Although the accelerated pace of Covid-19-induced digital disruptions has led to seismic changes in business operations across industries, their impact is expected to be the most pronounced in the financial services and insurance domains. The last few pre-Covid years had already seen the emergence of a new class of FinTech and InsurTech companies offering cutting-edge technologies. The Covid-19 pandemic not only intensified the pace of digital adoption; it opened a world of infinite possibilities for insurance and financial services businesses to reimagine their legacy operations.
Driving this digital adoption is an ecosystem of disruptive technologies that include artificial intelligence (AI) and machine learning (ML), big data, blockchain, and the Internet of Things (IoT). Central to the success of these technologies is data: not just the way it is collected but more importantly, how it is analyzed and used further. An explosion of data has already paved the way for radical changes in areas such as product development, pricing strategies, personalization of services, customer profiling, risk assessment, and fraud detection and prevention.
The most resounding impact of the Covid-19 pandemic has been to compel companies to overcome their reluctance of transforming from a legacy (primarily manual) framework to a digital (primarily online) one.
Nowhere is there a more urgent need for digital disruption than in legacy insurance and financial services companies, particularly if they are to capitalize on the post-pandemic shift towards holistic digital experiences. Interestingly, it is customers who are compelling businesses to embrace the digital revolution. For instance, not only have customers accepted that insurance is a must-have protection (versus the previous good-to-have one); they have become more discerning in the matter of buying products that meet their specific requirements.
The enormous speed at which customer preferences are changing is a clear indicator that plain vanilla products will soon be a thing of the past. Customers are demanding flexible and hyper-relevant products matching their lifestyles and offering greater price points. Such a high degree of personalization and flexibility can be achieved only if companies adopt an agile digital roadmap that enables them to respond to dynamic customer needs quickly.
This agility is not hard to come by today where, instead of developing complex technology frameworks in-house, insurers and financial services firms can integrate third-party solutions and collaborate with InsurTech/FinTech start-ups to adopt innovative solutions. This will accelerate digitaltransformation and help them adapt to a user-first, omnichannel approach quickly.
The demand for rapid digital innovation is giving rise to the trend of legacy companies tapping into the power of APIs to create connectivity and offer new or improved services without fundamentally altering their existing frameworks. This API-led connectivity will assume even greater significance due to the proliferation of data from alternative sources such as autonomous (driverless) vehicles, wearables, drones, telematics and IoT. Constant streams of real-time data provided by these interconnected devices and integrated via APIs is ushering in large-scale transformation in areas such as payments processing, risk evaluation, damage appraisal, personalization of product offerings, and claims processing.
Low-code/no-code (LC/NC) solutions are also accelerating the digital transformation journey. LC/NC platforms – cloud-based, ready-to-use solutions that merge seamlessly with existing processes – save IT costs, offer ease-of-connectivity with IT tools such as CRM, and provide greater flexibility and modularity. It is no longer necessary to build complex IT platforms in-house when an entire ecosystem comprising digital-first companies, big data companies and cloud storage providers can work in tandem to offer innovative solutions.
While AI, ML and other digital technologies are often considered buzzwords, the fact is that a future without them is unimaginable. Industries are preparing for commercialization of the next wave of deep learning techniques such as convolutional neural networks (CNNs), a type of artificial neural network used to analyze visual (pixel-based) imagery. Robotics, autonomous devices/vehicles and 3-D printing will radically reshape how businesses are operating. It is only a matter of time before such technologies become commercially available and are widely adopted. If insurance and financial services companies fail to reimagine their core businesses now, they will set themselves up for failure.
Convolutional Neural Networks (CNN) – an algorithm used for supervised and unsupervised learning mainly to process and analyses digital images, with some success cases involving processing voice and natural language, offers tremendous advantages such as heightened accuracy and little dependence on pre-processing thereby decreasing the needs of human efforts in developing its functionalities. For example in case of Home Insurance or health insurance, where pictures, selfies or videos are used by companies for image classification or verification. With CNN, these entries can be entered through ML power applications versus entering them manually thereby eliminating any errors or mistakes.
The digital future can be summed up in one word: data. The successful transformation of companies will depend on how this data – much of which will be generated in real-time mode – is analyzed and used to offer hyper-relevant products and associated services to increasingly discerning customers.
Most common challenge and a great opportunity for IT leaders is to identify and organize their data to be able to succeed in their digital transformation journey. – Its widely known that more than 50% of the data in an organization is unused. It could be that they don’t know it exists or if it exists, how to use it effectively
Metaverse is another fast-growing technology for digital transformation. It’s estimated that metaverse will increase our current data usage at least by 20 times in the next 10 years. Metaverse ecosystem will generate massive amount of unstructured data demanding IT leaders to increase their focus on edge computing, high performance, secure and reliable platforms.
While the initial use cases may have come from gaming and entertainment industries, Fintechs/ InsureTechs are exploring use cases in Insurance Surveys, Retirement planning, or even insurance products for the virtual world.
Already, new frontiers are being crossed with emerging technologies such as Wearable Deep Learning (WearableDL)- a human nervous system-inspired unifying conceptual architecture in which deep learning, IoT and wearable technologies converge.
It has been estimated that by the year 2025, there will be one trillion connected devices. Imagine the explosion of data from such devices, and what it can mean for gathering insights from it. Vehicles, smart devices and home automation devices as we know them today will cease to exist; instead, they will all transform into generators of big data.
India is emerging as a hotbed of IoT activity; it is estimated that by the end of 2021, the country will have two billion connected devices.
One of the key reasons contributing to the overall market demand in India is role played by Global Capability Centers (GCCs) who are leading from the front to test, implement and scale IoT technologies and use cases. GCCs are also driving the adoption of AI in India; other organizations can learn from their experiences and adapt their implementation strategies to suit their specific industry.
IoT services are already changing the fintech system worldwide. From offering immediate customer support to strengthening fraud-protection by employing on-site security systems, to debt collection by monitoring supply chain via networks, IoT has emerged as one of the key technologies shaping the future of fintech industry worldwide. IoT can even address the offline presence of banks and insurance firms by helping with indoor navigation and security at bank branches or other institutions. Fintech app development services are now tech-backed and are extensively leveraging the benefits of AI and IoT to improve the app user’s experience. According to a study, the global IoT banking and financial services will grow at a CAGR of over 55% between 2019 and 2027. In simple words, IoT in fintech will complete change the way we bank and do our financial transactions.
The future of digital transformation lies in how quickly and efficiently companies harness the power of data. In Andrew McAfee’s words, “The world is one big data problem.”
The article has been written by Ajayan Narayanan, Vice President and Head of Digital Business and Technology Solutions (DBTS) Technology, Sun Life Asia Service Centre India (ASCI)