The insurance industry is experiencing a revolution: the impact of digital tansformation has change the industry forever. What is today known as “insurtech” and refers to technology driven innovation in the insurance industry, will totally cover the latter and will also making the terminology difference between insurance and insurtech obsolete.Below, our initial glossary (a page we will periodically update) to illustrate which technologies and which new economic (and social) patterns are creating the greatest impact on the insurance industry, innovating it even with disruptive modalities, to make it more consistent with the new modern needs.
a – artificial intelligence
AI can be defined as the ability of a computer to perform functions and line of reasoning typical of the human being. Artificial intelligence is debated among scientists and philosophers, which shows theoretical and practical aspects as well as ethical ones. In its purely computerized aspect, it includes the theory and techniques for the development of algorithms that allow machines (typically computers) to show intelligent skills or activities, at least in specific domains. The activities and capabilities of Artificial Intelligence include machine learning, planning, cooperation between intelligent agents, both software and hardware (robot), Natural Language Processing, simulation of vision and image interpretation, as in the case OCR or facial recognition.
Artificial Intelligence is the most important technology for insurance companies today, as it is founding for and enabling of a number of other technologies, such as driverless car, robo-advisor, chatbot, search engines, analytics, etc.
b – blockchain
Blockchain is a communication protocol, which identifies a technology based on the distributed database logic, that is, a database where data are not stored on a single computer, but rather on several machines connected together, called nodes.
The blockchain is a data chain made of packets storing recent valid transaction blocks correlated by a timestamp. Each block includes the hash (a non-invertible computer algorithmic function that maps an arbitrary length string to a predefined length string) of the previous block, linking the blocks together. Such blocks form a chain, where each additional block reinforces the previous ones.
Blockchain is also a public and shared log, consisting of a number of clients. It is organized to automatically update to each of the clients participating in the network. Every operation performed must be automatically confirmed by each node, through encryption software, that verifies a privately-defined data package that is used to sign transactions. Thus providing the digital identity of those who have authorized the transaction.
To learn more about the technology, read the article “Blockchain: what is, how it works and applications in Italy”.
The power of the blockchain lies in its ability to support new financial transaction methods, improve existing insurance processes, and track records. Blockchain-based digital currencies can support many new insurance models, in particular micro insurance and P2P. Many of the blockchain applications could be grouped into a new category of smart contracts: software developed and executed within a blockchain system. Since this technology is ironclad (and without human intervention), it is possible to develop and automate applications involving multiple players where the common concern is the trust.
Blockchain technology can boosts insurances into a new era, starting with new models of micro-insurance, P2P, and parametric insurance, described in the article with examples.
c- customer experience
Customer experience refers to that set of elements representing, in positive or negative, the relationship between a customer and a brand, a product or a service. It refers to the emotional relationship created with a company (in case of insurance is the relationship of trust) and also to the more practical experience, so-called “customer journey” that the customer faces in different moments of interaction with a company. As far as insurance is concerned, the client’s journey can start from the web, an app, or even a broker, and include different moments up to the claim for compensation.
In today’s insurance where increasingly the client is the core, customer experience is obviously fundamental, is the reference that drives digitalisation and trials of new technologies (as AI or blockchain) and new business models (micro-insurance, cat-bonds, p2p insurance).
d – data
When it comes to big data, reference is made to a set of quick and different information, which requires innovative and efficient forms of data interpretation to make a valuable contribution to decision-making and process automation.
The term has been in the limelight for some years since the increase of digitization exponentially increases the creation of data and in the coming years the internet of things will push further in this direction.
Data rerpresent a great source of information and therefore a great opportunity for all companies and society as a whole, only when through artificial intelligence and analytics they make sense, driving information into real knowledge and value.
For the insurance industry, based on data, the extra oomph is given by advanced analytics and data driven management, fundamental to promote more and more “preventive insurance” models.
e – sharing economy
The sharing economy (exchange and sharing of goods, services and know-how, today booming thanks to technology platforms) is one of the changing factors with the greatest impact in the insurance industry, since it is a real challenge. The entire value chain of companies is threatened by the new models of sharing economy and digitization. Products, marketing, distribution, prices are being transformed.
The mutual confidence between insurance and sharing economy is at its onset. The growth of peer-to-peer insurance is a proof thereof.
h – hackers
As digitalization, IoT and industry 4.0 increase, IT security is even more at risk. The issue of cyber security affects insurance in two ways: First and foremost as any other company, even insurance carrires may be target of hacker attacks, given the huge amount of data stored; Second, in terms of business opportunity. Cyber-risk policies will be one of the trends of the coming years.
i – Internet of Things (IoT)
The Internet of Things (IoT) is a neologism related to the extension of the Internet to real objects and places. Objects are able to interact with each other and with the surrounding world through inward chips and sensors. So the material world can be (almost) fully digitized, monitored, and in many cases virtualized. Just to dumb down, thanks to the IoT our car will drive by itself, we will monitor the health through the smartwatches wired to the wrist and will be alerted if a parking lot is free.
The Internet of Things is one of the most innovative technology environments, closely linked to other tencologies such as artificial intelligence and big data analytics, and even the most prudent appraisals forsee double-digit annual growth rates. In fact, devices connected to the Internet in 2020 are expected to exceed 20 billion units, exceeding for hardware only, $ 3 trillion with a CAGR of 34% in units and 21% in value, compared to 2015.
The insurance industry perceives a great opportunity in terms of new business models (and preventive insurance as well). There is a set of new services that can be offered at lower costs, especially in the health and smart home sectors.
m – mobile
Mobile technology (including smartphones, tablets, and applications) has been greatly affeccted people and businesses over the last few years. Insurance carriers are likely to be the latest industries to have gained the awareness of the importance of mobile devices to relate to the customer, but in insurtech there is a change in the approach.
Not only mobile, but mobile first: this is the starting point in the business of many insurtech startups focused on a value proposition that opens and closes through a mobile application, from policy purchasing, to management and claim as well.
It’s matter of customer experience, not only focused on younger and “more mobile” generations, but also on new policies, such as on-demand ones. The mobile scenario is evolving. Quickly
p – peer-to-peer
The banking sector, earlier than the insurance market, has been invaded by the p2p (peer to peer) service models, with social lending systems that today make banks go weak.
They are now facing the insurance sector, closely related to the culture of sharing economy. Indeed, the concept of peer-to-peer insurance is very close to the concept of mutual aid for which all the insurances have been founded. However, today’s technology platforms have offered a tool to create networks, make financial transactions, simplify and streamline processes, with obvious benefits in terms of cost reduction. The peer-to-peer policy, enabled by digital technology, makes it possible to return to the origins, in some cases taking radical forms, ie replacing (and threatening) traditional companies, in other cases, collaborating with traditional companies and becoming a sort of broker.
s – self driving car
The self-driving car, also known as driverless car, robot car, autonomous car and in Italian language, “auto a guida autonoma” is now true thanks to the merging of different software and hardware technologies, ranging from the amazing development of artificial intelligence to that of sensor.
The issue is really relevant on the world’s industrial and technological sectors: eagerly awaited rather than nervously, Driverless car will freak human mobility out and will put a strain on other sectors, especially public administrations is required to think about new regulations, for a different circulation, a different use of the means of communication, also to determine the levels of civil liability of these vehicles, and insurance carriers, for which “car policies” is the most profitable sector.
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