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Digitalization will reduce the insurance cost, according to the Central Bank of Russia

The insurance companies will turn into IT structures within ten years, which will lead to lower tariffs. The employees of the Central Bank of Russia and analysts came to this conclusion, writes RBC.
Digitalization will reduce the insurance cost, according to the Central Bank of Russia

Sergei Shvetsov, the First Deputy Chairman of the Central Bank, is confident that the breakthrough in big data, artificial intelligence and machine learning will greatly reduce people participation in insurance business processes, and one of the main trends will be the strengthening of the role of electronic sales channels. “All financial organizations should become IT companies, because if you outsource IT, then you cannot compete at the time to market level (time to launch a new function),” said CB Deputy Chairman Sergei Shvetsov.

According to the Central Bank official, the insurance service content will change as well, its value will be measured by time: “If the task of CNC insurance today is to compensate for repair of a citizen’s damaged car, then in ten years, I believe the main criterion will be to reduce the number of seconds that a person is without his car".  

Insurers use big data when developing risk models, pricing and underwriting. The companies are building a personal risk assessment model using artificial intelligence; it processes more information than the classical scoring model. “As a result, about 70 factors are evaluated instead of the standard 10–20 when rate making, which allows reducing the price to 30% for 70% of customers due to a more accurate assessment. The margin of insurers will become insignificant as a result of digitalization,” the article says.

According to participants in the Russian market, the rates may fall by 30% for most customers in the future. An accurate risk assessment reduces the insurer's loss ratio by 10 percentage points and more, so that the individual price rather creates opportunities for profit growth, the optimistic expert states.

The development of online sales will also contribute to profit growth; the standard commission of an agent or broker is 30–40%. Ultimately, the clients will benefit from a reduction in the army of intermediaries, the experts are confident.

Source: https://plus.rbc.ru/news/5d879e537a8aa91af7c68d18

Photos are from open sources.  

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