Top 6 Digital Transformation Insurance Applications in 2024

Digitization can be a difficult process for the insurance industry since it relies on manual processes, difficult-to-digitize workflows, and strict government regulations. 

However, insurance companies have started to leverage data and digital technologies to become insurtech companies; and by extension, to thoroughly evolve the insurance sector. 

In this article, we highlight the top 6 digital transformation applications on insurance practices to guide insurers in their transformation journey.

What does digital transformation mean for insurers?

Given the increasing demands of customers and the prevalent competitive landscape, insurance companies need to be able to leverage digital technologies to stay ahead of competitors. 

With the implementation of digital technologies, insurance companies can expect to improve customer experience and increase operational efficiency.

Why is digital transformation important in the insurance industry?

Though market participants claim that the insurance industry is not an early adopter of digital transformation, new players, business models and demanding customers are forcing the industry to adopt digital technologies.

Insurtech: Both enables and forces traditional insurers to adopt digital applications

The number of insurtech companies is increasing and they drive change in insurers in 2 ways:

1. Some insurtech companies are building solutions for insurance companies that target traditional insurers’ pain points, such as inefficiencies in auto, P&C, health/travel, life and home insurance fields with a customer-centric approach. These insurance as a service vendors help traditional insurers improve those inefficiencies to gain a competitive edge.
2. Other insurtech companies, like Lemonade from the Netherlands, follow a direct B2C r approach, aiming to upend existing players. These can force traditional insurers to adopt digital technologies and launch easy-to-use products.

Rapidly transforming business environment: Increasing importance of being agile at scale

As competitors rapidly deploy new solutions, insurers are expected to rapidly launch pilots and roll them out in their organizations when they are successful. To do this, insurers need to leverage the latest digital solutions to have agility in their data management and other systems.

Demanding customers: Personalized products&services

The customer experience is increasingly the key factor for a business to differentiate itself from its competitors. Customers expect the insurance company to quickly handle policy quotes, bill payments, and communication quickly.

Top 6 digital transformation use cases in insurance

1. Automation

According to McKinsey, 25% of insurance operations will be automated by 2025 thanks to AI and machine learning techniques. The insurance industry is a good candidate for digital transformation since it’s saturated with bottlenecks and manual processes such as claims processing, fraud detection, underwriting, policy administration, and customer service.

Process mining tools are beneficial for insurers who wish to identify processes that can be handled autonomously. Some tangible automation use cases include:

2. Underwriting/Risk Scoring

Underwriting is one of the core processes of insurance, where insurers price the risk and diversify it optimally. AI/ML models interpret historical data faster and more accurately compared to humans. Thus, by implementing these models insurers can automate underwriting and improve profitability. 

Insurers gather information on their insured clients or physical properties to assess the risk of potential damage. For example, in the case of auto insurance, underwriters use the following metrics for calculating risk:

• Value of insured automobile.
• Driving records of the driver (previous accidents, penalties, etc.).
• Driving habits of insured (Average full breaks per 100km, regular route, frequency of driving, etc.).
• The age and driving experience of the insured,
• Crime rate in the area.

The diversification approach requires data interpretation as well. Insurance firms may find it risky to insure similar assets in the same region. Consider an insurtech that only sells home insurance in an area where devastating earthquakes occur once every few decades. Such a company will financially suffer after the earthquake due to increased claims. That is why insurance firms need vast datasets to diversify their plans accordingly.

3. Claims processing

Claims processing has multiple layers such as review, investigation, adjustment, remittance or denial of the claim. For each layer, insurers need to process a large volume of documents that can be automated by document automation tools. With document automation, insurers can automatically extract data from documents, identify fraudulent claims, and validate claims that are in line with policies.

For example, Tractable uses AI to interpret auto accident images and estimate repair costs in real-time. So claims can be settled faster, and insurers respond to accidents up to 10 times faster.

If you want to learn more about claims processing automation you can read our Top 3 Insurance Claims Processing Automation Technologies article.

4. Claim fraud detection

Insurers feed predictive analytics tools with data captured from the claimant’s story and use text analytics to detect fraudulent claims based on business rules.

5. Omnichannel

Designing a self-service portal, where customers and insurers can access to find answers to questions, conduct business (transactions, orders, make a claim, pay bills, etc), check on status, submit support tickets and download resources, is an effective approach to increase customer experience.

To learn more about insurance omnichannel you can read our A Complete Guide to Insurance Omnichannel article.

6. Smart Contracts

Blockchain-based InsurTech companies create better risk-sharing models while giving people more custom and affordable insurance options. For example, Nexus Mutual aims to replace existing insurance models with smart contract-driven mutual markets. By enabling people to share risk across larger populations, their purpose is to lower insurance costs and replace the need for bigger insurance companies.

What are the leading InsurTech companies?

Insurtech landscape is crowded and split into different categories such as auto, reinsurance, life, home and P&C, etc. Some cool vendors are:

• Virtuali Technologies helps insurers to perform AI-driven underwriting and risk scoring especially operating within the business insurance and P&C insurance sectors.
• Quantemplate is an insurance data and analytics vendor that help you integrate the insurance data to gain insights by analyzing with ML algorithms.
• Slice is the first on-demand insurance cloud platform provider, enabling companies to build digital insurance products such as cyber insurance. Slice also has a product called Slice Mind that uses behavioral science, AI and machine learning to unlock insights.
• Surround designs customer-centric insurance products. The company’s first offering is a subscription-based insurance starter pack coverage for young, urban professionals who rent, share, borrow, and freelance.
• Spot offers subscription-based short term policies that provide coverage for reimbursement of medical bills incurred for injuries stemming from accidents.

You can check our insurtech market map to learn more about the insurtech landscape.

If you want to start your digital transformation journey but don’t know what to do, you probably will need a digital transformation consultant. Feel free to check our regularly updated and comprehensive list of digital transformation consultant companies.

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You can check our other articles on digital transformation:

• Digital transformation statistics
• Digital transformation frameworks
• Digital transformation and customer experience
• HR Digital Transformation
• Digital transformation in banking
• Digital transformation in healthcare
• Digital transformation in retail
• Digital transformation in real estate
• Digital transformation in automative

If you still have questions about digital transformation initiatives, we would like to help: