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Featured General Insurance

Previously, we explored the evolution of the insurance distribution model from traditional standalone products to the embedded model we see today.

Insurance is no longer driven solely by physical agents and incessant spam. Cold calling is outdated and now gives the industry a negative image.

We discussed how insurtechs and consumer brands partner to offer insurance products seamlessly alongside primary purchases, enhancing convenience and relevance for customers.

While this approach simplifies the insurance process, ensures timely coverage, and introduces innovative products like on-demand ride-sharing insurance and event ticket insurance, it also faces challenges such as scalability, regulatory compliance, and data security.

Building on this foundation, lets now delve into how advanced technologies are further transforming embedded insurance

 1. Artificial Intelligence and Machine Learning

AI and ML enable real-time data analysis and predictive modeling, revolutionizing how insurance products are offered. These technologies can sift through vast datasets to identify when a customer might need insurance and what type would be appropriate.

For instance, AI and chatbots from Allianz can suggest travel insurance now of flight booking while others offer extended warranties for new electronic purchases.

Impact: This predictive capability ensures that insurance offers are timely and pertinent, increasing purchase likelihood and enhancing customer satisfaction.

 2. Blockchain technology

Blockchain offers a secure and transparent way to handle insurance contracts and claims through smart contracts—self-executing contracts with terms directly embedded in code.

This technology automates underwriting and even the claims process, which reduces the need for insurance intermediaries like agents and brokers.

Impact: Blockchain enhances trust and transparency while cutting administrative costs and mitigating fraud, which ensures that customers can confidently make their insurance purchases through digital channels without needing assistance

 3. Internet of Things (IoT)

IoT devices gather real-time data that can be leveraged to offer personalized insurance products. For example, telematics in cars can monitor driving behavior, providing real-time insurance quotes based on driving patterns. Likewise, smart home devices can offer data on home security, leading to customized home insurance policies.

Impact: IoT enables highly personalized and dynamic insurance offerings, aligning premiums with actual risk and usage, making insurance fairer and more efficient. This is particularly useful for embedded insurance since it allows for innovative solutions such as travel insurance customized to the actual travel distance or trip insurance per ride.

 4. Cloud computing

Cloud computing supports the scalable and flexible delivery of insurance products. It allows insurers to manage large volumes of data and provide real-time processing capabilities, crucial for the seamless integration required in embedded insurance.

Impact: Cloud computing facilitates the rapid deployment and scaling of embedded insurance solutions, ensuring they can handle high transaction volumes efficiently.

 5. Advanced analytics

Advanced analytics helps insurers understand customer behavior and preferences at a granular level. By analyzing purchasing patterns, insurers can pinpoint the optimal times to offer insurance products, ensuring relevance and value for the customer.

Impact: Advanced analytics drives efficiency in marketing and sales strategies, leading to higher conversion rates and an improved customer experience.

According to a study by McKinsey & Company, companies that leverage advanced analytics in their marketing and sales strategies report improved customer satisfaction scores, with an average increase of 15-20%.

An increase in margin of more than 10% is always good news for an insurance business, especially given that many premiums are offset by fewer claims.

Future prospects

Ernst & Young (EY) predicts that more than 30% of all insurance transactions will take place within embedded distribution channels by 2028.

As these technologies evolve, they will enable more sophisticated and personalized insurance offerings. Ongoing advancements will also spur new business models and partnerships, reshaping the insurance industry landscape.

August 5, 2024
Featured General Insurance Security

A concerning 73% of owners of small businesses reported cyberattacks in the previous year. Small and mid-size businesses (SMBs) are the target of approximately 43% of cyberattacks. What’s even more alarming is that only roughly 50% of SMBs have cyber insurance policies or coverage because it’s an additional cost that many cannot afford.

SMBs are more vulnerable since they lack the means to protect themselves effectively. Consequently, no one is “too small” for today’s cybercriminals. Nevertheless, even with constrained resources, SMBs may significantly strengthen their cybersecurity posture by combining efficient change management with artificial intelligence (AI), the most talked-about emergent technology available.

SMBs’ cybersecurity weakness: The pitfall of overvaluing compliance

Although it’s not always the case, many SMBs assume they are secure if they follow industry laws. Cybercriminals target different access points and data kinds during a breach, for instance, even though Payment Card Industry (PCI) compliance is a crucial tool to ensure the proper handling of credit card data and client information.

For this reason, small businesses must adhere to PCI compliance rules for protecting digital payments or risk fines from their payment processor. However, a yearly compliance action alone does not ensure a comprehensive adequate security posture.

SMBs typically lack the resources—time, manpower, and expertise—to develop, deploy, and manage their own cybersecurity capabilities. As a result, they tend to concentrate only on adhering to PCI compliance requirements rather than taking the essential actions to become more widely cybersecure. This is because a merchant’s digital environment may contain other areas that are open to cyberattacks if they choose to only implement PCI compliance in the card data environment.

SMBs need to be aware of numerous industry laws and best practices, including PCI Data Security Standard Version 4.0, which went into effect on March 31, 2024. Other frameworks that address general merchant cybersecurity for all industries and organizations, regardless of their size or level of cybersecurity skill, including the NIST Cybersecurity Framework and the FCC’s Cybersecurity Tip Sheet.

