It should come as no surprise that insurance companies have identified their reliance on legacy systems as their greatest barrier to digital transformation. Policy administration systems (PAS) for most insurance carriers today are more than tens of decades old. Keeping these legacy systems running, has proved to be an expensive burden for them. It
also means significant resource and technology risks due to outdated security protocols and an inability to scale fast enough to support new distribution models or product introductions to the market.
Disruptive technologies like blockchain, IoT, and machine learning are poised to revolutionize the entire policy administration game as we know it, as advancements in technology have begun to replace these obstacles with opportunities. From the added market agility granted by creating flexible platforms that can quickly adapt to changing regulatory and customer requirements to the elimination of redundant processes and systems, cutting-edge technology is set to make a permanent impact in this arena.
By incorporating machine learning into internal policy administration workflows, routine tasks like generating written notifications, clearing backlogs of paperwork, and keeping up with the responsibilities associated with traditional underwriting have been made obsolete. Automation in the form of machine learning algorithms have started to enable insurers to store, process, and exchange information differently. By using text and image recognition algorithms, cognitive computing, and the cloud, carriers can synthesize and make complex decisions almost instantaneously. Automation results in needing fewer employees to keep redundant and outdated processes going, thus reducing the costs involved by millions of dollars on an annual basis for some carriers.
Internet of Things (IoT)
In the past, an underwriter’s risk assessment was based primarily off impersonal data sets like hospital health records or credit ratings. Today, however, in such an increasingly connected world, social media and IoT devices are generating greater volumes of personalized data every second. From your Instagram posts to how many steps you took today, there is no end to the kind of information that can be used to generate more personalized insurance products and services for you.
Beam is one such example. As providers of dental insurance using IoT technology, all they needed was to track a customer’s brushing habits using a smart toothbrush to put together a personalized insurance plan that offered up to 25% lower premiums than their competitors. And Beam is not alone. It has gotten to the point where all types of customers are willing to share more personal data if it means getting more affordable risk coverage.
After payment processing, insurance is recognized as the second greatest distributed ledger use case for blockchain in the fintech industry. In fact, according to PWC, the implementation of blockchain technology has the potential to help carriers across the world save up to as much as $10 billion annually by eliminating errors and reducing the time taken to validate and verify information. By all parties being connected through smart contracts, reinsurers can gain direct access to all your health data without needing to verify multiple insured events for each contract anymore. In this way, blockchain can be seen improving transparency and the governance of workflows right off the bat.
From the initial point of contact to insurance back-office processes, policy administration systems are essentially the backbone of any carrier’s operations. Insurers can no longer risk bearing the high costs of rigid legacy systems that have been proven not to adapt well to changes in market dynamics, regulations, or consumer preferences. That being the case, disruptive technologies like blockchain, machine learning, and IoT must be deployed to move the needle further and help insurance carriers keep up with the times or risk being left behind and biting the dust.