The insurance industry has always been a slow mover in adapting to change and new tech. Mark Anquillare the COO and group president at Verisk had said “It’s highly likely that the insurance industry will change more in the next 15 years than it has in the previous 100.” This is primarily driven by 3 factors:
- Insurance industry is rapidly changing is people
- Global Climate is also changing
- Artificial intelligence (AI) technology
Beginning with people the industry has been pushing towards more people who are more motivated to drive change. Across the industry there are more teams focused on digital transformation and driving savings & efficiency through technology solutions. Along with this is the impact of Global Climate change. As weather patterns across the globe shift there is a drive for changing processes to quickly adapt both pricing and growth based on new risk algorithms.
What I’d like to focus the discussion on though is the impact of AI and where changes are anticipated to be seen in the coming years.
Consumer Connected Devices:
We have already seen a explosion in items that track data such as fitness watches, home assistants, GPS, but we will continue to see these products increase overtime. These are anticipated to move into new spaces such as shoes, cars, and retail. With the ability for consumers to share this information with insurance companies it will provide insurers with more information on individuals to provide personalized insurance plans. This could be based on your activity level or heart rate for health, or data on your driving and car for personalized auto plans. We will begin to see this more in the future.
In the next few years we plan to see an increase in robotics completing tasks for us such as self-driving cars and autonomous drones. This will present both opportunities to shift pricing models along with these and enter new lines of insurance that may have not previously existed. Even today in some places we are seeing drones being used for inspections for insurance claims- which can drive major cost and time savings for a company. “By 2030, the proportion of autonomous vehicles on the road could exceed 25 percent, having grown from 10 percent just four years earlier.” This stat shows how insurance companies will need to evolve and decide on the best policies and risk for new robotics.
Open source and data ecosystems
This will be more common to share data across different industries. With the ability to all input data into one data source it will be easier to share data “wearable data could be ported directly to insurance carriers, and connected-home and auto data could be made available through Amazon, Apple, Google, and a variety of consumer-device manufacturers.”
This is deep learning tech that can process image, voice & text. This will be used more in insurance to be able to process real time large data sets to evaluate risk. An example of this is data from an area that may be hit by a major catastrophe could shift the pricing real time for insurance policies based on the conditions or evaluate claims payouts based on this data. This can help the lag time with current insurance companies on paying out claims and thus helping customer service.
The technology is anticipated to impact all areas of insurance from distribution to underwriting to claims. The next question presented about the future of insurance is “Are insurance companies going to be able to transition quickly enough to accommodate these changes?” An interesting article I read in the Insurance Journal introduced this topic called “Future of the Insurance Industry and Who Owns It: 3 Scenarios from Verisk’s Anquillare” In the article three different scenarios were addressed on the future of insurance:
The first scenario discusses the idea that in the next 15 years the insurance industry is completed disrupted and over-taken by technology companies. It says that everything in the future will be connected and evaluated real time. In this scenario insurance will be connected to individual products such as sensors on a car determine your insurance pricing and pay outs based on smart technology. In this scenario the tech firms are the first to experiment with these new options and have the lead to market and thus take over market share. This is because they are more willing to take risks and have already worked with very complex data sets, also they can build trust based on personalization and product design that will make people switch over.
We have already seen companies such as Google, Amazon, Facebook and Apple investing in the insurance space. From Google subsidiary Verily creating its own tech focused employee insurance to Amazon and Facebook using their platforms to sell insurance in India. It was also noted that “A recent Capgemini survey found that 44% of customers are willing to buy insurance from a big tech firm, up from 17% in 2016.”
The second scenario is having a similar theme to the first that consumers & market pressures for major changes to the tech and way we do business in insurance. In this scenario the pressure pushes insurance companies to rapidly change and adapt but, in the end,, they win out do to insurance knowledge and government restrictions. There will be competition from tech companies but based on the trust consumers hold in the long-term insurance companies they will hold market power but adapt to what many tech firms will have tried to do.
The third (and least likely in my opinion) scenario is that the insurance industry does not change much. Insurance companies continue to evolve and slowly adopt new tech.
With the AI advancements discussed in the beginning of this post which scenario do you see as the most likely and why?