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How do commercial insurers develop a digital-first strategy

June 7, 2022 - Team EdgeVerve


The insurance industry is highly disrupted following technological innovation, new entrants, and changing customer expectations regarding digital services. In order for providers to adapt to the new change, they need to embrace a digital-first strategy successfully. This embracement should extend beyond developing insurance products and deciding pricing models to altering distribution channels and revolutionizing customer services. In addition, the latest technology solutions like AI insurance make the claims process more efficient and drive cost savings.

Even though the 2020 Bain & Company report suggests the insurance market is ripe for digital transformation, AI insurance is relatively a small market as compared to other industries.1 . Nevertheless, experts hope the same market will increase momentum and garner a revenue of $99bn by 2025.

AI in commercial insurance might be a challenge for many. However, only those companies who leverage the challenges to rethink and strategize their operations will benefit the most from digitalization in insurance, from underwriting and customer service to claims management. Despite the challenges underwriters face, AI in insurance has intersected the commercial space by automating processes for speed and efficiency, expanding the capacity for data ingestion and processing, providing data insights and intelligence, and improving risk modeling.

The potential of AI in commercial insurance

Commercial insurance processes involve a lot of paperwork and require a pool of customer data. AI in insurance can quickly address the labor and time-intensive factors involved when processing the requirements mentioned above for customers and ensure coverage on time.

When AI in commercial insurance is deployed, it can help transform all of these processes and benefit the providers in the following ways:

How do commercial insurers develop a digital-first strategy?

For commercial insurers to develop a digital-first strategy, they need to embrace digitization in all key areas, from developing insurance products and their pricing models to altering distribution channels and revolutionizing customer services. This will make claim processes more efficient and cost-effective.

Experts say that AI insurance in the commercial sector can boost revenues by up to 28%, reduce claims payouts by as much as 19%, and cut policy administration costs by as much as 72% within five years of embracing digitalization.

And to do that, commercial insurers need to shift their focus from simply selling protection to understanding what problem they’re looking to solve for a customer. The main challenge lies in the fact that those making decisions about product design are typically former underwriters or product managers, not digital experience or design owners.

There are a few steps to follow:

AI insurance creates price elasticity

As digital becomes more of the mainstream way, people can get a quote from ten different companies pretty easily on their mobile devices, particularly with auto insurance. Following a digital-first approach with AI in commercial insurance, pricing changes will be more market-based or an integrated hybrid, depending on the insurance line. With AI, the internal data and competitors’ actions are considered when deciding the pricing for claims.

Insurance becoming embedded in the distribution

Large-scale commercials are still an intermediate experience, and digital plays more of a back-office role, making the intermediary more efficient. In order for the digital-first strategy to be wholly embraced by the commercial insurance sector, experts believe digital has to evolve to where insurance is embedded into the distribution of things such as cars, homes, wearables, and smart speakers. It needs to be API-enabled further away from where insurance has traditionally been distributed or derived.

Embracing an adaptable customer service approach

When it comes to innovating around customer service, AI in insurance should help providers focus more on designed services while keeping customer preferences in mind. I Insurers must be adaptable to have a service model that accommodates how customers want to interact with them. And customer preferences are changeable. Carriers have to learn to listen to their customers and get involved in observing customers’ behavior. Assessing customer behavior manually is again a labor-time-intensive task. Insurance AI can address that provided the data are available in a digitized format.

Disrupting the claims process

There is a huge opportunity to reinvent the claims process. Claims are the single most extensive cost-saving opportunity areas across the insurance industry, be it commercial or personal, especially when it comes to going digital-first. This is where innovation through AI and Machine Learning can have some of the most significant impacts. High satisfaction in claims processing is about being fast and effortless, not necessarily in-person. With the help of AI in insurance, alongside other capabilities like robotics, providers can drive a 5% loss adjustment expense (LAE) ratio without dropping quality.

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