Technology has helped every industry sector including the insurance industry observed Bahaa Abdul Hussein. The growth of Insurtech has helped the insurance industry improve its operations. Risk management is a very important part of insurance. The advent of Insurtech has enhanced risk management.
Insurtech is the use of technology in insurance. It is the use of technological innovations to make insurance companies work effectively. Insurtech has allowed insurance companies to offer better quality products to customers at competitive prices. Insurtech has helped improve insurance process like risk management, underwriting, claims processing, etc.
Insurtech and Risk Management
Risk management is involved in every aspect of insurance. Insurtech helps in improving all these aspects, let’s see how.
Whenever a claim is made, it needs to be reviewed and this used to be done manually. Insurtech automates this task making the processing efficient. Most importantly, it is easier to detect fraud. A major problem the insurance sectors faces is that of fraudulent claims. Technology helps in managing fraud effectively thereby reducing risks.
A key process in insurance is underwriting, where the applicant’s risk profile is determined. The insurance product offered and the pricing is determined based on the risk profile. Any error at this stage can lead to increased risks for the insurance company. Insurtech automates this process making it more efficient. Apart from the data provided by the customer, software can use historical data to assess risk. It helps in identifying risk levels of customers in a structured way. The result is improved risk management for the insurance company.
The use of blockchain technology has allowed smart contracts to be used in insurance. The smart contracts are triggered when a pre-defined condition is met. The human element is thus removed from the picture and the entire process is unbiased. Payout is made when the condition is met, making risk management more effective.
Insurtech is using Big Data and Data analytics for risk management. Data can now be easily analyzed, compared, and summed up. It makes it easy to analyze a customer’s past history to determine risk potential. Claim management can be improved through the use of Big data. Fraud can be detected and even prevented through the use of analytics. Insurance companies can understand if they are taking on too much of a risk and also get information on where they are getting overexposed.
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