Digital Business

Digitization And Insurance Risk Mitigation

Ignoring all the policy and product details, insurance effectively comprises a process whereby clients outsource their perceived risks and ask organizations to carry the financial burden in the event that the risk occurs.

This has been at the core of long-and-short term insurance processes over the past few decades where clients and insurance organizations alike assessed their risks and developed a complementary approach to manage those risks.

Clients identified their perceived risk coupled with the likelihood of the risk being realized and measured the financial impact that the realization would have on them personally.

On the other hand, insurance organizations considered a broader view and, based the likelihood of a risk occurring on demographic information and market research.

This approach resulted in clients and insurance organizations both stepping back and waiting for the risk to materialize. One could liken this situation to a bomb with a fuse burning down, checking how long the fuse is, and then standing next to it waiting for it to explode.

Digitalization is Changing the Insurance Landscape

With the proliferation of digitalization, and the sheer amount of information that is now available to both clients and organizations, the world of insurance is starting to take the next step towards modernization.

Whereas organizations previously focused almost exclusively on risk contingencies, they now have the opportunity to delve into real risk mitigation, owing to the amount of information available about clients and their behavior coupled with mobility, the Internet of Things (IoT) and digitalization.

These advancements have made it possible for insurance providers to not only understand more about client behavior, which in itself can already improve the existing risk models and contingency plans but also use tools to actively influence client behavior and drive mitigation strategies.

By understanding client behavior more accurately, risk models can be adapted and thereby reduce the number of assumptions inherent in such models. This has a direct benefit to the organization in that the costs and risks are more predictable, and enables them to drive cost reductions while still offering the same, and even better, levels of service.

The benefit to the client, on the other hand, is the leveraging of inherent cost benefits provided as well as leveraging the innovations being driven in the models to make insurance more personalized by the insurer. Thereby risk mitigation creates a true win-win scenario for both clients and organizations.

Sculpting Client Behaviour with Risk Mitigation

By introducing a risk mitigation approach, and understanding what behaviors are being exhibited by clients, organizations are able to understand which behaviors lead to a higher likelihood of risk materializing, and which are likely to reduce risks. Once these are understood, it is possible to start initiatives to drive the desired behaviors and minimize the behaviors that are more likely to result in the realization of risks.

As a result, organizations reap the outcomes of the desired behaviors by further reducing the likelihood of risks. Simultaneously, clients are provided with deep insights and access to behavior-related information, notifying them of behaviors that are likely to reduce the realization of their risks. The resultant benefits to both insurance providers and clients are self-evident.

Improving Client Experience

Another benefit of digitalization to insurance providers is the improvement that it provides to the client experience (CX) journey, and how insurance organizations can leverage risk mitigation strategies to drive CX excellence and differentiate on more than just price, policy and product information.

By tailoring and building processes designed specifically to enable and drive CX towards the digitally enabled and mobile client, insurance organizations can open new revenue streams and partnerships that will set them apart in an already competitive market. At the same time, organizations can’t afford to throw away or ignore the traditional processes and approaches because they aren’t going anywhere…yet.

Craig Heckrath
Delivery Lead, Mint AI. Specialising in Artificial Intelligence (Machine Learning, NLP, chatbots, ANN, AI platforms) and Data Science. With over 10 years of experience in driving intelligent transformation across industries, Craig helps Mint AI drive business transformation that delivers true digitisation for customers while keeping technology simple, usable, and meaningful. With a focus on thought leadership and skills empowerment through AI, Craig architected high-profile projects across sectors including financial, healthcare, public, media, telecommunications, and transportation.

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