The Role of Standards in InsurTech
Technology is ever-evolving, and so are the capabilities it provides for the future of business. Technology was never meant to be a replacement for human interaction; rather, it is a tool to enhance productivity and decision-making abilities.
While the obvious route appears to be business needs (a.k.a. "use cases") driving innovation in technology, the reverse is quickly becoming the norm. Innovation and advancements in technology are paving the path for use cases that never before existed. The impact of telematics and AI on insurance is a good example of this.
Thus, business must have a strong grip on the new avenues that technological advancements have opened up, and to evaluate those for potential new use cases.
This symbiotic relationship is crucial to the success of both business and technology separately, as well as together in the form of an InsurTech. InsurTechs likewise can leverage existing tools and capabilities to drive positive change across the industry instead of trying to reinvent the wheel. Standards in insurance is one such tool.
Understanding and harnessing the power of standardization, and examining the correlation between insurance, technology and standards, will be pivotal to both the growth and long-term sustainment of InsurTechs and the broader insurance industry in these rapidly changing times.
Insurance & Technology
The insurance business faces several challenges that technology could help address through targeted innovation. For example, the industry is in constant need of alternate distribution channels. Legacy methods are also unable to address the need for accuracy and responsiveness in transactional processes. Further, the industry has yet to fully realize the power and potential of its vast data resources, as well as the contextual information within that data that would enable better straight-through processing (STP) and analytics.
Customer experience and retention also still rely heavily on traditional methods, and thus are at risk. Insurers typically compete by acquiring customers rather than relying on organic growth, making an optimal client experience integral to survival and success. Brand differentiation and customer-centric behavior are no longer limited to consumer goods; they are a necessity for insurers now, too.
Technological innovations continue to deliver solutions to these industry challenges in more ways than one. Digital transformation centered on pre- and post-bind, underwriting, claims, billing and supporting functions are active and on the rise. Data availability through traditional and new sources has propelled analytics that support more accurate risk assessment and pricing. Pattern and behaviors learned through AI are benefiting predictive modeling. The Internet of Things (IoT) has not only elevated risk evaluation but also has promoted loss prevention via real-time connected tools such as smart sensors and wearables. These next-generation digital products are optimizing the efficiency of key industry functions and empowering them with enhanced tools.
Experts predict a rapid rise in connected devices, with up to one trillion by 2025. These incredibly vast data sources would provide insurers with a much deeper understanding of clients, risks and their characteristics. Insurers can leverage the capabilities unleashed by these technological advancements to launch new products, target specific pricing and achieve enhanced speed to market.
Role of Standards in InsurTech
Standards provide insurers with a competitive edge when adopting new technology, as it enables savings in integration and maintenance costs. With widely adopted standards, organizations eliminate dependency on unfavorable custom or proprietary solutions and can easily migrate to new technology solutions and partners, effectively mitigating risks.
From streamlining operations to providing a common understanding of data, standards facilitate optimized growth for the insurance and InsurTech industries in a variety of ways. Commonalities reduce the capacity demands for transactions and help achieve straight-through processing (STP). Collected data can be reused across the enterprise, from intelligence to analytics. Standards are essential to achieve Robotic Process Automation (RPA), where data can be automatically processed without manual intervention. Such automation drastically improves the quality of data and the contextual information it carries, resulting in improved operational intelligence.
Collaboration is key for InsurTech operations, and industrywide standards drive collaboration across verticals effectively. Teams spend less effort on data collection and instead focus on making a direct impact within their functions. This increases satisfaction, and thus, retention, of domain-rich talent, which is the greatest commodity in the InsurTech world.
With faster implementations and cost-effective integrations using standards, InsurTechs can leverage custom off the shelf solutions easily to meet demands.
The Future Is Here: Next-Generation Digital Standards
As technology continues to advance and the InsurTech community grows, standards must also evolve alongside them. For example, the ACORD Standards have evolved with the development of the ACORD Next-Generation Digital Standards (NGDS), created in consultation with the broader insurance industry. Insurance stakeholders can utilize these new, industry-owned standards like NGDS to build foundational capabilities that improve data quality, optimize efficiency and promote innovation.
These new methods of data exchange incorporate technological innovations such as RESTful APIs and microservices, which are pivotal to the growth of InsurTechs. These technologies can be used to create microservices building blocks; when combined, they address a variety of insurance business transactions, independent of geography or business domain. The emerging standards also must be accessible to developers, with low barriers in the expertise and training required to work with them effectively, while taking advantage of a constantly growing knowledge base. These factors will facilitate development, integration and interoperability both within the enterprise and across trading partners, driving efficiency across all stages of the insurance value chain.
The development and adoption of these new standards will ensure the electronic data exchange and communication between carriers, brokers, third-party distribution partners, agents, and consumers are in place and ready for new business opportunities in this digital, data-driven era.