5 Technology Forces That May Impact Insurance Strategy
As we all know it, the insurance industry, like so many others, is in a state of upheaval that will continue to play out this year. The disruptive forces at work in the industry have come into sharper focus over the past 12 months, and industry players across the board are now in motion as they race to adapt. The landscape shifts with which the insurance industry is currently contending to include new developments in both technology and consumer behavior. With that said, let’s take a look at the technology and forces that will have the greatest impact on the insurance industry and its members this year.
AI and Automation
The implementation of artificial intelligence and automation within insurance organization — from robotic process automation and conversational AI to blockchain and advanced analytics — is no longer a project, program or initiative. It’s a new way of working. These elements aren’t nice to have. They need to have, and the implementations aren’t limited to the back office. They’re customer-facing as well, often in the form of on-demand customer service interfaces. According to a recent Vanson Bourne study, 62 percent of business leaders expect to hire a chief AI officer in the future.
Risk and RegTech
In 2019, to enable effective regulation, it’s going to be vital for regulators and platform innovators to work together to educate each other about new digital technology and its impact on the market and consumers. The relationship between regulations and technology in insurance is not new, but it is becoming closer. And that’s understandable. More than ever, we need to ensure enterprises comply with new requirements that have arisen in large part due to the growing availability of data. Technology that improves enterprises’ ability to automate and comply with regulatory requirements (so-called RegTech) has the potential to deliver substantial benefits and cost savings to the insurance industry.
In addition, we can expect to see a rise in risk-reduction technology, or RiskTech, as the Internet of Things becomes more deeply infused with the world that surrounds us. That’s going to be a gamechanger in insurance. Rather than merely covering and more than predicting the likelihood of auto accidents, we’re talking about employing technology that prevents them. Also likely to affect the business model, the opportunity is fueled by technology from onboard telematics to fully autonomous vehicles. The same goes for detecting, predicting and preventing any number of losses that might arise in both residential and commercial buildings, from water leakage to electrical shorts.
Moving to the Cloud
The move to the cloud is picking up steam in the insurance industry, and for good reason. While it was once thought that on-premises systems were the most private, secure and controllable option for insurers, the cloud is actually proving to be the safer option this year.
Initial transitions to the cloud were often justified by cost-savings, but these days it’s the power of cloud computing’s infinitely flexible and scalable digital storage that might be the most compelling point for the insurance industry. This flexibility not only enables insurance enterprises to instantly scale up data capabilities in the event of a large-scale incident like a natural disaster, but it also gives them the ability to analyze larger data sets that can help them better understand consumer needs. These days, the migration to the cloud is an integral part of any true digital transformation.
Consolidation and Partnership
2018 marked the rise of insurtech startups like us. The business models of these emerging players vary greatly and, in some cases, include full carriers. But for the most part, the insurtech landscape is represented by a host of niche innovators that are serving specific needs within the customer service and customer experience realm. As such, we can expect to see a wave of consolidation in this space this year and beyond, as incumbents seek to supplement and improve their offering by way of acquisition rather than internal development.
But beyond M&A activity, there’s a reason to believe that partnership will emerge as the dominant model of collaboration between incumbents and InsurTech start-ups. According to Capgemini’s inaugural “World InsurTech Report,” only 35.8 percent of insurers are looking at acquisition as a preferred way of filling new InsurTech needs. Rather, 80.2 percent are looking to purchase solutions as a service, 79 percent are looking to partner to develop a new solution, and 62.2 percent are looking to white-label a new solution.
Retaining the Connected Consumer
Finally, when it comes to the continued evolution of the insurer-InsurTech relationship, let’s not forget what’s at the center of the ongoing upheaval: the customers themselves. The current insurance industry revolution isn’t about technology solutions for technology solutions’ sake. It’s about keeping up with consumer needs, desires, and demands, and doing so in a way that aligns with their growing understanding of what today’s AI and automation enable. The need to retain customers — not the technologies themselves — should be the driving force behind all digital transformation efforts.
Also in this regard, we think that everyone in the insurance sector should be looking for new ways to use technology to improve customers’ lives since the possibilities are endless if we are open to them.