Almost a year into the pandemic, the accelerated digital transformation has begun to feel less abrupt and more sustained. 2021 looks likely to be defined by a new phase: Thriving on digital transformation, rather than just surviving through it.
We’ve written about the changes forced on the traditionally risk-averse insurance industry by COVID-19. In 2021, with the crisis hopefully fading, insurance will have time to evaluate the changes made in 2020, assessing what worked and what didn’t, and planning a new way forward rather than reacting in real time.
The future looks bright, but there’s still a long way to go. In Deloitte’s Insurance Outlook survey, 79% of respondents believed the pandemic uncovered shortcomings in their company’s digital capabilities and transformation plans. While adaptations were made, a staggering 95% of those surveyed are still accelerating, or looking to speed up, digital transformation to maintain resilience.
Not only will technology play a critical role in 2021, but privacy and regulation will stay front and center. These are prominent concerns because of increasing regulatory pressure, but also due to how rapidly data volume is growing due to sensors, third-party aggregators, and other alternative sources. There are also concerns about what new regulation may be enacted to oversee cloud service providers both in general, and in regulated industries.
I’m sure you’ve already ready a number of trends and forecasts for 2021. Here I’ll comment on a few of the data and analytics-focused trends we see that will impact insurers in 2021 and beyond.
Trend #1: Expanded Use of ML/AI as Part of Digital Acceleration
Touch-free technology has seen huge adoption during the COVID-19 pandemic. Everything went touch-free — from hand-sanitizer dispensers to increased contactless payments. And now the data coming out of that technology is coming to insurers at scale too, with a much different meaning.
As the insurance industry adapts to changing consumer behaviors and expectations, insurers will see automation in claims processing gain traction, using Machine Learning (ML) and Artificial Intelligence (AI) to adjudicate more decisions than ever.
A LexisNexis whitepaper on the future of claims technology defines touchless claims as “a process or workflow that is similar to virtual handling except no claims adjuster or insurance carrier employee is involved in the claims process at all.” Technology such as a camera phone, drone or an automated chat bot is used to report the claim, capture information about damage or invoices and to communicate with the customer. Behind the scenes, an automated audit takes place and, if the results meet approved criteria, the insurer may pay the claim automatically and without the intervention of a human. It’s fast, scalable and increasingly safe for businesses and customers alike.
COVID-19 has forced a traditionally risk-averse industry to embrace new ML/AI technology. As the dust has settled, that technology, which automates a percentage of claims without human interaction, has proven productive and effective, unlocking new confidence as well as scalability. We anticipate that 2021 will see the increase of this technology throughout the industry.
In the transition to digital interaction, there’s a pivotal moment for the insurance industry to better understand customer needs and gain trust and engagement. By expanding their use of ML/AI, data management and other technologies, the industry can also evolve toward better digital experiences and drive our next trend: A more personalized customer experience.
Trend #2: The New Customer Experience – Data-Driven, UBI, Customized Products
We live in a digital, always-on, connected world and we expect a similar level of responsiveness in all aspects of our lives. Customers today expect insurance services to be highly personalized.
Insurers maintain an abundance of traditional data about their customers that forms the foundation for insurance profiles. This data can now be complemented with real-time information from new data sources such as sensors, weather data, location and traffic updates to better inform and predict insurance needs.
Insurance companies around the world are moving forward with innovative offerings that are fundamentally changing the insurance landscape. They are creating personalized offerings and products that are tailored to the specific needs of their customers. For example, they are implementing usage-based insurance (UBI) based on driving habits, miles driven and driving history and discounts on health insurance based on health trackers, etc.). This all better addresses the customers’ experience and improves the retention and renewal rate for customers.
2021 will offer advancements in customer experience and carriers should be mindful of the competitive choices available to customers as they examine their digital strategies.
Trend #3: Cloud Considerations
Drivers of innovation such as AI/ML, a modern IT architecture and smart sensors as well as other new data sources all rely on the flexibility and scalability of the cloud. We predict cloud transformation projects are likely to accelerate in 2021, because building a foundation in the cloud allows insurers to rapidly and cost-effectively implement advanced analytics and automation tools.
There’s no one-size-fits-all approach to cloud transformation, and most may prefer a hybrid approach. Many insurance companies have data privacy and processing needs which will necessitate that at least some of their infrastructure stays on premise. They need to spend 2021 finding the right balance in their environment, both technological and regulatory.
Alongside this transformation, insurers will also need to address risks and operational resiliency concerns. As cloud computing has gained the attention of regulators at global, regional and national levels, Cloud Concentration Risk concerns will need to be addressed.
By avoiding cloud lock-in, insurers (and financial institutions) can reduce concerns about a lack of concentration causing systemic risks in cloud environments.
Trend #4: Regulation – Data Privacy
The adoption of new digital technologies means there’s a treasure trove of data to be secured, whether it’s in the cloud or on-premise. As data and analytics keep expanding, so do the regulations surrounding customer privacy and rights.
Data privacy has become a priority on a global level. In addition to GDPR, other legislation is being introduced, like the Digital Charter Implementation Act (DCIA) in Canada, which we wrote about recently, and The Asia Pacific Economic Cooperation (APEC) Cross Border Privacy Rules (CBPR). Each new regulation adds a layer of protection, but also adds complexity.
Insurers need to be able to easily identify and manage sensitive data, and effectively address regulatory requirements with unified, platform-wide operations, including data classification, lineage, modelling, and auditing.
It will be critical to enable security, governance and compliance that is manageable and provides confidence that data is protected, whether on premise, cloud or hybrid, anywhere in the world.
We talked in more detail about the critically important privacy topic recently. Check out our webinar with Privitar.
As insurers look forward to another year of focus on digital “adaptation,” there are lots of opportunities to maintain the momentum gained over the past year. The insurance world is moving into a “new normal” and it is crucial to realize the strategic role that data, analytics and AI will play in that evolution.
Cloudera offers an end-to-end enterprise data platform to help insurers realize the potential of their data. We are equipped to handle all these trends in 2021, allowing insurers to collect, process, store, analyze and model data so they can better meet the specific needs of their customers, and rise to the fresh challenges of this new year. And we do this throughout the entire data journey, while securing data lineage and transparency, which is so critically important to insurance around the world. Learn more about our insurance capabilities at