SMBs will have more work to do to maintain their cybersecurity and compliance posture because of hackers utilizing cutting-edge technology like artificial intelligence (AI) in addition to the growing use of mobile payments and contactless transactions. Sensitive consumer data was compromised by 39% of small firms in the past year, and more are sure to come given that cybercrime is predicted to cost the global economy $10.5 trillion by 2025. SMBs who don’t integrate their cybersecurity and compliance efforts run the danger of joining the 60% of small firms that shut down because of cyberattacks.

AI technology can be used by small firms to bridge this gap and lessen the strain of maintaining cyber resilience in the face of scarce resources.

AI: The key to uncovering hidden blind spots

AI is leveling the playing field for cyber resilience by assisting SMBs with limited funding and cyber knowledge in strengthening their security postures through:

Cutting through the clutter

What you cannot see is unassailable. To put it another way, 25% of workers at small businesses believe they lack the knowledge and resources necessary to recognize possible cyberthreats in the workplace. They lack the resources and knowledge to map out all digital assets at risk within a business, identify which vulnerabilities require patching, and determine which networks are most likely to be the next in line for attack. AI comes into play here.

Artificial Intelligence (AI) facilitates this process by giving small teams instant access to relevant information about vulnerabilities, possible security incidents, and remediation activities. This greatly expedites threat detection and response, enabling firms to remain ahead of the curve.

Though it’s not the sole tool, artificial intelligence (AI) is a potent one for SMBs, and its use will only increase with time. To provide a multi-layered strategy to identify cyber risks, AI solutions should expand upon the organization’s existing cyber tools (firewalls, endpoints, and vulnerability scanners that input security data to the AI model). The image of cyber danger becomes a high-resolution, color image when AI is used in conjunction with current cyber technologies.

Integrating compliance and cybersecurity measures

Due to PCI requirements and business needs, cybersecurity protection is becoming more necessary for SMBs in all sectors and regions. No longer can maintaining cardholder data security and preventing disruptions from cyberattacks be a “point-in-time” endeavor, as PCI and other compliance measures have historically been.

Businesses with little to no cybersecurity experience can put the necessary policies and procedures in place with the aid of industry best practices included in the NIST Cybersecurity Framework and FCC guidance, but these basic suggestions are insufficient to promote continuous cyber resilience.

Without requiring technical expertise or internal resources, AI technologies enable SMBs to quickly and effectively assess their cyber risk as part of the compliance process. AI solutions that integrate cybersecurity and compliance should be considered by SMBs. This will guarantee “always on” cyber defense in addition to adherence to industry rules and suggested baselines.

Eliminating the uncertainty

As generative AI (GenAI) chatbots advance, even non-technical staff of small and medium-sized businesses can more successfully establish and uphold cyber resilience and compliance with new industry requirements. Because every user has a different level of cybersecurity experience and different online and compliance security contexts, new GenAI chatbot capabilities can adjust the terminology, complexity, and level of detail of cyber events. This reduces the possibility of error by enabling everyone, regardless of skill level, to quickly identify their weaknesses and discover methods for mitigating risk.

Anticipating the future

Understanding where cyber threats are and how to best address each one necessitates a multi-layered strategy to SMB cyber risk management, comprising a combination of technology and process enhancements. Even though the dangers associated with cybersecurity and compliance are greater than ever, only 33% of SMBs have added new technology or processes to guarantee security in the last year. SMBs require assistance in the battle against cybercriminals, and AI is the co-pilot required to produce outcomes despite the leadership’s possible lack of experience and time.

AI isn’t just for big businesses; SMBs can also benefit from tools that help them prioritize which vulnerabilities to patch, recommend the best course of action for fixing those problems, and make sure they comply with crucial industry requirements like PCI. For SMBs, compliance and cybersecurity must become mission vital, or else they run the danger of being caught in the crossfire of cyberattacks.

August 1, 2024
Cloud Computing Featured General Insurance

As of today, over 44% of data from financial services organizations is stored in the cloud.

In one of our articles, we explored what cloud computing entails and its impact on the insurance industry. We also examined how certain insurance players like Lemonade and Allstate have leveraged cloud technology to enhance their operations.

However, the number of these early adopters remains limited due to various hurdles.

Cloud computing involves migrating all operations to the cloud, enabling communication, access, and resource sharing from anywhere at any time. For the insurance industry, it allows insurers, brokers, and agents to store, process, and access their data and applications on remote servers via the Internet. This is made possible by means of an internet connection and a subscription to hosting platforms like Amazon Web Services (AWS) and Microsoft Azure.

Despite its benefits like cost efficiency, scalability and business continuity, several challenges hinder the widespread adoption of cloud technology in the insurance sector.

Let’s delve into these challenges and suggest potential solutions:

 1. Legal and compliance issues

Ensuring compliance with federal regulations like the Gramm–Leach–Bliley Act (GLBA) and the Health Insurance Portability and Accountability Act (HIPAA), as well as state laws like the California Consumer Privacy Act (CCPA), requires considerable effort and delicacy.

Failure to comply can subject insurers and cloud hosting providers to significant fines and penalties.

