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Following the COVID-19 pandemic, the manifestation of risk on all levels became jarringly evident. This prompted the insurance industry to take a long look in the mirror and face the fact that current insurance practices only provide broad coverage, excluding the depths of modern-day factors. So, how should today’s insurance companies approach coverage for hard-to-predict categories?
To start, insurers can eradicate the notion of “uninsurable risk” due to high levels of uncertainty. Modern insurance companies have greater access to new data sources and analytical tools equipped with advanced capabilities. By embracing the role technology plays in propelling insurance practices, these businesses can quickly adapt to ever-evolving risk levels—and adjust policies accordingly.
However, modern risk complexity goes far beyond common, simple factors; they are more fluid and dynamic. The advancement of technology, such as the proliferation of Insurtech, empowers insurers to analyze previously unreachable data to create policies beyond reproach. By reframing traditional insurance models, agents can provide more personalized and precise coverage, while managing risk in a manner that prepares both businesses and policyholders for whatever comes next.
Entering the World of Insurtech
Since its introduction in 2010, Insurtech—where insurance meets technology—has experienced a massive boom in adoption. With an expected value of $146.43 billion by 2030, insurance companies are welcoming its promise to empower agents to zone in on mission-critical responsibilities—all through the power of artificial intelligence and automation.
By reshaping traditional insurance practices around AI and machine learning, organizations can rewrite the rules of underwriting. These advanced technologies position insurers to establish more personalized pricing models based on the risk profiles of individuals. By using machine learning algorithms, insurers can catapult risk assessment capabilities through robust data analytics.
The integration of big data analytics enables more accurate customer segmentation, which positions insurers to develop more tailored insurance solutions. This is because AI-driven approaches account for more dynamic factors, other than the traditional reliance on static variables.
This is particularly helpful for high-risk coverage categories such as those discussed in the following sections.
Personalizing Policies for Extreme Categories
Extreme sports insurance provides medical coverage for any accidents or injuries sustained when individuals participate in an adventurous sport, especially when traveling. This includes medical expenses, potential medical evacuations, accidental death or dismemberment, and repatriation. Those who crave the adrenaline rush require additional recommendations for extra coverage specific to their activities.
For example, a first-time driver looking for auto insurance may present a clean driving record upon application, but AI-driven systems may identify them as adventurous in spirit. By analyzing this information, insurers can develop a customized policy that includes coverage for extreme sports-related incidents. By doing so, the driver can gain peace of mind from value-added protection and the agent can ensure customer satisfaction and retention—while effectively mitigating risk.
Protecting Policyholders with Exotic Pets
The same principle can be applied to exotic pet insurance—an area that requires meticulous assessment. This is a specialized type of coverage that protects owners from sudden veterinary expenses and liabilities. Exotic pet insurance expands beyond the borders of traditional coverage to include unique species, such as reptiles and small mammals, all with unique healthcare needs.
Incorporating AI in risk assessment increases connectivity, thereby boosting the availability of risk-relevant data on potential applicants. Insurtech products equipped with capabilities to review sensor data from home devices can leverage AI to assess client risk at lightning speeds. This enables insurers to unearth never-before-experienced performance and reporting metrics and, in turn, unparalleled prevention strategies.
AI-powered analytical tools also unlock the ability for insurers to estimate policyholders’ potential to face insured losses. This information greatly influences an agent’s decision-making regarding coverage, applicable insured limits, premium charges, and capital considerations. Leveraging this advanced data can also bolster accuracy in underwriting and pricing while empowering insurers to increase policyholders’ pricing differentiation based on individual risk levels.
Integrating IoT Technology and Wearables into Policymaking
As risk assessment practices become more sophisticated, the industry is adapting by embracing the power of the Internet of Things (IoT). As an interconnected network of devices embedded with sensors, the marriage of IoT and Insurtech has opened the door for insurers to gather risk-related data more meticulously and accurately. It also enables individualized data to be collected in real-time—supporting highly personalized policies and fairer premiums.
Real-time insights also provide continuous monitoring opportunities that create transparent and verifiable records of events—which serve as a strong foothold against insurance fraud. Not only does this discourage fraudulent behavior or exaggerated claims, but also solidifies insurance policy integrity. This transparency also translates into elevated customer trust and engagement.
IoT technology has also paved the way for wearables to thrive in the insurance sector. While the days of simple pedometers counting daily steps are far behind us, it wasn’t until 2015 that insurers began actively integrating wearable data into policies by quantifying human behaviors. Since then, insurance companies have leveraged this wealth of data to inform equitable pricing structures, reduce risk, and enhance underwriting efficiency.
Conclusion
Today’s technology shows no signs of slowing down, prompting the insurance sector to ramp up its approaches to policymaking to follow suit. With the power of data analytics, AI, and IoT, Insurtech is booming through the barriers of traditional practices to make once-uninsurable categories, like extreme sports and exotic pets, more accessible and affordable.
Integrating advanced technology, like wearable data in insurance policies, empowers insurers to inform their decisions in a way that tailors policies around the intricate nuances of individualized risk profiles. By moving away from one-size-fits-all solutions, insurance companies are better positioned to personalize coverage through more robust risk assessment and management. This, in turn, fosters a deeper sense of customer engagement and satisfaction.
The insurance sector is on the precipice of unprecedented innovations, where technology can bolster both individual protection and the integrity of the insurance process itself. With a more proactive approach to quantifying risk, agents can benefit from real-time insights into personalized data that establish peace of mind in a world that is more unpredictable than ever before.
