The insurance industry is on the cusp of a major transformation, driven by many emerging technological trends. These changes will redefine the very essence of insurance, as we know it today. From auto insurance to life insurance, the risk landscape is poised to shift dramatically. In this article, we shall delve into the five major tech trends that are set to reshape the insurance industry, the resultant scenarios, and the strategic considerations for incumbent carriers.
Key Technological Trends Reshaping Insurance
Over the past few years, numerous technological advancements have emerged that are reshaping products and services across various industries. In the insurance industry, we have identified five key trends that are likely to have a significant impact in the coming years.
1. Applied Artificial Intelligence (AI)
While numerous carriers are dabbling with AI, few have managed to fully integrate AI capabilities across their enterprise. As AI becomes more widespread and algorithm creation becomes commoditized, carriers will have the opportunity to drastically revamp their core processes to become more predictive.
2. Distributed Infrastructure
Many insurers today grapple with significant technology debt, with core processes bogged down by on-premise legacy technologies. The maturation of cloud technologies will enable insurers to become more agile in launching new products and improving customer service.
3. The Future of Connectivity
The wider adoption of Internet of Things (IoT) technology could lead to a substantial reshaping of product offerings in life, health, property, and commercial lines of insurance. The increased prevalence of 5G will allow for real-time data sharing, enabling insurers to provide real-time services to clients.
4. Advanced Process Automation and Virtualization
Emerging technologies will enable insurers to rethink product and service offerings fundamentally. For instance, industrial IoT can enable real-time monitoring of equipment to predict maintenance needs before claims occur.
5. Trust Architecture
As insurers handle sensitive customer information, new technologies will enable them to manage risk and utilize complex customer data more effectively. This will be crucial as the insurance model evolves to a "predict and prevent" model where data is shared more frequently.
Why These Tech Trends Are Important Now
These technological trends have the potential to materially alter some of the core inputs of insurance products and functions. For instance, in underwriting, automated warehouses could fundamentally alter the nature of workers' compensation coverage by removing the majority of human workers from warehouse operations.
Scenarios Enabled by Tech Trends
Depending on factors like technology adoption, government legislation, consumer preferences, and tech-enabled product innovation, several scenarios could play out.
Property and Casualty
Two scenarios illustrate the potential impact of these trends on the property and casualty (P&C;) insurance landscape.
1.Seamless, Automated Underwriting of Commercial Insurance
The combination of applied AI, distributed data collection, future of connectivity, and next-level automation will allow insurers to underwrite a much wider range of risks more or less automatically using real-world, real-time data.
2.Drastic Shift in Risk Profile and Insurer-Customer Partnerships
As automation increases in traditionally labor-intensive industries, the nature of insured risk will change. The role of insurers may shift from claims to prevention, whereby they are best placed to identify and reduce risk by partnering with clients and using technology.
Life and Annuities
The combination of tech trends will enable insurers to cover individuals in more dynamic and responsive ways.
1.Insure the Individual: ‘Pay as You Live’
The ability to engage individuals continually will lead to products that dynamically adjust premiums, benefits, or both on a regular basis.
Re-envisioning Strategy Amid an Evolving Landscape
As these trends unfold and begin to steadily alter the nature of insurance operations and products, incumbent carriers will need to carefully consider a number of critical questions to inform decisions and actions in the near future.
The tech trends highlighted in this article will dramatically reshape the industry from top to bottom, creating significant opportunities and, in some cases, existential threats to traditional players. To embrace the potential of tech trends, winning insurers will build their tech talent, put tech trends and their business implications on the leadership agenda, and be willing to disrupt their own products and services.
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