What makes matters worse is the fact that different jurisdictions have varying legal requirements, making it difficult to maintain compliance when operating in multiple regions, as is often the case with cloud computing.

Solution: Insurance companies should work closely with legal experts to understand the regulatory landscape and ensure that cloud providers comply with relevant laws. In addition, enforcing robust data governance frameworks like Zero Trust Architecture and regularly auditing compliance practices can help mitigate legal risks.

 2. Interoperability issues

Many companies in the insurance industry still rely on outdated legacy systems. These systems often lack the compatibility needed to integrate with current cloud solutions easily.

Migrating these legacy systems to the cloud requires careful planning, significant resources, and technical expertise making the process complex and time-consuming, as it involves replacing old software and ensuring data integrity and security throughout the transition.

Solution: Using standardized protocols and middleware solutions can make it easier to connect old systems with new cloud technologies. This can be complemented by working with experienced cloud migration partners to help fix compatibility problems and make the transition smoother. Google has Google Cloud, which has one of the widest global reaches with numerous data centers and servers all over the world.

Add to that, a phased migration approach can help manage the transition from legacy systems to the cloud. Starting with non-critical applications and gradually moving to more complex systems allows for testing and adjustments along the way.

 3. Skill gap

There is often a shortage of skilled professionals who are adept at managing cloud infrastructure. This skills gap can lead to increased training costs and operational inefficiencies.

Solution: Investing in training and development programs for existing employees can bridge the skills gap. Partnering with cloud service providers for training resources and certification programs can also enhance the organization’s cloud expertise.

 4. Data security and privacy

Cloud environments are prime targets for cyberattacks, which can lead to unauthorized access to sensitive data, resulting in financial losses, reputational damage, and regulatory penalties. Additionally, there is a significant risk of data loss due to technical failures and human error.

Solution: Implementing strong encryption protocols, multi-factor authentication, and regular security audits can enhance data protection. Insurance companies should also work closely with cloud providers to ensure they have stringent security measures in place.

Conclusion

While cloud computing offers significant advantages for the insurance industry, overcoming these challenges requires strategic planning and investment in terms of time, human and financial.

By addressing legal and compliance issues, ensuring interoperability, bridging the skill gap, enhancing data security, and carefully managing the migration of legacy systems, companies can fully harness the power of cloud technology to drive innovation and improve operational efficiency in the insurance space.

July 29, 2024
Featured General Insurance

With inflation high, many people are already feeling the squeeze. From groceries to gas to utility bills, everything seems more expensive by the day, forcing many to tighten their belts and make tough choices about what they can afford. Unfortunately, the pain doesn’t stop there.

Home and auto insurance are also surging, adding another layer of stress to household budgets. The average insurance rate is already a hefty $2,377 annually, but homeowners across the country are expected to see a 6% spike in average premiums by the end of the year. This comes on top of a whopping 20% increase over the past two years. US home insurance rates are even expected to reach a record high this year, with the biggest increases hitting hardest in states prone to severe weather events.

Car insurance isn’t any better news. The national average cost for full coverage sits at $2,543 annually, and that number is climbing too. With these rising costs, many families are having to choose between essential coverage and other necessities. It’s a tough situation, and hopefully, some relief is on the horizon.

But why exactly are costs surging? Let’s get into it.

Why are home insurance costs rising?

As you may have guessed, the reason behind surging premiums is varied and nuanced, but we must start somewhere. Let’s start with extreme weather events. Here’s why these events are impacting your home insurance bill:

  • More frequent and severe disasters: The White House itself reports a dramatic rise in economic damage from extreme weather. We’re experiencing, on average, more than one-billion-dollar disaster every month, compared to just a handful per year a decade ago.
  • Increased risk for insurers: These frequent and intense weather events translate into billions of dollars in payouts for insurance companies. Floods, wildfires, hurricanes, and other catastrophes are becoming more common, forcing insurers to re-evaluate their risk models.
  • Higher payouts, higher premiums: With a greater likelihood of claims due to extreme weather, insurance companies need to raise premiums to maintain financial stability. This means homeowners are paying more to ensure their property is covered in a disaster.

Secondly, inflation is playing a significant role. The cost of repairs and replacements following weather damage has risen sharply. Lumber for rebuilding roofs, parts for car repairs after hailstorms – everything is more expensive. The Insurance Information Institute reports that for every dollar collected in home and auto premiums last year, insurers paid out a whopping $1.10 in claims and expenses. This imbalance means insurance companies are essentially losing money on every policy, prompting them to raise rates just to stay afloat.

Pricing power also plays a role here. While state regulators have some power to limit these price hikes, insurance companies often have more leverage. Regulators know that if they move too aggressively to limit premiums, insurance companies might stop offering coverage altogether in certain areas or for certain types of properties. This can leave homeowners with limited options and potentially force them to pay even higher premiums for less comprehensive coverage from a smaller pool of insurers. This dynamic, where insurance companies have significant “pricing power,” also contributes to the overall rise in home insurance costs.

Why auto insurance is rising

Auto insurance is surging a lot – It’s hitting levels not seen since 1976. In 2024, the average annual premium for full coverage in the U.S. spiked to $2,543, a 26% increase from the previous year. This hike in rates is contributing significantly to overall inflation, adding half a percentage point to March 2024’s inflation rate of 3.2%.

