How COVID-19 has accelerated digitization in the insurance industry
The industry is innovating faster to meet new needs that have emerged during the pandemic, say Volaris business leaders
This is part two of a two-part series about how COVID-19 has transformed the insurance industry. Part one focused on why the insurance software space is attracting major investor interest and why conditions are ripe for consolidation. Part two, below, focuses on the trends that have arisen over the past year.
The pandemic has presented a challenging year for many businesses, but Volaris Group’s backing has allowed smaller software businesses to focus on serving customers amid changing conditions. Here is a look at how businesses within the insurance and benefits portfolio have tackled emerging challenges and trends.
Moving toward a fully digital customer experience
Customer demand has expedited greater adoption of digital technologies in the industry, according to several leaders within the Volaris insurance and benefits portfolio.
“Before the pandemic, everyone in the industry knew they had to go digital, because there were pressures from the millennial generation,” says David Squibb, President of Covenir, an insurance outsourcing provider.
“When the pandemic hit, we had no choice—everything was forced to go remote.”
Shurre Hampton, General Manager of policy administration software provider Silvervine Software agrees that the shift toward digital was inevitable, even before the pandemic.
“Insured parties are now demanding the same kind of direct interaction with the company that they’re used to in their typical online shopping experience,” Hampton says, further adding that the shift toward a digital user experience means there is less need for in-person interactions or an independent agent force.
She adds that because of reduced in-person traffic, most carriers saw a need to offer direct-to-consumer buying options to prevent losing market share.
Customers are seeing increased efficiencies from these newly adopted forms of digital technology.
“Nearly every client we work with is interested in deploying some form of digital claim payment solution, says Terry Brown, President and General Manager of Insuresoft, a provider of policy, billing and claims administration software.
“These solutions facilitate faster claims settlement with claimants, insureds, and even lienholders and offer a wide variety of payment methods including pre-paid cards, Venmo or PayPal payments, and direct deposit,” she adds.
New working conditions have prompted new product offerings from Volaris companies. For example, Covenir, a business process outsourcer for the insurance industry, ran a virtual mailroom before COVID-19, which digitized paper-based mail on behalf of insurance companies. During the pandemic, the company spun out this service and began offering it to more customers.
“Nearly every client we work with is interested in deploying some form of digital claim payment solution.”
- Terry Brown, President and General Manager, Insuresoft
Similarly, mass office closures during lockdowns created more demand for remote options to sign documents, thus prompting Silvervine to develop its own version of an electronic signature solution, called SilvervineSign.
“Our product will rival Docusign and Assuresign at a more competitive price,” Silvervine’s Hampton says.
A traditional insurance model would group together people based on similar risk profiles and charge rates accordingly. But now, with the growth of advanced data methods and a growing trend toward mass data availability, insurers can more easily and accurately assess risk on a personalized level.
Data advancements and AI allow for deeper customer insights
“Advanced data analytics using artificial intelligence (AI) and statistical methods can now be used to process data harvested from mobile apps and Internet of Things (IoT) devices,” explains Walter Copozzolo, CEO of Switzerland-based BBT Software.
For example, an auto insurance provider can add a level of hyper-personalization to its policy offerings by collecting data from sensors that track a driver’s habits. That data can give an insurer enough information to reward safe drivers with a discount, or charge higher rates to drivers who frequently go over the speed limit. In the world of health insurance, smart watches and apps can help insurers decide to offer discounts to people who exercise frequently or live a healthier lifestyle, or detect any factors that could justify a higher rate for health insurance.
“Over the next five years, we’re going to see the capture and use of data drastically change the industry.”
- David Squibb, President, Covenir
Silvervine’s Shurre Hampton has seen an increase in requests for the emerging trend of vehicle telematics, which enable the communication of data between automobiles through wireless connection. To meet demand, they struck up a partnership with smartphone-based telematics provider Xemplar to provide this service to existing and new customers.
“Over the next five years, we’re going to see the capture and use of data drastically change the industry,” predicts Covenir’s David Squibb.
Data advancements can also hold many benefits for insurers looking to increase profitability by lowering risk exposure.
“With our carrier clients, we are seeing growing interest in how artificial intelligence can improve their risk selection or underwriting abilities, along with their claims processes and fraud detection,” according to Insuresoft’s Terry Brown.
Data collection can also save time from a customer’s point of view. Whereas a new customer might traditionally need to answer a long set of questions before an insurer has enough information to assess risk, now insurers can use third party data to help them get an accurate assessment and provide a quote faster.
Trends and challenges on the horizon
And it doesn’t stop there. Leaders point to a converging set of market and technology trends on the horizon that could challenge insuretech leaders in the coming months, including:
- Competitiveness and faster entry to market: “Insuretech start-ups are emerging more quickly and entering the market much faster than traditional carriers have done in the past. This is largely due to their ability to deploy technology very quickly and not be tied to the historical patterns of working. As a back office services company, we are engaged with many of them in supporting these operations as they do not want to deal with the non-technology human infrastructure that is required to support the insurance side of the business. This support allows them to focus their critical resources on deploying technology and entering new products/markets very rapidly.” –David Squibb, President, Covenir
- Maintaining the productivity of a remote workforce: “Once COVID restrictions were implemented last year and insurance companies were forced to adapt, they quickly saw an uptick in productivity, but after several months of working from home, productivity began to decline. By moving everyone to exclusively working remotely, it exposed the need for better management tools within their policy admin systems to identify and understand how to more effectively manage their overall business operations and productivity, regardless of where the work was actually being performed.” –Shurre Hampton, General Manager, Silvervine
- A shift toward SaaS: “Our industry is moving away from the traditional installed policy admin system model and towards the cloud-based SaaS model. As a direct result, policy admin systems are becoming more ‘headless’ and providing universal application programming interfaces (APIs) that allow the rapid adoption and deployment of new tech to capture competitive advantages in the areas of distribution, predictive analytics and claims settlement.” –Shurre Hampton, General Manager, Silvervine
- Focus on low-code solutions: “Both carriers and providers are focused on low-code solutions that are easy to maintain and can be modified quickly and with little to no risk.” –Terry Brown, President and General Manager, Insuresoft
- Ongoing vigilance around data security: “With the increase of digitization and cyber crime threats, data protection and IT security is becoming more and more important.” – Walter Capozzolo, CEO, BBT Software