How technology impacts the insurance sector
The impact of technology
While e-commerce giants like Texas Farmers Insurance Company, Allstate Texas Lloyd's, Liberty Insurance Corporation and ASI Lloyds to name a few are challenging traditional ways of buying insurance, new, fast and more reliable ways of insuring self, goods, properties and commodities are being set up to enhance end user experiences and settling insurance claims. The market trends are evolving from traditional broker based scenarios to a more subtle direct-to-market approach where middlemen are cut off and the brokerage benefits are passed directly to the consumer. Also, considering how insurance policies were underwritten previously, today companies are able to transform the data provided by potential customers into actionable insights and directly assess individual risks rather than rely upon customers to answer a set of standard questions to evaluate them.
Technology, considering the ongoing market trends and customer preferences as on today, is no longer a "nice to have" notion but a crucial differentiator clearly spelling out success and failure - Insurance companies have to keep pace with cutting edge technologies and constantly enhance end user experiences to challenge competitors and remain competitive.
Benefits of technology
While using technology as an enabler for generating growth, the future of a company depends heavily upon what type of technology it uses and how well it uses it. The better and more effective technology you use, greater will be the growth.
Generating new business
Unlike FMCG businesses which a large variety of products to offer, insurance companies have fewer policy products to sell. So acquisition of new customer is always an important issue and companies are forced to increase their sales team to reach out to new buyers. To sustain growth and generate profit on a continual basis, online or digital marketing processes can aid insurance providers to reach out directly to the vast magnitude of online buyers. Traditional advertising methods such as hoardings, banner promotions, signage and TV commercial ads incurred substantial promotional expenses whereas the same objectives can be availed through online PPC advertising campaigns which are easily afforded and cost significantly less. Moreover, it's much easier to target new buyer audiences online rather than reaching out to them physically as was the case in the past. Technology helps to reduce customer acquisition cost.
Reduced operational overheads
For any company it's always fruitful to save a few dollars and reduce expenses whenever possible to save for a rainy day. Operational overheads are a major concern to organizations and demand a large chunk of working capital to support business processes and operational activities. More and more fortune 500 companies now have in-house departments which oversee operational overheads and find innovative ways to reduce expenditure while expediting the organization's business processes. Process automation can go a long way in reducing workforce and employee cost by substituting humans for technology enabled processes and devices. It's more reliable and cheaper to store, retrieve and process documents electronically using PC networks and limited human intervention rather than employing a huge team of clerical personnel to physically move files and folders to different places in cabinets and storages situated in different parts of the building. In addition, you don't need several branch offices in different parts of the country and maintain staff for all of them. Technology helps to reduce operational cost.
Making policy underwriting easier and quicker
The heart of any insurance company, policy underwriting policies and efforts put in by the evaluation agents directly decide how well the insurance business will grow and whether the company shall make a good profit through the premiums or not. Insurance agents need to communicate and ask a lot many questions before they can give a clearance. One of the biggest hurdles faced by agents in the past was meeting a client at a particular location, or at a particular time and explaining the nitty-gritty of the policy. This consumed a lot of time and agents had to travel a lot to "close" customers and meet target deadlines. Nowadays, policies are clearly explained on portals and interested visitors can communicate directly with the agents using online chats tools and video conferencing facilities to inquire about eligibility aspects, answer queries and facilitate the agent in deciding the underwriting process. That way agents can respond to many customers in a day and decide which customer should be given the policy and which shouldn't. Technology helps to make the underwriting process easier and quicker.
Target ideal customers to enhance brand value
MNCs spend billions of dollars to create and build powerful brands. As per market research the cost of branding activities in the U.S. rose to 5.5 percent in 2015 to reach more than $560 billion. It gives an idea how much important branding is how much big MNCs are ready to spend for it. Branding is always expensive as it takes years to build a brand and a lot of advertising capital. The social media plays an important part in branding and insurance companies now don't have to spend exorbitant sums to create and maintain their brands - they use a fraction of the budget they used in the past to achieve the same objectives by promoting and advertising their brands on Facebook, Twitter, Instagram, Pinterest and other social media venues. The biggest advantage is you can target prime customers very effectively using marketing insights facilities and analytics tools which are often provided by the media portals. Moreover you can submit videos and adverts to cover all types of audiences as and when required. Technology helps to target ideal customers and enhance brand value since you can do more over social media by spending less of advertising and branding budget.
Achieve higher ROI
All businesses strive to achieve high ROIs to increase profits. Businesses generally borrow capital from banks and investors at high interest rates or raise the money through public limited issues and incorporations. Technology helps to drastically reduce working capital and offer a tremendous opportunity for insurance companies to churn out higher profit margins through online activities, electronic funds transfer and process automation which are all made possible using reliable technologies.
There are many other significant advantages of using technology to boost sales by making it easier for consumers to avail insurance policies and expediting the underwriting process. Reputed insurance companies provide affordable insurance packages to consumers worldwide and even help them in their dire times.
Note: Reference of publicly available material has been taken for this write up.
About the author
HITESH KHRISTY is a Development, Project Management and Reinsurance Broking professional, having worked in multiple countries. He is an Author to a book, and has been writing for NGOs, Technology Companies, Insurance sector on social issues, political empowerment, United Nation and its concerns for more than a decade.
He has been involved in teaching, speaking at Social work, Social science schools & various universities in different countries on "Insurance for Social Change", "Welfare Insurance", "Micro Insurance", "War & Terrorism", "Modern Social issues". Few of his upcoming books are 1) Modern Social Problems, 2) Liability Insurance, 3) Terrorism.