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Insurance 2.0: How New Tech is Impacting Your Risk Management
Historically, the insurance industry embraced change at a conservative pace. Now though, spurred in part by the pandemic, insurers have made greater efforts to join the digital revolution. Among the high-tech adoptions: new apps, virtual appraisals and data analysis.
As clear-eyed advocates for our clients, this step into the future has us asking, what does it mean for consumers? Is it all good news, or does such progress come with downsides? The answer, we believe, is a little of both. Here are our thoughts about the good and bad of the various technological developments in the insurance industry.
1. Digital platforms and apps.
Whether allowing you to pay online, access policies, call for roadside help, or document a claim, these tools are certainly changing the game by making administrative tasks more convenient. But too often this convenience comes with a loss of the white-glove personal-touch service that clients expect. We recommend that our clients choose a carrier based on more than the functionality of their digital products, because we know the benefit that high net worth individuals and families gain from close relationships with insurance professionals. Many start-ups are using their digital platforms to differentiate themselves from competitors, but, to us, they are just a nice bonus. The priority remains excellent customer service and claim handling.
2. Virtual appraisals and claims.
When the quarantining and social distancing began, companies had to find new ways to handle what were once in-person transactions. A year later, clients might give a video-call tour of their new property to an appraiser, or, if there is no bodily injury involved, capture damage for a faraway adjuster with the camera on their phone. But, again, if you put aside the public-health and scheduling benefits of such virtual communication, it is hard to shake the feeling that something might be sacrificed. All things being equal, professionals can be most helpful only when they are physically on hand, not least to see the details their eyes are more attuned to than their clients’. In the long run, virtual appointments may continue to have a place in less expensive home purchases and smaller-claim cases. For more substantial events, though, we don’t see them ever fully replacing in-person visits and recommend our clients do so when it is safe.
3. Smart-home gadgetry.
Digital thermostats, remote water shutoffs, high-tech locks, inexpensive cameras, automated generators …products like these can protect against worst-case scenarios and minimize damage when things do go wrong. Say the temperature drops significantly in an unoccupied second home. Now, the owner can turn off the water remotely and send someone out to check things as soon as it happens, rather than being surprised by a frozen rink of a floor when they arrive several weeks later. Most of these products have cellular backup too, so you can continue to track a situation when the power goes off. It’s no surprise then that many carriers give premium discounts to clients who install them. In this case, if you’re looking for downsides, you won’t find any here.
4. Data-driven risk assessment.
The rise of big data has elevated insurance carriers’ ability to forecast risk, allowing them to uncover patterns in claims quicker and better analyze exposures. For clients, though, that has meant a more challenging market, producing carriers that are stricter about the amount of coverage they offer and who they insure. Being more aware of any overexposures also encourages carriers to regularly reevaluate their client base and alter their rates. This is partly why the past several years have been more challenging for clients, to say the least. But on the plus side, better data has spawned a wave of new insurance carriers who, because they are able to be more systematic about where and how they offer coverage, are in a more sustainable position from the start. Previously, new carriers had typically experienced big losses during the tricky early years and covered those losses with huge premium hikes.
One more noteworthy item: Anyone who does anything online has a digital profile that an insurance carrier can and will use to assess their risk profile. And that has an especially significant impact on high-liability and life insurance policies, for which carriers consider lifestyle as they decide to offer a policy. As hard as it is to always watch what you post or where you go online, it’s worth thinking about in the context of risk management.
As with most emerging technology, it’s not possible to categorize the impact as simply good or bad. The reality for clients is more nuanced, because thus far its led to a much more volatile and challenging market but it has also led to greater convenience and new ways to protect your home. As we emerge from the pandemic—and as the technology continues to evolve long after the virus is gone—you can be sure that we will monitor it all. And should you have any questions or concerns about the digitization of the current insurance market, we’re here to offer our insight and guidance.