The Future of Insurance

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.

Physical Robotics:

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.

Car Humour | Car humor, Self driving, Connected car

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.”

Cognitive technologies

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:

Scenario 1:

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.”

Scenario 2:

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.

Scenario 3:

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.

6 Companies that Succeeded by Changing Their Business Model

With the AI advancements discussed in the beginning of this post which scenario do you see as the most likely and why?

https://www.mckinsey.com/industries/financial-services/our-insights/insurance-2030-the-impact-of-ai-on-the-future-of-insurance#

https://www.insurancejournal.com/news/national/2021/02/17/601595.htm

How Google, Amazon, Facebook, And Apple Are Targeting The $6T Insurance Market

12 comments

  1. olivia_levy8 · ·

    Thinking about the consumer connected devices and how insurance can leverage this data immediately had me thinking about the Waze app and how it shows my speed when driving. I can also share a drive, in which the other end user will also see my speed, I can only imagine the type of prediction that an insurance company can use this data for to manage personalized deductibles. Also already in cars, especially luxury brands such as Porsche, BMW, etc. we see a car connected app, which I’m sure is bringing in loads of data. Also, interesting to see that Google, Amazon, Facebook, and Apple already have a radar on the market, but once again not surprising. This was an informative post, thanks for sharing!

  2. Ive done alot of work with MetLife over the years (and to a lesser degree Liberty Mutual). Both have spent considerable time thinking about how digital technology was going to change insurance in radical ways, and were innovating considerably (for insurance, at least) to combat it.

  3. Scott Siegler · ·

    I enjoyed reading this. I actually have my Apple Watch integrated with my health insurance company’s incentives app, and the arrangement is basically that I get paid each day as my activity data syncs over to the app. When I’m practicing healthier habits, I get more rewards. It immediately made me think of the safe driving discount that auto insurance companies offer. I think the idea of getting a personalized health insurance plan that caters to your own lifestyle is awesome.

    1. alexcarey94 · ·

      Wow that is very interesting! First hand experience with the new tech. I hope I get that opportunity to try something similar out soon!

  4. Digital transformation in the insurance industry becomes a trend as more and more leading companies adopt new technology in accessing claims and writing policies, which turns out to help these companies save costs and improve efficiency. I do notice that as more and more industries start the digital transformation, especially these related to healthcare industries. Data security becomes one of the crucial aspects of digital transformation. Fortunately, the government also realized that and started to enact laws/policies around the data. HIPPA, Health Insurance Portability and Accountability Act, and GDPR, General Data Protection Regulation are two examples to prevent data from illegally using by these companies.

  5. conoreiremba · ·

    This is a great post Alex and something that I only thought about recently, as my friends argued in a group chat about price hikes in their auto insurance premiums even though they all claim to be “good drivers”. However, it made me think about when my brother started driving a couple of years ago. It is notoriously expensive for first-time drivers to get insurance, but he used an app with an insurance company Aviva (https://www.youtube.com/watch?v=f-tDHcpysBU&ab_channel=AvivaUK). The app tracks your driving, and much like in Scott’s example above with his health insurance, Aviva rewards safer driving habits. However, I do agree with your point above on the idea that scenario 3 will be the most likely to play out. Digital maturity seems to be a slower process in the insurance industry, and there is still a long way to go. For instance, even though the UK was under strict lockdown guidelines during the pandemic, the same app I mentioned above was instructing drivers to drive 200 miles to avail of insurance discounts. (I’m not sure if “my phone told me to do it” would be a good excuse if stopped by the authorities)

    Thank you for sharing and it will be fascinating to see how technology will change the insurance industry in the coming years.

    1. conoreiremba · ·

      *least likely (apologies for the confusion)

  6. As someone who has worked in insurance over the past handful of years, this is something that has shown to be in greater focus as time has gone on. I think the likely scenario is a blend between the first and second options you listed. Tech companies have pushed the boundaries on what can be done with data and analytics, which has to have a trickle down effect on insurance companies. The insurance companies themselves will find that they are left behind if they do not transform like other industries have. That combination of internal and external pressure will lead the digital change.

  7. Great post Alex! It is really interesting to see how IoT is having such an impact on the insurance industry. Covid has demonstrated this, in Q2/3 of 2020 a lot of auto insurance companies were returning premiums due to so much less travel being logged by cars. It is interesting in the future to think that companies could be making these payouts on a monthly basis.

  8. changliu0601 · ·

    From my perspective, the scenario 1 is most likely.Through the censor on the car, the insurance company can analysis their driving habits and analysis the risk.Now some insurance companies uses telematics devices to track driving habits and passes them onto the insurer. Companies also provides consumers with a copy of the report to help them improve their driving skills with a savings incentive.In the same time ,insurance companies leverage social media to offer insurance quotes through facebook.

  9. shaneriley88 · ·

    Awesome post. I like how this (by happenstance) dovetailed perfectly with Profs discussion on the firm using alternative means to determine credit. I wonder if these programs or the use of the generated data is subject to the same data “bias” concerns that we discussed in class.

  10. AndraeAllen · ·

    I’m curious, has the explosion of services such as Uber and Lift decreased the number of drivers under 25? This thought came up because I remember reading this range is the most expensive age bracket for car insurance. I could see a company like Tesla offering a subscription-based insurance policy. Considering all the sensors crammed into their vehicles, they have first hand knowledge regarding a drivers’ attentiveness and/or aggressiveness. In the health insurance arena, I will not be surprised when my health insurance provider offers discounted rates if I send them my fit bit metrics. Great Post! I absolutely love this topic.

%d bloggers like this: