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Insurance Technology: 7 Disruptive Ideas to Transform Traditional Insurance Company

Have you ever tried to check your insurance claim status? It often requires several calls, some emails, or even visiting an agent to get claim status details. Lack of web presence equals lower customer satisfaction. Today, nearly 61 percent of customers prefer to monitor their application status with digital tools.

While some insurance carriers have made significant modifications courtesy of disruptive digitalization (we’ve already discussed this topic in our whitepaper), most companies trail behind. And the chasm between modern insurtech agencies and traditional ones is deepening.  Disruption caused by Haven Life is a prime example. The company reduced time to process applications from what was usually 1-2 weeks to 20 minutes via their website’s online questionnaire.

In 2016, insurers spent nearly $187.3 billion on IT, accounting for 25.7 percent of the whole of financial services spending. The total, nevertheless, is still quite low with legacy system complexity only slowing innovation. According to McKinsey, nine out of ten insurance companies identified legacy software and infrastructure as barriers for digitalization. As a result, the large industry – which in the US accounts for $1.2 trillion – needs to urgently change the ways of business development. It’s clear that the make-insurance-great-again mission heavily depends today on technology adoption.

Mike de Waal, president and founder of Global IQX, says:

Modernization of core legacy systems, new insurance exchanges and changing business models (platform and peer-to-peer) defined the year. They will continue to do so as carriers adopt digital strategies… Juggling the onslaught of new innovation and understanding how it can be used to create a competitive edge–very quickly–can be disconcerting. However, these disruptive forces should be seen as the catalyst necessary for the kind of dramatic change required to spur growth and new insurance products.”

Vertical players look for a short pass to the digital age. Some companies make internal changes by backing insurtech startups or establishing innovative labs, while the rest are only hesitating. What kind of changes should be made in the first place? These are the main problems to address:

1. Internal processes of insurance companies are often too complicated. There are so many duplicating business operations that nearly 1 million insurance jobs in the US alone can be automated. McKinsey claims that automation and digitalization define the main potential of the industry. This means you can cut costs by about 40 percent by automating up to 30 percent of operations.

Great Potential to Increase Automation


2. Insurants are not satisfied with their service providers. The recent studies of Morgan Stanley and BCG claim that insurance companies tend to provide poor customer experience. About 60 percent of insurance clients worldwide aren’t satisfied with their service providers and nearly 50 percent of insurance clients consider turning to newer models.

3. Young prodigies prefer to join technology, consulting, or other financial companies rather than insurance. According to Accenture, only 2 percent of US university alumni plan to enter the industry. As a result, companies frequently don’t have enough technically-skilled employees to follow changes let alone drive them.

These are the problems. How to approach them? Let’s discuss 7 opportunities that will lead the transformation from traditional insurance agency to innovative insurtech firm.

Personalization Trend Will Rock Insurance Pricing and Risks Assessment

The old-fashioned style of risk assessment is to rely on impersonalized datasets. But today, endpoint devices and social media can provide large amounts of more personal data. The approach can help both insurers and customers – consumers get cheaper or better coverage and highly personalized services, while a business gets more accurate risk assessment, stable margins, and satisfied clients. The recent Morgan Stanley and BCG study demonstrates that such a model is viable–customers are ready to share personal data to get cheaper risk coverage.

An underwriter can consider a broad range of highly personalized records. Connected devices and wearables provide deep insights into the customer’s physical condition, like blood pressure, temperature, pulse. Now, the insurer can even explore the client’s lifestyle patterns, such as the number of steps per day, or how often and how long it takes someone to brush their teeth. Social media data from Facebook, Twitter, or other networks also could be useful. It discloses customer risk tolerance with the application of machine learning or other predictive analytics techniques. In addition, all this data Is available in real time, which provides additional value for insurance companies.

UK telecommunication company O2 has already employed this personalized approach. It launched a special car insurance product based on the idea that the safer you drive the better price you get. Driving habits are tracked by a special device and scored by a mobile app after each journey. The O2 app also assists by giving tips on improving your driving for risk mitigation.

Beam is another relevant example. The company uses IoT technology to offer dental insurance.  A smart toothbrush tracks how well customers take care of their teeth. Then the company provides a personalized insurance plan based on teeth-brushing data. The firm claims that it can offer up to 25 percent lower rates compared to competitors.

Chatbots Replace Insurance Agents and Brokers

Each year insurance agents spend thousands of hours supporting customers in the decision-making process, providing standard on-demand information or reports. Chatbots, reporting tools, mobile technologies, and voice recognition algorithms can easily automate these tedious operations. Chatbots can perform as effectively as a large customer care center and drastically cut costs in customer support and sales.

Some US insurance carriers are already armed with such technologies. In Canada, Ontario-based Excalibur Insurance has employed AI bots to automate their client interaction. Not only is the insurer available 24/7 via a website or Facebook, but the system also engages new clients, deals with claim reports, and service requests. It’s a good alternative to phone calls as 70 percent of callers hang up while waiting for customer care to respond. Also, smart systems can send renewal notifications, assign tasks to agents, and build warm relationships by sending friendly greetings and special offerings to clients keeping them engaged.

Insurance Workflow Automation – One More Step toward the Digital Age

Paperwork, manually written notifications, follow-ups, and underwriting are usually boring to do. Automation allows companies to reduce cost that is spent on routine work and refocus some full-time employees to more creative tasks. A persuasive example of cost-cutting is the automation of payout calculation at Fukoku Mutual Life Insurance. The company replaced 34 employees by AI and now expects to boost productivity by 30 percent after complete system integration. It’s estimated that the firm will save about $1.25 million in the first year of AI use.

Mitchell Sharp, Marketing Associate with Insurance Shop, says:

“The Insurance Shop went through a workflow review of our own processes and are working on implementing a workflow automation process that we estimate will improve efficiency by 40 percent – that’s dramatic and will give our customer service department more time to focus on our client’s real needs and less processing work.”

The other side of the problem is inbound correspondence and documentation. Every day all financial institutions process and gather thousands of files in paper archives. That’s not the best way to store, process, and exchange information. It doesn’t contribute to saving the environment either.

If files are digitalized, analyzed, and stored in a cloud, documents can be automatically reviewed and rejected in the case of inconsistent information or errors, which allows insurance staff to deal only with consistent and correct information.

The customer data that has been collecting dust in paper archives for decades is no longer an expenditure item in a profit-and-loss statement. If you apply image and text recognition algorithms, these become valuable assets that tell an insightful story about your customers.

How Blockchain Disrupts Reinsurance Operations

Blockchain implementation is a $5-10 billion cost-saving opportunity for reinsurers worldwide, according to PWC. The nature of reinsurance is close to chain structure. No wonder it is recognized as the second largest distributed ledger use case in fintech after payments. The major benefits for stakeholders are reduction of verification and validation time, elimination of errors and minimization of reputational risks. By using blockchain, a reinsurer won’t have to interact with the insurer to get data provided by client. For instance, you need to verify several insured events for one health risk reinsurance contract. If all parties are connected by smart contracts, the reinsurer will be able to get direct access to an insurant’s health data.

Another sound idea is the prevention of reinsurer’s loss access. The key problem here is the loss variability at different stages of claim handling due to complex documentation processing. Blockchain solves the issue by recording the loss estimates history for each contract. It enables better liability tracking and difference solving.

Redefining Traditional Ways of Insurance Claims Handling

Ask yourself how long it takes for your agency to make claim decisions. There are lots of issues with a variety of scope: a broken finger, a big car accident, the fire in a luxury villa, or a significant agrarian claim from a large corporate client. Assume that their US land bank was affected by drought. There are thousands of acres across the country sown with crops. How long would it take for employees to gather and process all data required for payout decision-making? There’s a good way to cut costs for such projects by employing AI. Machine-learning-based systems can calculate detriment using satellite images or drones to explore fields.  It will eliminate the human factor and significantly cut time and cost.The use of satellite images enables low cost, efficient loss assessments in agro insurance


Claim reporting is also changed by a combination of machine learning and mobile technologies. State Farm arms clients with a Pocket Agent app. A customer can send the vehicle image and the claim will be submitted without wasting time on dealing with paper documents or large web forms.

