Insurance software is developing rapidly, but are providers of insurance keeping pace and embracing the changes it can offer? Clara Bullock investigates the potential in the market, and examines what might be holding back further adoption by insurers
The rapid adoption of AI and machine learning capabilities in the claims process is allowing travel insurers to automate tedious processes, freeing up time and resources to tackle more challenging tasks. For insurers, the underlying technologies span the entire value chain, from marketing and product development, through to underwriting, and all the way to claims and customer service. They include artificial intelligence (AI) and cognitive computing, cloud, mobile technologies, social tools and networks, the Internet of Things and many others.
Additionally, by supporting the straight-through processing of claims, companies are creating a better customer experience and overall supporting the broader adoption of insurance by travellers across the globe. Research shows that insurers are investing more and more in new technology, with Q1 2021 being a record quarter for insurtech investment, during which startups raised over US$2.5 billion across 146 deals. This record level of funding reflects a 180-per-cent increase compared to the same period last year, when fears of Covid-19 impacted investment, and a 22-per-cent increase compared to Q4 2020, as investment activity steadily bounced back. In addition to funding growth, the number of deals this quarter also grew significantly, including a 52-per-cent year-on-year increase, and a 42-per-cent quarter-over-quarter increase.
However, travel insurers are said to be behind the times when it comes to technology, often being more sceptical when it comes to adopting new software into their processes. David Corney, Chairman and Owner of travel insurance software company Firemelon, thinks the slow adoption of new software could be due to the smaller profit margins travel insurers have compared to other insurers. “There is not enough investment in software from travel insurers because they don’t have the same budget that other insurers do. Even though travel insurance is more complicated with a large amount of quotes, there is not the same margin. We are conscious of the budget of travel insurers, and sometimes we have to come up with innovative solutions on a tight budget.”
Covid-19 makes automation more urgent
Following the pandemic, travel insurance software might move further up the list of priorities for insurers. Consumer preferences continue to change and evolve, and one of the key lessons learned from the pandemic is the need for flexibility to react and respond quickly to market changes, and systems and technology partners are critical to enabling that flexibility. Manjit Rana, Founder and CEO of Ingenin, believes Covid-19 has changed how people interact with technology. “The pandemic has dramatically evolved consumer behaviour and expectations – we now take for granted that we can order something online and it will be delivered home the next day. Consumers are now accustomed to this type of digital service and expect it as standard.”
The insurance software industry is supporting this with services that are hyperautomated. Software interconnectivity is key, and the new open technical architecture now allows real-time data exchange. New digital software has transformed ease of access by allowing insurers to be where the consumer is, be they in a shop through an agent or buying a package or individual trip online – or perhaps like most of us, last minute at the airport gate.
Rana continues: “Imagine booking a flight that automatically comes with flight delay cover and a simple tick of a box to include any-reason cancellation cover. These types of products are designed to have low premiums but high volumes. When the distribution of these types of insurance products is ultra-simplified, it’s important that the claims experience is equally as slick."
Graham Gordon, Product and Strategy Director P&C at software company Sapiens, has noted similar experiences post-pandemic. “Prior to the pandemic, over half of travellers worldwide would travel without insurance. Due to the uncertainty, few now travel without it. As travel picks up, many insurers are indeed now reporting growth. However, Covid-19 went beyond influencing demand. Digitisation is the name of the game today, and insurers the world over have needed to up their digital game.”
Corney agreed: “It’s been an interesting year – a threat, but also an opportunity. Covid has made the automation of jobs that used to be done manually more urgent. For example, customers can make changes, cancel or renew their policies themselves – in other types of insurance it’s been done for years, but not in travel insurance.”
Elliott Draga, Director at NIS Canada, an insurance software solution company, added: “Our industry has just gone through extremely challenging times, so the current focus will be on recovery for most companies, but once travel gets back to pre-pandemic levels, the shift towards digital transformation will continue stronger than ever.
“In fact, we heard from multiple customers throughout the pandemic that had they not implemented our platform pre-Covid, they would not have been able to handle all of the operational challenges that they faced with as much success as they did.”
Transitioning from legacy platforms
However, insurers are often facing difficulties when adopting new software, for example, if they are transitioning from a legacy platform. The inherent complexity of the process might scare away some insurers from trying out new technology.
Draga explained: “Simplifying the transition off a legacy platform is something we pride ourselves on at NIS. We have years of experience replacing legacy systems, which has led us to create specific tools and processes to help make upgrading an insurer’s technology investment as seamless as possible. Because of this, we create more time within projects to focus on people, training, and change management, resulting in better adoption rates and more long-term success.”
Abhijeet Singh Sachdev, Managing Director at Medinyx Technologies, explains that while travel insurers are adapting new technologies, switching from legacy systems has to be carefully considered before taking that leap. “There are parts of the world, especially countries with old legacy platforms, that need to introspect. On the other hand, it is not always about scrapping the old and replacing it with the latest – it has to be planned in a phased manner. The platforms vary and customer target markets vary.”
“We have about 30 clients who all communicate with different systems, sometimes it’s easier than other times, but everything is doable,” adds Corney.
When the distribution of these types of insurance products is ultra-simplified, it's important that the claims experience is equally as slick.
An expanding market
Generally, there isn’t a lot of choice when it comes to software for travel insurers. Corney says there isn’t a lot of competition for his company. “Our biggest competitor is when insurers decide to do it themselves,” he tells ITIJ. “A lot of travel insurers think they need to use their own tech, even though outsourcing is easier – easier to manage, update, etc. Some people think they’re unique and have a competitive advantage from doing it themselves.”
Rana highlights the advantage insurtech companies have in comparison to other tech startups: according to him, insurtechs have an edge, they are not typically held back by legacy platforms, legacy products, legacy processes or legacy thinking. The investor community has spotted this trend, hence the surge in insurtech investments.
Sachdev adds: “My personal perception over the years is what holds travel insurers back from adopting new technology is not really investment, but finding the right technology partner with the right solution and actually going through the process of change. Change is never easy, but it is also inevitable.”
But, looking into the future, Corney is optimistic. “We have had way more enquiries since the pandemic. The market will likely fragment as it comes back, and we have always benefited from disruption: when new players get on the market, they want to get on a new system. Fresh people coming in will be good.”