Several factors are driving this surge. First, the cost of car repairs has increased by 6.7% over the past year. While this rate of increase is slower than in recent years, it remains substantially higher than pre-pandemic levels. The higher repair costs are partly due to more advanced and expensive technology in cars, which requires more specialized skills and parts to fix.

Additionally, the U.S. is experiencing more severe and frequent car accidents. Data from the National Highway Traffic Safety Administration shows a concerning rise in traffic deaths, with figures reaching 42,795 in 2022, up by about 7,000 compared to pre-pandemic numbers. Naturally, an increase in accidents has led to a rise in insurance claims, particularly due to the severity of these incidents. In fact, insurers saw losses on 27% of collision claims in 2022, a significant increase from the previous year.

Compounding the issue, there’s been a shift in driving behavior, although experts aren’t exactly sure why. More drivers are engaging in risky behaviors like speeding, texting while driving, or operating vehicles under the influence. These habits increase the likelihood of severe accidents but also lead to another costly problem – more legal cases. More claims now involve representation, further driving up costs for insurers. This combination of factors means that finding affordable car insurance is becoming increasingly difficult for many drivers.

Will the surge continue?

Predicting the future is tricky, but the factors driving the surge (extreme weather, inflation, risky driving, and insurer pricing power) aren’t likely to vanish overnight. So, some continued increase in home and auto insurance premiums is likely. However, regulatory changes or advancements in mitigating weather risks could offer some relief down the line.

Final thoughts

The rising cost of home and auto insurance is a significant burden for many households. While the future is uncertain, the factors driving this surge are unlikely to disappear quickly. This suggests that continued increases in premiums are probable. However, there’s still hope. Regulatory changes or innovative solutions to mitigate weather risks could bring much-needed relief in the long run.

In the meantime, homeowners and drivers must be proactive. Shopping around for competitive rates, seeking discounts offered by insurers, and adopting safer driving habits could help lessen the financial strain. While navigating this complex landscape might be challenging, acting can make a significant difference in managing these rising costs.

July 25, 2024
Featured General Insurance

In the past, insurance was typically sold as a standalone product. Endless calls from insurance agents pitching motor vehicles or homeowners’ insurance made it seem like a money-mongering practice. This approach has gradually evolved.

The first significant change came with bancassurance, where banks began offering insurance products alongside loans, deposits, and other financial services. Another example is travel insurance, which became an add-on to include when booking a flight.

Today, advanced technologies enhance the insurance purchase journey, providing more coverage options, less hassle, and a more convenient experience for consumers.

What is embedded insurance?

Leveraging consumer data and purchase habits helps make insurance products more relevant to customers.

Insurtechs—tech startups in the insurance space—partner with businesses to offer a digital insurance journey where consumers purchase insurance products alongside their primary purchases. This is known as embedded insurance, which involves “embedding insurance” products alongside other purchases.

Simplicity

Partnerships are not new in the insurance industry, but the elegance of the embedded approach lies in its simplicity. Insurtechs handles the complex task of developing the technology, while the partner only needs to integrate a few lines of code into their website.

This seamless process enables the partner to offer insurance products effortlessly, creating a streamlined experience for customers without requiring significant effort or resources.

Insurance at the right time

By leveraging data analytics and real-time insights, businesses can offer insurance products precisely when customers need them most.

For instance, travel insurance can be presented when booking a flight, or smartphone protection plans can be suggested when purchasing an iPhone.

This timely approach not only enhances the customer experience by providing relevant coverage but also increases the likelihood of purchase. The convenience of receiving insurance at the optimal moment ensures that customers are protected without having to go out of their way to seek coverage independently.

Innovative products

By partnering with consumer brands, insurtechs can address and bridge the insurance gap for newly sought products and services. This is particularly relevant for startups offering new products that bring new, unaddressed risks.

For example, on-demand insurance for both drivers and passengers using ride-sharing services exemplifies the perfect marriage of convenience and protection. Available when booking a ride through apps like Uber or Lyft, this kind of embedded insurance ensures both parties are safeguarded throughout the journey.

The availability of ride-sharing coverage enhances the overall safety and trust within the ride-sharing ecosystem, reassuring users that they are protected against unforeseen incidents.

INSHUR partners with Uber to offer insurance to the latter’s drivers via their mobile app. Drivers can get quotes and purchase policies directly through the Uber app. This not only elevates the user experience for riders but also promotes a sense of security, encouraging more people to utilize ride-sharing services with confidence.

Another example can be drawn from the entertainment industry.

Event ticket insurance offers coverage for cancellations, postponements, or personal inability to attend events due to reasons like illness. This type of insurance is seamlessly embedded into the ticket purchasing process for concerts, sports events, and festivals.

By reducing the financial risk associated with these events, customers are more likely to commit to their plans, knowing they have a safety net in place.

Event ticket insurance, like that offered by Allianz on ticketing platforms like Ticketmaster, enhances the purchasing experience by providing peace of mind, ensuring that unexpected changes do not result in financial loss. This, in turn, encourages higher attendance rates and boosts the overall success of events.

