The term "digital transformation" isn't a new phrase in the insurance industry, but do you know its true meaning? New technology and strategies that rely on digital components are quickly becoming essential for insurance companies to remain competitive. This is especially true when it comes to property and casualty (P&C) insurance, which can often be challenging for companies to manage efficiently. Here are some of the most advantageous ways to lean into the digital transformation trends in P&C insurance.
P&C insurance isn't new, but as the policy landscape begins to change and react to external factors, this kind of insurance will shift as well. Digital technology like predictive software aids insurance companies in ways that an agent could only dream of even 20 years ago. This kind of digital transformation is being seen around the world in various industries. P&C insurance has also been seriously impacted by digital advances, whether it's how P&C insurers analyze data or boost actuarial science.
P&C insurance companies that modernize quickly likely see a competitive edge against others in the marketplace. The right digital tools can also help the provider put a heavier emphasis on customer experience and customer satisfaction in ways unavailable to those left behind. We know that staying current and capitalizing on some of the most useful trends can be difficult, but it will most likely help the insurer in the long run by meeting customer expectations.
The modern P&C insurance industry looks different than it did 50 years ago. The P&C insurance product offering has always changed in reaction to customer behavior. For example, car and homeowners are older, which has important implications for the insurance industry. Another great example of how P&C insurance is at a higher risk during inflation is the cost of vehicle repairs. These expenses have risen faster than inflation, as mapped by NPR through the Bureau of Labor Statistics. This added cost forces insurance companies to increase premiums in order to protect themselves from risk.
The nature of insurance is to prepare for the ever-changing customer behavior to stay ahead of the curve. The better the resources and tools available to insurers and actuaries, the more reliable their choices will be. This is what has encouraged insurers to lean into digital transformation.
The insurance industry is continually going through changes, preparing and reacting to the economic environment and customer behavior. Here are some of the trends that most P&C insurance products are experiencing:
In the P&C insurance industry, customer data is one of the most important tools that insurers can use to prepare for the future and assess risks. Actuaries have access to modeling and data analytic software which is a side effect of digital transformation. In the end, the insurance company and its customers benefit from the digital impact. This assists with risk management and premium pricing as well as future financial modeling.
Going hand in hand with data collection and predictive analytics, telematics is a type of information technology that P&C insurance providers use to help them make better decisions. For example, telematics uses data from connected devices, like a car, to gain helpful insights. These devices can give information to the insurance provider that can offer added visibility into the driver's behavior. From here, the insurer can make more concerted efforts to manage risk and create a cost-effective insurance policy.
The increase in people participating in the sharing economy has brought complications for P&C insurance products and insurers. The sharing economy is a type of economic system where a private individual shares their assets and services for profit (Uber and Airbnb for example).
The lines are more blurred than ever between personal and commercial coverage. If the policyholder is using the asset for personal reasons, it will get different coverage than if they're using it for business purposes.
Digital transformation has made it more difficult to find the ideal policy for someone who has a personal asset, like a house that they rent for commercial use such as an Airbnb. Insurance companies need to find creative solutions for these situations and circumstances.
Many P&C insurance providers are leaning into digital transformation by beefing up their communication platforms. One example can be seen in chatbots, which insurers use for intelligent automation of the service to their customers. This is especially helpful for those who have a large clientele because of the high volume of requests. Artificial intelligence (AI) chatbots can help improve the customer experience.
These are just some of the ways digital transformation impacts a P&C insurance company, but there are many more.
One of the most important things that an insurance company can do with its digital tools is mitigate risk. This kind of corporate insight is vital for insurers who are trying to maintain their competitive edge in the marketplace. Actuaries can leverage their software and data analytics tools to manage risk and price products more accurately. A company that refuses to adopt new ways of managing digital risk and insuring policyholders is likely to be left in the dust. Outdated methods won't cut it anymore, and working with a modern actuary can help bring your company into this landscape.
Whether it's auditor support, software solutions, statistical consulting, product development or financial reporting and market conduct examinations, digital tools can make risk management more reliable than ever. While it's ideal to work ahead of market conditions, the right risk assessment and management tools can help insurance companies stay competitive.
Staying up to date can be a daunting task, especially for older insurance companies who sell P&C insurance products, but they don't have to work towards this alone. Insurance companies often work with actuaries and consultants who have access to better statistics and analytics software. This kind of outside support can help the insurance company modernize and keep up with digital transformation, and even use it for their own advantage.
Are you ready to work with Lewis & Ellis and find a solution for your needs? Digital transformation is here, and it's time to make sure that your P&C insurance is modern, too. Reach out to our team to get started today.