Unlocking opportunities for insurance using lessons learnt from banking industry

Zainab Iwayemi

IN RECENT TIMES, DIGITAL transformation has helped banks to serve more customers, expand market
share, as well as increase revenue at lower cost. Today, digitization is helping banks get access to the bigger
and richer data sets that are required to fuel advancedanalytics (AA) and machinelearning (ML) decision
engines to drive Artifcial intelligence (AI).
Artifcial intelligence is based on the idea that systems can not only learn from data, but also identify patterns and make decisions with little or no human intervention.
Te last decade witnessed signifcant improvement in the banking sector aided by advanced technology as Artifcial Intelligence enhanced decision-making capabilities that gave the bank a decisive competitive edge by generating signifcant incremental value for customers, partners, and the bank.

How can insurance mirror this to improve insurance?
Massive success recorded in the banking industry is not untied to the adoption of digitization. In the next decade to come, the same could as well be said of the insurance industry if insurance providers are able to unlock opportunities which experts say are present in the insurance industry if adequately utilized.
“Insurance companies are not big enough,” said Aigboje Aig-Imoukhuede, during a media briefng ahead of the
launch of his book titled, ‘Leaving the Tarmac, Buying a Bank in Africa’.

The author and banker pointed out that a vast opportunity is present in insurance and assets management for those who are willing to take the bold step. In his words, “the largest fnancial companies are not banks but the insurance companies and assets management. Tat is where companies are lacking and if we don’t fx that we will continue to lag behind.”

Banks are already strengthening customer relationships and lowering costs by using artifcial intelligence
to guide customer engagement. Insurance as well needs to walk along the same digital path.

In the view of Adedamola Oloko, an insurtech expert in a note to Business A.M., “The adoption of technology and opening up the industry to insurtech, aggregators, telcos and other players will help the industry grow.”

Insurance can increase value by leveraging machine learning model

As a key take home from the growth-leading events that has recently unfolded in the banking industry, McKinsey opined that insurance
providers that plan to scale up and compete in global and regional markets increasingly infuenced by digital
ecosystems will need a wellrounded AI-and-analytics capability stack comprising layers such as: reimagined
engagement, AI-powered decision making, core technology and data infrastructure, and a leading-edge operating model.

The primary AI and ML decision capabilities required to understand and respond to customers’ fast-evolving
needs with precision, speed, and efciency. Insurers that leverage machine-learning models to determine the best way to engage with each customer have potential to increase value in a number of ways.

Insurance providers can gain an edge by creating superior customer experiences with end-to-end automation
in addition to using advanced analytics to craft highly personalized messages at each step of the customer-acquisition journey.

Also, insurers can increase the lifetime value of customers by engaging with them continuously and intelligently to strengthen each relationship across diverse products and services.

Furthermore, insurers can lower costs by automating as fully as possible document processing, review, and decision making, particularly in acquisition and servicing whilst also lowering credit risk which would allow for
more sophisticated screening of prospective customers and early detection of behaviuors that signal higher risk
of default and fraud.

What’s more?
The rapid improvement of AI-powered technologies triggered competition on speed, cost, experience as
well as intelligent propositions. To remain competitive, however, insurance providers must engage customers
using highly personalized and timely content to build loyalty.

Personalized offers with tailored communication delivered at the right time through the customer’s preferred channel can help maximize the lifetime value of each customer relationship and reinforce the organization’s market leadership.
To achieve these benefits, insurers would need to build AI-powered decision capabilities fuelled by a rich mixture of internal and external data and augmented by edge technologies.