Not all is gold

As embedded insurance continues to grow, scalability is a significant challenge.

Typically, embedded insurance products are designed to be simple and will provide limited coverage, leading to low premiums. For these offerings to be viable and successful, they must achieve scalability—selling a high volume of policies.

Regulatory compliance is another critical concern. With insurance regulations varying across different industries and jurisdictions, insurers must navigate a complex legal landscape.

Finally, data security is crucial in today’s digital age. Protecting customer data from breaches and ensuring privacy requires robust cybersecurity measures.

By addressing these challenges, embedded insurance can continue to provide convenient and effective coverage solutions, enhancing customer experiences and driving industry growth.

July 23, 2024
Featured General Insurance

In recent years, the mainstream move to electric vehicles (EVs) has led to a rise in autonomous vehicles. EVs like Tesla have pushed the boundaries of driving with features that can be automated.

Aside from that, Tesla also launched its own insurance business in 2019 to address the growing rates of auto insurance. Though there are mixed results, this initiative has also prompted other insurance companies to revise existing rates by offering discounts on vehicles equipped with Advanced Driver Assistance Systems (ADAS).

In attempting to address this, two critical issues emerge:

  • How does ADAS affect the likelihood of road accidents?
  • Are insurance rates directly impacted?

What are Advanced Driver Assistance Systems (ADAS)?

At the heart of EVs are Advanced Driver Assistance Systems. Although ADAS have also been found in non-electric vehicles for decades, their impact on insurance has only been studied recently with the emergence of EVs.

ADAS are car safety features powered by smart technologies. In the past, they were mostly developed in-house by car manufacturers as most didn’t require proprietary tech.

Nowadays, start-ups mainly in the spare-parts space specialize in developing various Advanced Driver Assistance Systems. From Lane Departure Warning and Blind Spot Detection to Automatic Emergency Braking and Automatic Cruise Control, ADAS helps drivers avoid and reduce road accidents caused by human error.

Types of ADAS

Advanced Driver Assistance Systems can be divided into two categories: Active and Passive.

Passive ADAS: These systems are designed to alert the driver of a potential hazard or impending collision. Examples include Lane Departure Warning and Blind Spot Detection, which alert the driver in case of an unintentional lane departure or detect obstacles the driver might not readily see, respectively.

Active ADAS: These systems actively intervene to prevent an accident or reduce the risk of one. Examples of Active Automatic Driver Assistance Systems are Automatic Emergency Braking and Adaptive Cruise Control. These take control in critical situations to avoid or mitigate accidents.

Impact on auto insurance

Automatic Driver Assistance Systems are designed to enhance safe driving by reducing human errors. Studies have shown that vehicles equipped with ADAS experience fewer accidents compared to those without such systems. For instance:

Reduction in rear-end collisions: Automatic Emergency Braking can significantly reduce rear-end collisions by automatically applying the brakes if a potential collision is detected.

Lane departure prevention: This Automatic Driver Assistance System can alert drivers if they unintentionally drift out of their lane, reducing the risk of side-swipe road accidents.

As a result, the integration of ADAS in vehicles can lower the overall frequency of road accidents whose leading cause is human errors. This, in turn, can lead to fewer insurance claims and a reduction in the costs associated with accident-related damages.

Impact on insurance rates

The effect of Advanced Driver Assisted Systems on insurance premiums is multifaceted.

Insurance companies are now using data collected from Advanced Driver Assisted Systems to refine their risk assessment models. This data can provide insights into driving behavior and vehicle performance, allowing insurers to offer more personalized and accurate pricing.

Moreover, such analytics can form the basis for road incident assessments during the claims process.

In terms of premiums, some insurance companies offer discounts on rates for vehicles equipped with certain ADAS features. These discounts are based on the reduced risk of accidents and the enhanced safety provided by these systems.

While Automatic Driver Assistance Systems can reduce the frequency of accidents, the cost of repairing ADAS-equipped vehicles can be higher due to the complexity and expense of the technology. Sensors, cameras, and other components can be costly to repair or replace, potentially leading to higher claim costs.

Insurance initiatives

Tesla’s entry into the insurance market is a notable example of how ADAS and vehicle data can be leveraged to influence insurance. By using real-time data from their vehicles, Tesla aims to offer more competitive rates based on actual driving behavior rather than traditional risk factors.

This approach has the potential to revolutionize the auto insurance industry by making premiums more reflective of individual driving habits, otherwise known as Usage-Based Insurance.

Other U.S. auto insurers, like GEICO and Liberty Mutual, are also incorporating ADAS into their pricing models:

GEICO: Provides various discounts for safety features, including ADAS. Policyholders with vehicles that have advanced safety features like Automatic Emergency Braking and Lane Departure Warning may qualify for reduced rates.

Liberty Mutual: Their RightTrack program offers discounts to drivers who use Automatic Driver Assistance Systems and demonstrate safe driving behaviors. The program tracks driving habits and provides personalized discounts based on the data collected.

Final thoughts

The integration of Automatic Driver Assistance Systems in vehicles is reshaping the landscape of auto insurance. By reducing the likelihood of accidents, these systems can lead to lower insurance claims and potentially lower premiums for drivers.

