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How Will Automation Impact the Insurance Industry?

Automation, also known as virtualization, is the use of various systems to operate equipment, machinery and software to complete a process with limited, reduced or no human interaction.
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Imagine this: Home and car doors automatically unlock as you approach. Auto coverage is automatically secured and bound when you purchase a new car. Travel insurance is automatically calculated and implemented as soon as you book international travel.

Automation, also known as virtualization, is the use of various systems to operate equipment, machinery and software to complete a process with limited, reduced or no human interaction. From machine automation in factories and plants to software automation in businesses, such as automated ordering and accounts payable systems, the technology has broad implications for all aspects of human life.

As all industries move closer to embracing automation, businesses will be able to devote more time and resources to core organizational goals.

Economic Impacts

Online shopping with Amazon and Zappos is possible thanks to automation of processes such as warehouse robotics. Production automation has been in full force for decades, and non-automated processes are on their way out. Automated home appliances are already on the market, including refrigerators that know their contents and can order supplies for grocery delivery when stock runs low.

In the coming years, automated transportation systems will begin to arrive as more devices connect to the Internet of Things. Automated ordering systems in offices will automatically order supplies as needed, with little to no human interaction or monitoring.

Overall, automation will allow for a reduction in operational resources, but it will also impact employment in industries like restaurants, as many traditional jobs will no longer be available. Education will change to satisfy the needs of these new processes in order to avoid high unemployment numbers.

Insurance Industry Implications

Automation will impact the insurance industry in a variety of ways. On the positive side, the technology will reduce the resources required to do business, particularly in the areas of policy checking, data entry and monitoring for supplies. The claims process will become quicker and more efficient as human oversight of the process will only be necessary for correcting inconsistencies and issues. The need for electronic data processing coverage will increase, presenting new sales and prospecting opportunities.

On the negative side, as unemployment rises alongside automation, workers comp premiums could also drop, reducing profits from this type of coverage. Collaboration between carriers, vendors and agents will be necessary to stay on top of changing trends and processes.

Recommended Actions

  • Educate yourself and your agency staff on automation and the current trends around it in your area. Ensure agency leadership and staff are aware of basic automation concepts and applications.
  • Review agency workflows to determine where you can leverage virtualized automation to provide instant and superior service to customers, both during business hours and after hours.
  • Review your current customer base for possible impacts. Educate your clients on the risks involved with automating processes.
  • Understand when payment and coverage points can be enacted for on-demand insurance.
  • Investigate markets for automation coverage, for both providers and consumers. Understand where your carriers stand on automation, as well as their offerings in this area.

Once automation is fully realized, it will lose its capacity to reduce the resources necessary for an organization to operate. But as automation increases, so does the importance of people who can provide thought leadership, code, advice and maintenance for the automated process. As automation grows, so does its risk for failure. Systems will rely on expert people to resolve issues as soon as they arise in order to keep automated businesses running.

Perry Myers is IT manager at Peel & Holland. Jerry Fox is principal, client market strategy, Insurance & Spatial Solution at CoreLogic.

This article is adapted from the Agents Council for Technology’s risk advisory on virtualizationView the entire Changing Nature of Risk advisory series online.