Embracing the Digital Transformation in the Insurance Industry
In the modern conditions of the functioning of the insurance market, digitalisation of insurance is becoming the main trend, contributing to its rapid growth.
The insurance system is undergoing a process of evolution in accordance with the new conditions of the digital economy, through which advanced methods of conducting insurance activities are being introduced, which contributes to the activation of the movement of insurance capital and the integration processes of the insurance system.
Transformation process
The digital transformation process involves the use of various digital technologies in order to optimise existing business models and to improve business performance. Such a procedure is understood as the introduction of the latest technologies on an ongoing basis, which can lead to complete digital changes in the entire economy.
What are the effects
The use of digital technologies optimises the possibility of mutual action of insurance companies, the state and customers. The introduction of the latest methods of providing insurance services, reducing the cost of doing business occurs as a result of the transition of most services to the field of online services, the use of innovative technologies in insurance such as the Internet of Things, advanced data analytics, machine learning, artificial intelligence, online sales technologies, blockchain.
The active use of information technologies in insurance contributes to the growth of efficiency and competitiveness of a modern insurance company and is also predetermined by the unpredictability and instability of the external environment.
The financial stability of the insurance system during this period depends on the use of the advantages of digital technologies, expansion of the client base through the widespread and round-the-clock availability of insurance services. Insurers using the most modern technologies in their activities will be able to take leading positions in the insurance market and will be the winners in the competition for the policyholder.
Implementation
The development of new digital technologies is being implemented in insurance companies in the following areas:
-online sales of insurance services;
-remote communication with clients, insured persons, as well as objects of insurance,
-settlement of insurance claims via the Internet.
Big Data technologies
The use of Big Data technologies and business analytics tools make it possible to analyse in real-time many factors affecting risks and unprofitability, reduces the cost and optimises the daily business processes of insurers, involves the use of instant policies, automates the process of buying policies on the Internet, excluding human intervention, reduction of unprofitableness from fraud. For policyholders with a positive insurance history and low risks, this will allow them to purchase insurance products at an individual, lower rates. Digital technologies will enable insurance to be “included” as an application in a smartphone. If necessary, the policyholder will be able to buy insurance during the trip or at the time of departure (car and home insurance).
Factors contributing to the development of digitalisation
-higher profitability of online sales
-insurance services and settlement of insurance claims via the Internet;
-active use by insurers of technologies aimed at personalising insurance services, offering them and settling losses;
-an increase in the number of Internet users and persons engaged in Internet commerce operations.
All this reduces the costs of doing business in insurance, effectively calculates risks, increases customer loyalty, and makes it possible to practically customise policies.
Management approaches
In connection with the introduction of digital technologies that are focused on consumers, it is necessary to optimise management approaches. The use of the latest technology requires insurers to have the necessary skills to operate in the digital economy. The digital transformation of the insurance market requires an integrated approach, which is based on the creation and use of a digital strategy that will be aimed at resolving the following tasks:
-introduction of digital technologies,
-changing the process of pricing services,
-improvement of the financial segment of digitalisation and optimisation of the organisational structure.
Personalisation
Further development of the insurance market is associated with the growing interest of policyholders in purchasing an individual insurance product, which requires the collection of large amounts of information via the Internet. New digital technologies in insurance make it possible to personalise the offer of insurance services through the use of Big Data technology and reduce costs. And with insurance distribution software every insurance business can easily reach their customers.
Telematics devices
Telematics and telemedicine, as automated devices for collecting information about the insured, also help to significantly reduce the cost of payments and improve the quality of customer service. So, in-vehicle insurance, when developing an individual approach to the policyholder, statistical data obtained with the help of telematics devices are used. The insurer, setting the price of the insurance product, is based on telematics data on the driving style, the frequency of its use, which makes it possible to get discounts on insurance for careful drivers. Telematics can also reduce the risk of car theft and fraud.
Blockchain technologies
The use of digital technologies in the internal business processes of the insurer is another direction in the development of new production technologies. Blockchain technologies make it possible to modernise all business processes and stages of insurance, from purchase to the settlement of an insured event, reduce risks, the cost of insurance services by refusing to use intermediaries when concluding insurance contracts, and generally improve the quality of service for policyholders. Insurance contracts concluded online are immediately sent for storage to a distributed database on the network, where they can no longer be falsified. With the help of blockchain technology, the insurance history of any insured is checked, which makes the insurance service more transparent.
Conclusion
Data analysis suggests the need to give a new impetus to the development of the insurance market in the digital economy. The modernisation of the insurance system necessitates the effective formation and use of new technologies in insurance. This requires a qualitative transformation of the insurance market, the development of measures in various areas of digital optimisation of insurance, coordination with other strategies for the development of the financial market in order to develop solutions that help maximise the effectiveness of insurance companies in the digital economy.