However, the increased repair costs and the need for specialized knowledge to fix ADAS-equipped vehicles must also be considered.

As technology continues to evolve, so will the insurance industry’s approach to pricing and risk assessment.

July 17, 2024
Featured General Insurance Security

Ensuring robust security measures is essential in today’s digital landscape, where cyberattacks are serious threats and data breaches occur frequently.

Traditional authentication methods like passwords and PINs are becoming less effective against sophisticated hacking techniques. For instance, brute-force attacks allow hackers to automate a series of letters and numbers to forcibly enter a system.With such security measures in place, hackers can easily access users’ personal files, finances, and other records, leading to potential blackmail and even bankruptcy.

However, with biometric authentication, a cutting-edge security system, there has been significant reduction of cyberthreats, and a higher level of security for sensitive information.

Understanding biometrics

Biometrics refers to the process of capturing and verifying an individual’s identity using unique behavioral or physical characteristics. Biometric scanners capture unique personal characteristics that are inherently difficult to replicate, making them a robust solution for security.

Unlike traditional authentication methods like passwords or PINs, which can be easily forgotten, stolen and even guessed, biometric identifiers are directly tied to an individual person.

Types of biometric systems

Depending on the biological information collected, biometric systems fall into several categories:

  1. Fingerprint recognition: Utilizes the unique patterns of ridges and valleys on an individual’s fingertip.
  2. Facial recognition: Analyzes facial features, such as the distance between the eyes, nose width, and jawline.
  3. Iris scanning: Examines the unique patterns in the colored part of the eye.
  4. Voice recognition: Identifies individuals based on the unique characteristics of their voice, such as pitch, tone, and speaking style.
  5. Behavioral biometrics: Includes patterns in how individuals type, walk (gait recognition), or other means by which they interact with devices.

Biometric verification in insurance

The primary advantage of biometric authentication lies in its ability to provide highly accurate and reliable identity verification, significantly reducing the risk of fraud and unauthorized access.

In the insurance industry, this is a game-changer.

According to the FBI, the total cost of insurance fraud (excluding health insurance) is estimated to exceed $40 billion per year.

In medical insurance, where personal information is more prone to being hacked, the situation is even more severe. Solving medical identity theft consumes a considerable amount of time, and only 10% of patients report satisfaction with the resolution of their cases.

The same study explains that on average, patients, hospitals, and insurers spend over 200 hours addressing these incidents.

Roles & success stories of biometric systems in insurance

Numerous insurance companies are already leveraging biometric technology with positive results.

From using voice recognition systems for customer service to facial recognition for secure access to policy information, there are many practical uses of biometric systems in insurance.

Enhancing data protection & privacy

What makes Biometric data highly secure is the fact that it is unique to each individual and difficult to forge.

This ensures that sensitive information is better protected against unauthorized access, providing peace of mind to customers and complying with stringent data protection regulations.

While it is easy to brute force one’s way through PINs and password logins, it is nearly impossible to do so on a fingerprint or iris scan login.

Prudential, for example, has integrated biometric authentication into its mobile app, allowing customers to access their accounts using facial recognition, fingerprint scanning and voice (Prudential Voice). This not only enhances security but also improves user convenience, leading to increased customer satisfaction.

Preventing fraud & identity theft

Biometric systems significantly improve identity verification in the insurance industry by providing a secure and accurate method for confirming an individual’s identity.

By adding an extra layer of security that is difficult to breach, biometric data like iris patterns or voice recognition is unique to each individual and nearly impossible to replicate. This makes it challenging for fraudsters to impersonate someone else or create fake identities.

Streamlining customer onboarding & claims processing

Traditional methods of onboarding customers and processing claims often require extensive paperwork and manual verification, which can be time-consuming.

With biometrics, insurance companies can quickly verify identities using fingerprint scans or facial recognition, reducing the time needed for onboarding new customers or processing claims.

AuthID.ai, a data analytics and fraud prevention software company, provides biometric identity solutions that companies in all industries can implement in their customer onboarding process.

Conclusion

The integration of biometric authentication into the insurance industry represents a significant advancement in security and efficiency.

As traditional methods of identity verification become increasingly vulnerable to sophisticated cyberattacks, biometrics offers a robust solution that leverages unique biological characteristics to ensure secure access and data protection.

Biometric systems in tandem with other advanced security measures like Two-factor authentication (2FA) can help establish a comprehensive framework that enhances overall service and fosters trust among all insurance stakeholders.

July 15, 2024
Featured General Insurance Press Release

LenderDock Inc., the leading provider of online Property and Casualty Insurance policy verification and automated lienholder process management services, is pleased to announce a new partnership with Citizens Property Insurance Corporation.

“LenderDock is excited to announce the expansion of our strategic partnership with Citizens of Florida. This collaboration represents a significant milestone in our commitment to revolutionizing lienholder process automation,” Brandon Rodak, LenderDock’s Head of Development stated.

“By fully digitizing lienholder notifications, we aim to enhance efficiency and streamline operations for both the carrier and lenders. Together with Citizens, we look forward to advancing the insurance industry through innovation and novel approaches to traditional business methods,” he added.

