inform their decisions.

  • SaaS Proficiency: With digital insurance, speed is the name of the game. Instead of installing and hosting software locally, which can create roadblocks, many insurers use SaaS for better operational efficiency with secure hosting and support offsite. SaaS proficiency is achieved when the needs of insurer using the software evolves. For example, a professional SaaS must be able to scale in size and depth to the insurer’s growth, upgrades must be completed without disruption, and safety and security measures to meet compliance requirements need to be handled smoothly.

  • Internet of Things (IoT): Certain digital insurance offerings include IoT abilities for insurers and customers to include within policies. IoT technologies are growing in the P&C insurance industry, particularly using telematics or wearables in auto insurance. Data about policyholders' behaviors and activities are used to tailor insurance products and pricing to individual needs. Digital insurance is also continuously moving forward with IoT measures to support digital customer journeys with the latest product offerings like end-to-end usage-based insurance (UBI) and embedded insurance.

Why is Digital Insurance Important?

Insurers can define new standards that surpass the competition while consumers know that their time and attention is of value. Therefore, insurers and consumers both have reasons to care about digital insurance, such as: 

  • Convenience: Digital insurance makes it easier to purchase, manage, market, and update insurance. Customers can access insurance products and services online or through a mobile app, at any time and from any location. This eliminates the need to visit a physical location or speak to an insurance agent. Likewise, insurers can easily communicate with customers and make internal improvements. 

  • Efficiency: Administrative and operational costs associated with traditional insurance processes are often reduced with digital insurance platforms. This can lead to lower premiums for customers. It also supports global insurance needs for customers of all backgrounds and insurers of all sizes, including small businesses. 

  • Personalization: Through digital tools, AI, and IoT technologies, digital insurance allows insurers to offer customized insurance products and services. Personalization for policyholders is critical to retention, as it shows customers they are valued and more than just another number or policy. 

  • Inclusivity: Digital insurance can help increase the availability and affordability of insurance for underserved populations, such as those living in remote areas or with low incomes.