Paperless insurance: key trends in the digitisation of insurance processes
By Anais Masetti - 31 December 2020
Going paperless is not a question of if but of when for insurers. So why hasn’t paperless insurance become the norm yet?
Insurance is historically a paper-heavy industry due to stringent regulations and processes which call for a lot of documentation. The current consensus is that the amount of required documentation will continue to increase. Regulatory bodies across Europe are demanding greater accountability and transparency from insurers, which translates into more forms and paper trails.
Meanwhile both insurance clients and workforces are evolving to expect increasingly digitised processes. This is where new technologies such as blockchain and cloud-based ECM hold great potential. Within our database our 30,000 qualified startups, we have seen a strong growth of such tech tools designed to digitise legacy processes.
Why is paperless insurance important?
Before we dive into the technologies and innovative companies driving this trend, let’s look at the reasons motivating the shift to digital insurance documentation.
Paper is expensive to store and manage. In fact, it is estimated that one could save 53 cents on every document issued electronically versus in paper. As the saying goes, time is money and paper forms also take more time to complete and process than digital documents.
Another downside of paper documentation is that there is a greater risk of mismanagement than with digital counterparts. Paper files can get lost and damaged, mistakes can be introduced when the information is transcribed digitally… So digital document software can reduce risk thanks to automatic safeguards that identify and even correct human errors. Furthermore, digitising data from the get-go facilitates the extraction, aggregation and analysis of the data.
Aside from being cost-effective, paperless insurance can also allow for better customer experience. Of course, this can result in greater customer satisfaction and a lower churn rate. Many consumers accept and appreciate e-billing, for instance. Customers also enjoy being able to choose how they want to access their documents, make transactions or interact with customer service – be it through digital channels or traditional ones. Not to mention sustainability, as both companies and consumers might prefer a digital channel to paper for its lesser environmental impact.
Adapting to the pandemic
The Covid-19 pandemic has meant that face-to-face contact between insurance employees and customers was not available or avoided for most of 2020. Insurers have had to accelerate their digitalisation to allow their staff to work from home (WFH). Paperless insurance processes have therefore become a requirement rather than a “nice to have”. This is not only true for insurance. Across all industries, the future of work is looking to be less reliant on in-office presence, even beyond the pandemic period. So, a more distributed workforce calls for better digital processes for document creation and management.
What are the key use cases for paperless insurance solutions?
KYC and customer authentication
Making sure a customer is who they say they are and checking the veracity of the information they provide involves a significant volume of documentation. That’s why paperless solutions for KYC in banking and insurance have seen a fast emergence in the past five years. With smartphones and image recognition technology improving at speed, insurers now have multiple ways of running KYC checks.
Ubble uses live video streaming to authenticate ID documents for new customers. Simply by filming their identity card, a customer can prove their identity within seconds. The startup’s algorithms analyse both visual and holographic elements, therefore making it more accurate than authentication based on just a photo. Rated in the top 10% of startups by Early Metrics in 2020, Ubble is one of many great examples of new paperless KYC enablers.
Document classification, completion and distribution
Going paperless naturally entails being able to supply documents to clients, allow them to fill and send these back and then analyse the information all through digital channels. Of course, online forms distributed via email or a website are widespread and they do the job fine. But can insurers go one step further?
Automation and artificial intelligence are making their way into these paperless insurance processes with the goal to improve speed and ease of use. One example that is often cited is that of Lemonade. Using NLP technology, the American insurtech’s chatbot has reportedly processed a theft claim for a $979 lost coat within 3 seconds. So by analysing user behaviour, machine learning and other AI protocols can shrink the number of interactions and steps needed to complete insurance processes. Moreover, automation can be applied to the classification of digital documents, making it more easily retrievable within ECM systems.
Automated voice recognition and analysis is another emerging tech solution for insurance. Speech recognition can not only enable client identity verification; it can also be used to directly fill in a digital document by recording and transcribing automatically a client’s answers to a phone interview. This saves precious time for employees who can then attend to more value-added tasks.
Document storage and accessibility
For the most part, legacy systems are still siloed in insurance. This creates integration hurdles and in turn, compliance issues for data privacy. It’s a missed opportunity to aggregate data and draw useful insights for product development, for instance. Enterprise Content Management (ECM) systems need to evolve to make data accessible and actionable across departments.
Cloud-based ECM systems could be a solution. Cloud technology allows for greater flexibility and scalability in document storage. In a time where distributed workforces and WFH becomes widespread, the cloud seems like an obvious route to make documents accessible to employees.
Secure and certify documents
Ensuring the highest level of data security and privacy is paramount in insurance. This includes identifying and preventing fraud. Blockchain solutions hold great promise in providing strong safeguards for paperless processes.
The European startup ecosystem is rich in such solutions. Among the startups rated by Early Metrics, Stratumn is one that achieved a very strong growth potential score. The startup develops blockchain and cryptography solutions for banking and insurance groups for a variety of use cases – from preventing fraud to certifying and safely sharing documents digitally.
What are the risks associated with paperless insurance?
Innovation always creates new opportunities as well as new threats. While the scale tips largely on the pros, technologies for paperless insurance do hold some risk.
Earlier we praised digital document management for being less prone to mismanagement than paper-based management. So you would assume documents would be safer when handled digitally. Yet, the rise in cybercrime gives insurance providers good reasons to be wary of digitalisation.
It’s crucial that alongside solutions for digitalisation, insurance providers also invest equal resources in cybersecurity. This can include adopting cryptography protocols but also giving regular education to the staff. Indeed, a study by IBM showed that human error is the number one cause of 95% of cybersecurity breaches. Hence the importance of proper, regular cybersecurity training and auditing.
Again startups can help insurers stay ahead of cyber threats while adopting new technologies. It’s the case with PeckShield, in the top 10% of startups rated by Early Metrics, which has designed a solution to identify vulnerabilities within a blockchain.
Accessibility and inclusion
Regardless of the industry, digitalisation brings up a key concern: will some customers be left behind? From the elderly to rural populations with poor access to the internet, digital channels aren’t suitable for everyone. To make sure customers don’t feel alienated by new digital processes, insurance companies should consider maintaining the option of traditional paper-based documentation while adding paperless alternatives.
Moreover, when adopting digital solutions, insurers need to make sure that they provide inclusive alternatives. Ipedis (a startup rated by Early Metrics) is among the tech suppliers that support this effort. Its solution allows companies to make digital documents accessible to visually impaired individuals, in compliance with the EU Web Accessibility Directive.
Digital skills gap
It’s not only customers who can feel alienated by new technologies. Without the proper guidance, experienced employees could end up feeling overwhelmed by a sudden change in traditional ways of working. Open innovation departments play an important role in making sure the staff that are concerned by new paperless solutions are fully trained and have access to continuous support.
When it comes to automation, it’s also important to clearly express that today’s digital solutions are nothing more than enablers for employees to do their job faster and better. Replacing staff with artificial intelligence is not the goal for now, at least not in the short-term.
While there are still some obstacles and risks to be addressed, it seems the shift toward paperless insurance is only going to accelerate. The Covid-19 pandemic made the need for digital alternatives to traditional process extremely salient. Which most insurance players, both incumbents and newcomers, have responded to. Meanwhile, the startup ecosystem continues to provide ever more innovative solutions to go paperless in a safe, inclusive, sustainable and efficient way. Certainly a market segment to watch in upcoming months…