Citizens will fully utilize LenderDock’s NOTiFi ™ service. NOTiFi ™ makes it easier for insurers, lenders, leasing firms, government agencies, and trackers to share insurance information. Insurance firms submit electronic files to LenderDock, which thereafter makes the insurance information available to its trading partners via paper or electronic media, depending on the trading partners’ needs and preferences.

About Citizens Property Insurance Corporation

Established in 2002 by the Florida Legislature, Citizens Property Insurance Corporation plays a crucial role in the state’s property insurance marketplace by providing property insurance protection to people who are in good faith entitled to obtain coverage through the private market but are unable to do so.

Citizens operates according to statutory requirements established by the Florida Legislature and is governed by a Board of Governors. The board administers a Plan of Operation approved by the Florida Financial Services Commission.

Citizens is a not-for-profit company whose employees are driven first and foremost by a mission of service to the people of Florida. In addition to providing a quality product and service, they strive to be good stewards of the premium funds entrusted to them and are committed to modeling the highest level of ethical behavior.

About LenderDock Inc.

LenderDock Inc., with its headquarters located in Salt Lake City, Utah, is the industry leader in automated lien holder process management services as well as online property and casualty insurance policy verification. Banks, lenders, and financial third parties can digitally verify and update house and car insurance-related data in real time using the policy verification-as-a-service (VaaS) platform.

July 9, 2024
Featured General Insurance Security

The insurance industry sits on a mountain of personal data – health records, driving habits, financial details. It’s the fuel for innovation in Insurtech, but without responsible use and robust security, it becomes a liability. Here’s a harsh reality. An eye-watering 37% of consumers have already walked away from companies due to data privacy concerns. And 81% believe how you handle their data is a direct reflection of how much you value them as a customer.

These statistics reflect a growing distrust. Policyholders are asking: how is my data being used? Is it secure? Does the company truly value me as a customer, or just my information?

With this in mind let’s examine why transparency and trust are paramount, and how prioritizing data security can become a competitive advantage in the Insurtech landscape.

The data privacy landscape today

Consumers today are more conscious than ever before about their data privacy – 69% report feeling more worried than ever about their personal information. This heightened awareness isn’t born in a vacuum. Recent years have seen high-profile data breaches like the Facebook-Cambridge Analytica scandal, where millions of users’ data were harvested without consent, the Equifax breach that exposed the sensitive information of 147 million people, and the Marriott International incident, which compromised the personal details of approximately 500 million guests. And popular documentaries like Netflix’s The Social Dilemma have peeled back the curtain on how our data is collected, used, and sometimes misused.

The result? Around 70% of adults globally are actively taking steps to protect their online privacy. They’re deleting unused accounts, tightening privacy settings, and demanding greater transparency from the companies they interact with. This shift in consumer behavior presents a stark reality for the insurance industry: data privacy isn’t just a regulatory hurdle, it’s a bridge of trust to your policyholders.

What types of data does the insurance & Insurtech industry collect?

The insurance and Insurtech industries collect a vast amount of data to accurately assess risk, set premiums, prevent fraud, and provide better services to their customers. This data is essential for creating tailored insurance products and for the efficient functioning of the industry.

Here’s a breakdown of the data Insurtech collects, and why it matters:

  • Personal information: Name, address, date of birth – the foundation for any insurance policy.
  • Financial data: Income, assets, credit scores – used to assess risk and determine premiums. It might also include property and asset information, including things like the square footage of your home, the year your car rolled off the lot, whether you have a security system, and so on.
  • Health information: Medical history, medications, lifestyle habits – crucial for health insurance and increasingly used for personalized wellness programs.
  • Driving habits: Telematics data (think connected car sensors) can track mileage, braking patterns, and even location – used for usage-based car insurance and potentially to incentivize safer driving.
  • Digital footprint: Browsing history, social media activity (with consent) – can provide insights into overall health, risk profile, and even potential safety hazards (like posting about extreme sports).
  • Behavioral data: This can include gym memberships, loyalty program participation, or even public records of traffic violations. This broader picture helps Insurtech create a more comprehensive risk assessment.
  • Claims history: Claims history can help insurance companies understand risk profiles and forecast potential future needs.
  • Geolocation data (with consent): Real-time location tracking (e.g., through telematics), travel patterns, and geographic risk factors (e.g., flood zones) help in risk assessment, underwriting accuracy, and providing location-based services.

Regulations alone aren’t enough

Insurance companies operate within a stringent regulatory framework designed to protect consumer data. For example, the Federal Gramm-Leach-Bliley Act (GLB) mandates that financial institutions (including insurers) must fully explain their information-sharing practices to customers and offer them the option to opt out of sharing their sensitive information. Similarly, the California Consumer Privacy Act (CCPA) provides California residents with the right to know what personal data is being collected about them, if it’s being sold (and to who), and the ability to access, delete, and opt out of the sale of their personal information. Then we have the Health Insurance Portability and Accountability Act (HIPAA) which sets national standards for the protection of sensitive patient health information.

All insurance companies will be aware of these regulations and more. However, compliance alone is not enough. It’s crucial for insurers to transparently communicate their data protection practices to build consumer trust. Let’s get into how in the next section.

Building trust through transparency: How to communicate your commitment to data privacy

Today, policyholders are demanding transparency and control over their personal data, and that means insurance companies need to do more to communicate how they handle consumer data. Failing to do this can result in consumers going to your competitors.

