The claims for Hurricane Irma are starting to pour in and they’ll be big, $25 billion to $35 billion, forecaster AIR Worldwide says.
The scenes of flooding, displaced people, wrecked homes and disrupted communities are all too familiar, as are concerns about insurers managing claims and their own financial futures, too.
Homeowners and business owners affected by Hurricane Irma will probably go through many of the same processes as Floridians affected by Hurricane Andrew 25 years ago. Claims stations sprouted up on street corners, adjusters poured into the area, some walking down streets not quite sure which houses they even insured. Until Irma, Andrew was Florida’s most destructive storm, causing $27 billion in damage. The New York Times reported 22 insurers failed, leaving a million policyholders without coverage.
As these events become more common, insurers, which touch practically every consumer, must catchup to other industries and build resilience into their systems and technology. Like healthcare, insurance is an industry slow to change and is often hindered by legacy IT and regulation. Insurance is also an industry built on neighborhood agents, face-to-face interactions.
Time is of the essence and face-to-face doesn’t scale during a disaster. Irma-sized disasters underscore the risks of not changing and instead being stuck with outdated, time-consuming and inefficient processes.
Homeowners should be able to take photos, hook into the adjuster via Skype, do virtual walk-throughs, then have data uploaded to databases that draw insights from data on other homes on the same street, or from homes constructed the same way with the same materials.
Homeowners update homes and contents all the time, but how often do insurance policies get updated? Not nearly as often, in part, because it’s a cumbersome process to do so. That points to the need for easier, online ways to update policies and coverage amounts.
In the wake of disasters, communication is often difficult. Some insurers have mobile apps. Others communicate via Twitter.
Consumers should be able to access insurers through any available channel, and be assured that the information they share — in effect their data — gets to the right place and is then easily accessible and shareable to speed claims processing.
Disruptive technologies and innovators will help push the rest of the industry forward.
Digital transformation is imperative, so insurers and consumers can communicate and transact across any available channel. With large disasters, face-to-face meetings don’t always scale. People can’t wait that long to get their money. It’s an inefficient use of resources and it is increasingly not the way consumers want to interact with companies.
Instead, they’re embracing the AirBnB, Amazon Prime, Netflix-level of streamlined, on target and convenient service. Insurance should be no exception.
Digitization Benefits Industry, Too
Everyone benefits from having a healthy, competitive, financially stable insurance industry. Accenture Research estimates that digital transformation offers insurers in mature markets the chance to increase profits by up to 100 percent.
Companies clearly see the challenge. Seven in 10 European insurers say a failure to innovate will restrict growth or result in them falling behind the competition, research firm Pierre Audoin Consultants recently found.
Health insurer Aetna even ranked number five on a Harvard Business Review list of the 2017 Transformation 10. It followed digital leaders Amazon, Netflix, Priceline and Apple. What’s Aetna doing right? Building a narrative about future possibilities and how to get there, HBR says.
In another part of the world, Australia’s MLC Life Insurance is spending $300 million to upgrade its technology to provide greater digital functionality and to digitize processes.
Meanwhile, smaller “insurtech” companies are starting from scratch with disruptive business models. The Texas-based startup, Bestow, underscores the potential.
It claims that 85 percent of Americans believe they should have life insurance, but only 41 percent do. Why not? Consumers don’t understand it, don’t like the perceived cost or the hassle of purchasing. That’s why Bestow is readying what it says will be the “consumer-first” life insurance solution driven by analytics and technology.
Look for many more such announcements, and not only from the insurance industry but from technology and consumer innovators, too.
Bestow, for instance, describes itself as a “band of finance experts, tech specialists, and data nerds.”
Big Disasters Needs Big Helpers
Disruptive technologies and innovators will help push the rest of the industry forward. But with disasters as big and broad as Irma, Harvey and others, the need for agile incumbent “big” insurers is obvious.
Given the size of losses to insurers following the most recent storms, there’s concern that some may cut back on innovation and digital transformation investments. That would be a mistake. Sticking with decades-old technologies will only add up in terms of lost efficiency, lost productivity and inability to prevent fraud.
Sticking with old technologies will also lock insurers out of one of the largest trends continuing to sweep through our economy: personalization. To tap insights within that data to better personalize customer service, insurers need new IT and database technologies.
Homeowners battened down the hatches before Irma to minimize losses.
Insurers who take steps to transform their technologies and business models now will be much stronger when the next storm hits — which will be good for both the victims and the insurers.