By Xinmin Wang, Innovation Research Analyst, DBS Bank

Digitalisation is transforming industries and the insurance sector is no different. According to a Bain report, a majority of insurance customers in most markets use digital channels for at least some of their information and transaction needs, with the share of digitally active customers globally increasing more than 60% from 2014 to 2018. Accenture’s Technology Vision 2020 also saw 96% of insurance executives reporting that the pace of innovation in their organisations has accelerated in the past three years due to emerging technologies.

So what exactly are the key trends that are driving the future of insurance?

Competition or collaboration?

The rise of insurance tech, or insurtech, start-ups has created a new wave of competition to digitalised traditional insurers. According to research firm CB Insights, investments in insurtech start-ups reached more than $4.15 billion globally in 2018, a 10-fold increase from $348 million in 2012.These insurtech start-ups offer alternative ways to access, purchase, and claim insurance, often through mobile apps.

Traditional incumbents are acquiring these insurtech start-ups to enhance their capabilities. Prudential Financial, for example, has acquired online insurance start-up Assurance IQ Inc, while Allianz has also invested in insurtech Lemonade. Traditional insurers are also leveraging the services of insurtechs such as Carpe Data, which allows continuous risk evaluation by accessing data as a stream and uses non-traditional data sources such as web and social data.

In addition, firms from other industries also entering the insurance space, using existing data they possess to provide insurance services. For example, automotive firm Tesla has launched an auto insurance offering designed to provide Tesla owners with up to 20 to 30% lower rates.

Insured only when you need it

Technologies such as telematics, geolocation technology and Internet of Things (IoT) have enabled the provision of episodic, usage-based or pay-as-you-go insurance products. This allows users to choose the type of coverage most suited to their needs.

For instance, Revolut’s Pay-per-day travel insurance allows users to be covered worldwide for medical and dental services and pay only for the days that they are away. Revolut’s geolocation technology can automatically detect when the customer leaves and returns home, turning the cover on or off accordingly. Separately, start-ups Metromile and Cuvva provide pay-per-mile auto insurance that allow drivers to pay for what they use based on the exact number of hours or days they drive, using telematics devices that capture mileage data.

The U in insurance

Emerging technologies have also enabled insurers to better capture individual behaviour and thereby provide policies tailored to customers based on their behaviour.

Root Insurance’s app analyses driving behaviour to produce a performance score that entitles users to a discount on auto insurance premiums. Start-up Sureify also provides software to enable insurers to use data from IoT devices including wearable devices such as fitness apps that monitor consumers’ health behaviours to provide personalised underwriting for health and life insurance.

New types of insurance

The growing diversity of consumer needs and lifestyles has led to the rise of niche insurance segments and item-specific insurance products. For instance, Startup Trōv provides on-demand insurance for specific items — from cameras to bikes — for tailored lengths of time with coverage activated and deactivated via an app.

In addition, the changing nature of the economy has led to the development of products catering to areas such as the gig economy as well as home and office space sharing. Insurtech Zego provides insurance for services such as ride-hailing, ride-sharing, car rental and scooter-sharing, offering policies ranging from minute-by-minute insurance to annual plans, while home-sharing platform AirBnB offers Host Protection Insurance that provides primary coverage for Airbnb hosts and landlords worldwide.

The human touch

However, even as consumers increasingly access insurance via digital means, the human touch remains an important part of the process. According to a Bain report, customers remain heavy users of offline channels, including contact centres and in-person meetings, with most citing the need for personal help. With the growing complexity of insurance products, agents play an increasingly important role in providing advice and greater value-added services, as well as building deeper customer relationships.

Digital tools can augment such roles by empowering agents to be more productive and responsive. For example, Ping An Insurance’s virtual sales assistant Gamma eExpert, built on financial knowledge and NLP technologies, has attained an accuracy rate of 91% in interpreting financial texts, enabling sales staff to get the correct answers to customer inquiries within 1 second and reducing the average engagement time by 30%.

Looking forward, the insurance value chain will likely continue to evolve along with the introduction of new technologies, driven by ever-changing consumer needs and demands. At the same time, , the role of humans in cultivating relationships and providing greater value-added services will remain ever more crucial amid greater digitalisation. The future of insurance thus lies in the combination of new technologies and customer service excellence to offer consumers tailored products that best meet their needs.