Tech is a top concern among insurance agencies—or should be, at least—when looking to future-proof their business.
Technologies such as artificial intelligence (AI) and data analytics are transforming the way many industries do business, and the insurance industry is not immune to this transformation. In fact, the insurance industry is becoming more acutely aware of their need to step up in this department.
Tech is a top concern among insurance agencies—or should be, at least—when looking to future-proof their business. In 2021, independent insurance agencies that were low and medium digital adopters grew their revenue an average of 10% year over year, but high digital adopters grew 17% year over year—a 70% higher growth rate than other agencies, according to the Liberty Mutual and Safeco Insurance “2022 Agency Growth Study."
The insurance industry is seeing a surge in innovative tech involving AI, machine learning, big data and the Internet of Things (IoT). Most tech is solutions-based in the form of an online or cloud-based platform. However, some tangible tech can also be used to enhance the insurance industry, such as drones to monitor weather and catastrophe patterns.
For example, insurance agencies that process property claims can track weather conditions and adjust policies accordingly, offering enhanced coverage in times of elevated risk of natural disaster. Being aware of these changes through drone sensors, claims management systems, and predictive analytics can help insurers mitigate the impact of worsening climate change.
There are also smart contracts that use blockchain technology to automate the underwriting process and issuance of policies. InsurTech solutions exist for appetite, data, payments and quoting.
Of course, InsurTech is not without challenges. The top tech challenge independent insurance agencies face is getting the most out of the tool, according to Catalyit's “The State of Tech in Independent Insurance Agencies." There are concerns among insurance agencies about whether they're picking the right InsurTech for their specific needs. With the novelty of certain InsurTech solutions comes questions of adoption, oversaturation and privacy.
While digital tools can encrypt consumer information and keep it safe from identity theft, consumers are more keenly aware of how their information is being used and stored, and insurers need to follow data protection laws such as the CCPA and CPRA. This becomes a bit complicated when InsurTech includes many collaborative touchpoints and is connected with various third-party platforms.
Educate yourself and your respective staff about the risks associated with using InsurTech. To prevent breaches, make sure to control access to sensitive information and platforms, encrypt data, scan for viruses periodically, educate all team members on cybersecurity best practices and how to spot potential threats, and monitor for vulnerabilities; of which there are approximately 1,900 new ones each month, according to Coalition.
When you do decide to upgrade your tech stack, it's important to vet each third-party solution for security and practical application, having an implementation plan, adding one InsurTech solution at a time. Make sure to share feedback with vendors and take advantage of the customer service that is included with the purchase. And, of course, ensure data protection policies and cybersecurity best practices are in place.
Sam Bowman writes about careers, tech, insurance, and how they merge. He enjoys getting to utilize the internet for a community without actually having to leave his house. In his spare time, he likes running, reading, and combining the two in a run to his local bookstore.