To effectively communicate your commitment to data privacy:

  • Be clear & concise: Don’t bury your data privacy policy in legalese. Craft clear, concise language that outlines what data you collect, why it’s necessary, and how it’s used.
  • Less is more: Resist the urge to become a data hoarder. Clearly define the minimum data required for each insurance product or service. This demonstrates respect for policyholders’ privacy and reduces the risk of exposure to a breach.
  • Data retention with a reason: Develop a data retention policy with clear timelines. Explain to policyholders how long you retain specific data types and the criteria for deletion. This builds trust and demonstrates responsible data management.
  • Education is key: Don’t underestimate the power of clear communication. Utilize blog posts, explainer videos, and even infographics to educate policyholders about data privacy practices. This empowers them to make informed choices and fosters a sense of partnership.

Lastly, we have cybersecurity. Collecting data allows for more accurate policies and fuels the development of innovative products, so it’s not something insurance companies want to give up. And let’s not forget, it benefits policyholders too. However, any data collected should be protected with stringent cybersecurity measures.

Insurance and Insurtech companies should prioritize advanced threat detection systems, implement the principle of least privilege (limiting user access to only essential data), and utilize firewalls and network segmentation to prevent unauthorized access. These measures not only prevent attacks but also limit the damage if one occurs.

Final thoughts

In today’s data-driven world, ignoring data privacy is a recipe for disaster. By prioritizing clear communication, responsible data practices, and top-notch security, Insurtechs can turn privacy concerns into a competitive advantage. The choice is clear: embrace data privacy or risk losing policyholders.

July 8, 2024
Cloud Computing Featured General Insurance

The insurance industry has always relied on data to perform its operations and sustain itself over the long term.

From underwriting data such as Know Your Customer (KYC) and vehicle information to claims data like accident details and investment data like financial forecasts, insurance is essentially a data-driven practice.

With the explosion of data in our increasingly connected world, the volume of information far exceeds human capacity to analyze it manually. Advanced technologies like big data, cloud computing, and artificial intelligence are poised to transform data into actionable insights that directly impact insurers’ decision-making. Quantum computing, however, will take this transformation to a new level, enabling organizations to process and analyze previously unimaginable amounts of data at unprecedented speeds.

By leveraging the principles of quantum mechanics like superposition and entanglement, quantum computing offers computational power far beyond the capabilities of classical computers. This leap in technology promises to revolutionize the insurance industry, providing more accurate risk assessments, optimized investment strategies, and enhanced fraud detection capabilities.

What is quantum computing?

Quantum computing is a type of advanced computing that utilizes the principles of quantum mechanics to process information. Unlike classical computers, which use bits (binary values of 0 or 1), quantum computers use qubits. Qubits can exist in a superposition state. This allows them to simultaneously represent both 0 and 1. Additionally, qubits can be entangled, where the state of one qubit can instantly affect the state of another, regardless of the distance between them.

Classical computers process information sequentially, which can be time-consuming for complex calculations. In contrast, quantum computers leverage the unique properties of qubits to perform multiple calculations simultaneously. This ability to process information in parallel allows quantum computers to solve problems that classical computers currently cannot handle.

For example, in healthcare, quantum computing can optimize treatment plans and accelerate drug discovery by analyzing vast datasets at unprecedented speeds.

Application of quantum computing in insurance

Risk assessment & pricing

Quantum computing can enhance risk assessment and pricing models. With its ability to analyze large datasets and perform intricate calculations, quantum computing allows insurers to develop more accurate and precise actuarial models.

This leads to better alignment between premiums and actual risk profiles, resulting in more competitive insurance policies.

Investment optimization

Quantum computing can revolutionize investment strategies in the insurance industry. By processing vast amounts of data and performing complex optimizations, quantum computers can help insurers make more informed investment decisions, maximizing returns while minimizing risks. Monte Carlo simulations are used to model components of project cash flow, accounting for uncertainty.

Fraud detection & claims processing

Quantum computing can play a crucial role in fraud detection and claims processing.

Quantum algorithms can analyze large datasets in real time, identifying patterns indicative of fraud. This enhances the speed and accuracy of claims processing, reducing fraudulent claims and saving insurers significant amounts of money.

Decision making & data analysis

Quantum computing’s ability to handle and analyze large-scale datasets efficiently can transform decision-making processes.

Quantum machine learning algorithms extract meaningful insights from complex datasets, enabling insurers to make better-informed decisions. This leads to improved risk prediction, customer segmentation, and personalized insurance offerings.

Final thoughts

While quantum computing holds great promise in the insurance industry, its power also poses significant cybersecurity threats.

Quantum computers’ potential to break current encryption standards could compromise online security, leading to increased cyber insurance claims due to heightened vulnerabilities in data protection and business continuity. This necessitates a major review of cyber insurance policies and the adoption of quantum-resistant encryption practices.

Add to that, quantum computing’s ability to process vast amounts of data quickly raises concerns about data privacy and the ethical use of sensitive information.

To harness the potential of quantum computing in insurance, organizations must prepare by exploring its applications and implications.

July 3, 2024
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