The insurance industry is continuing its journey through digital transformation with the latest trend being the shift in innovation focus away from personal lines and towards commercial business.
Commercial insurance is a highly attractive market as it presents a large untapped financial opportunity particularly to the underserved SME sector. At the most recent Insurance Insider conference, CEOs of leading insurance providers disagreed on a few things, but had a clear common interest in innovation in the SME space. Premiums in SME are often too low, especially at the smaller end of the spectrum, to warrant brokers and underwriters spending too much time on customer profiling research. Therefore, technologies that can improve operational efficiencies and help carriers win in SME distribution, sale and onboarding are attracting more and more interest.
A recent survey by the Digital Insurer, “The Impact of Automation on Commercial Lines” showed that 75 per cent of insurers are already implementing some automation processes for their commercial books of business. It is clear that automation is not just a personal lines phenomenon but has real implications for the commercial and wholesale insurance market as well.
So, what are the benefits of AI and automation for commercial insurers? The key lies in their ability to drive transformative change by:
- Improving operational efficiencies and reducing costs
- Improving the way underwriters select, target and price risk
- Improving loss ratios/profitability
- Developing new products and services
- Improving the customer service and claims experience for their clients
- Better mitigating against fraud
For small commercial, cyber and other lines of business, general market sentiment indicates that we will see developments in data-driven direct channels. MGAs will have a crucial role to play here and they will need the right analytical tools to succeed. Indeed, automation powered by AI can be especially beneficial in non-complex sales to small and medium-sized enterprises due to the simpler nature of the risks they face. Artificial intelligence augmented with open data has the potential to equip the industry with meaningful information to help insurance providers better serve their customers. Having real-time access to a 360-degree overview of customer profiles, with insights to understand the current client needs enables insurers and brokers to provide a faster, more user-friendly digital journey to their SME customers.
Changes in SME customer behaviour
It is predicted that more than 60 percent of small businesses in the US will be owned by millennials and generation Xers by 2020. These new owners will have different preferences and expectations. They are very comfortable with online purchasing and self-service, and prefer the digital journey to in-person or phone interaction.
Recent data from the Charted Insurance Institute showed that whilst the majority of SMEs currently bought insurance through a broker, nearly half of them said they would, in principle, be comfortable buying all or some of their insurance products online or in a commoditised way in the future.
Management consultancy Oliver Wyman also predicts that technology will have disrupted the SME insurance market by 2022, with up to 80% of small business being underwritten automatically in direct-to-customer channels. This clearly demonstrates that changes in consumer demands are already impacting the industry and that the rate of change is increasing.
Shifting customer behaviours and other challenges will require new approaches but also represent new opportunities for the commercial insurance sector. In an effort to codify what that means for the sector today, DFP recently put together a report on Digital Technology in SME Insurance. We took a research-led approach and tried to pinpoint the most transformative tools that commercial insurers are deploying today. The result is a deep-dive into the ways in which SME insurers are adapting to the rapidly changing technological landscape.
In a further effort to gain a deeper understanding of the current challenges in SME insurance and the latest technological trends, we will also be running a Commercial Insurance focused event on 15th of March 2019 (more details here). The morning of debate and conversation with industry leaders will be dedicated to the pressing topics facing commercial insurers and brokers in 2019 and beyond. If you would like to understand the sector’s key pain points and what it takes to leverage technology and AI-driven data, please join us at the event.
The insurance industry is on the threshold of being able to turn the new technology and big data into commercial success. Those commercial insurers who can focus on insurtech collaboration and can push customer-facing solutions and digital experiences will have the biggest advantage in the market.
Written by Anna Kurmanbaeva