Software Solutions Bring Insurance Fraud Detection to the New Level

Fraud is a great calamity of the insurance industry. According to Coalition Against Insurance Fraud, US carriers lose at least $80 billion annually. On average, it accounts for 5-10 percent of claims costs for North American insurance companies. Cloud and mobile technologies can support insurance agents with real-time information to deal with duplicate claims, inflated claims, fake diagnoses, fake dependent family members, mutually exclusive diagnoses, insurant data inconsistency, overpayments, and internal employee scams. For example, a client claims payout for a lost right eye twice or tries to recover from the same property fire by counterfeit documents with a changed date. The system will compare the claim data with the database and identify the fraud. This will reduce cost by increasing operational speed, delivering higher accuracy, and removing the influence of an interested party.

Reshaping the Insurance Product Distribution

Long gone are the days when clients had to call or visit the insurance agent to get a policy. The web made people more aware of offerings on the market and today anybody can easily compare products, review testimonials, or find special plans that match personal requirements. Insurance shopping platforms like Insurify or Friendsurance are actively redefining distribution models. While clients can get more specific about what they are looking for, service providers gain more visibility if they comply with demand. These marketplaces help insurers cut distribution cost and, at the same time, bring in even more well-targeted leads.

Nick Braun, Founder of, says:

The biggest change that we see is how mobile is changing comparison shopping. Pet insurance marketplaces are becoming more and more popular. This trend will force providers to create online quoting, servicing and APIs, so they can reach and serve this new audience.”

What Should the Insurance Industry Expect?

Digital technologies bring several disruptive trends to the insurance business such as personalization, the shift to a platform economy, automation, and real time-based estimates rather than historical ones. What are the features with the most impact?

1. Cost cutting. A digital insurer gets strong competitive advantages over the traditional carriers. According to BCG,  the disruptive technology change allows for cutting up to 10 percent in premium costs and 8 percent in claims expenses. The turn to the web platform ecosystem allows for cutting distribution cost and reaching better communication with customers by social media, emails, mobile apps, etc.

2. More accurate risk assessment. The digital business model enables better risk assessment and sometimes even aids in preventing insured events when it comes to driving assistance or health and lifestyle monitoring.

3. Better customer experience. The use of mobile apps and social networks integration enables better understanding of a customer and ensures 24/7 availability.

4. Move from reactive to proactive decision-making. Insurance is a data-driven business that ought to consider numerous factors about customers and strongly rely on statistics. However, the industry still leverages historical rather than real-time data. Various wearables and sensors are yet to reach their potential of data streaming and hyper-personalization.

5. Expanding portfolio. The wide range of data records allows insurance carriers to cover very specific risks and work with new micro-segments. It also reconsiders the nature of incurrence products (e.g. bring them to a pay-per-use basis).

6. Insurers become more insulated from scams. APIs and mobile shorten the time it takes for fraud detection and makes the assessment process more rigorous.


The industry has a strong demand for technology talents and needs support or partnership in the innovative process. Mobile and ubiquitous automation have already become the reality of insurance. Here are the points to consider about enterprise mobility that we covered before. AI, IoT, blockchain, and wearables are emerging technology trends of the near future, which should be monitored to stay ahead of the competition.

If you are a fan of the financial services industry, read our recent article Unlocking Fintech Potential: Top 10 Opportunities to Transform Financial Industry with the Use of Technology



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Lanes Insurance
Apr 13, 2018
Lanes Insurance

This is an awesome blog.

Alistar Scott
Jul 21, 2017
Alistar Scott

Thanks for this. The insurance industry, especially the property & casualty and the life insurance industries, have a lot to gain from the wave of automation that is occurring at present. Robotics Process Automation or RPA can bring in many exciting changes in the industry. The time that typically goes into issuing new policies and handling policy endorsements can be drastically reduced, thereby improving customer experience in the process too.

Jul 21, 2017

Thanks for complementing our point, Alistar! We couldn’t agree more.