Creating the accelerated, highly-personalized online service customers demand and quickly developing new products in response to shifting regulatory and market forces won’t be possible unless insurance and wealth management companies can fully leverage tomorrow’s technology.
Taking that leap into the tech-enabled future won’t be easy for most companies, whose infrastructure is decades old, but the potential revolutions in risk mitigation, customer experience, and product development are so significant that modernization is not going to be optional.
Emerging technologies like the Internet of Things (IoT) and Artificial Intelligence (AI) will reshape all industries. They will cause customer expectations to continue to rise as products and experiences become more personalized. The insurance and wealth management companies that can’t meet those heightened expectations will be left behind.
With the stakes so high, it’s important to understand what exactly AI and IoT are, and some of the ways they will reshape our industries.
What are IoT and AI?
IoT describes the vast universe of embedded sensors connecting consumers and companies through the internet. These sensors, in everything from smartwatches to cars to fridges, collect and share data on what our bodies are doing and how we behave. They can tell if we are safer drivers than average if we get enough exercise — even what we eat. And the vast volumes of data created and collected by IoT becomes, in part, the fuel that powers AI.
AI is in fact pattern recognition used to provide information to the user at the appropriate time — whether it’s a consumer using Google Maps or Waze to determine the best time to leave home to avoid traffic, for example, or a company looking to predict emerging trends in the vast volume of client, IoT, and public data. But what can AI and IoT do for the insurance and wealth industries?
Streamlined underwriting process
The huge amounts of client medical and behavioral data generated by IoT combined with the analytic power of AI will revolutionize many areas of insurance. AI and machine learning algorithms will sift the data, turning millions of information points into actionable insights for businesses.
Together, IoT and AI will enable higher-quality decisions to be made faster, accelerate speed to market for new product development, increase transaction velocity for consumers, and reduce risk by doing a better job at predicting negative outcomes.
In particular, the underwriting process will be streamlined as personal data collected by IoT is processed by AI to identify patterns. Today, it’s unthinkable to do real-time underwriting. We can’t, for example, ask an individual to do a blood test every month in exchange for a discount on their insurance.
However, wearable health devices generate a large volume of data in real-time, enabling insurers to assess an individual’s risk for things like heart attack, stroke, or diabetes. When companies can aggregate data from millions of users, they can identify patterns that will determine a risk profile for an individual that would be almost as reliable as medical tests — but done instantly.
This real-time underwriting represents a fundamental change in insurance. Whereas today the insurance buying process is very involved, real-time underwriting will make insurance products much more dynamic and granular. Instead of purchasing a very big policy with high levels of coverage, an individual could buy many micro-contracts that would evolve to meet their changing needs.
Costing will become more variable to reflect what the data of the moment shows — good behaviors and lower risk will be rewarded with lower costs and vice versa. Insurers will spend less time and effort trying to predict risk and they will have a more accurate profile of the consumer at almost zero cost.
Real-time wealth management advice
In wealth management, AI enables companies to analyze client and market data to identify specific patterns. For instance, analytics engines could analyze a client’s bank account transactions to establish his/her financial profile and provide real-time automated advice. It could generate alerts if a customer is spending too much and facing the risk of not meeting their financial goals. All this data can be used by the advisor to provide better financial planning services.
By analyzing large volumes of data on how people invest, AI enables companies to identify investment patterns — for instance similar people who invest a certain amount of money, in a certain type of fund, at a certain period in their life. This creates benchmarks that can be compared to individual investor performance.
When investor performance doesn’t meet minimum benchmark targets, automated flags would signal the advisor that their advice is necessary — providing opportunities to interact with clients in the moments of greatest need. And the advisor can use the benchmark data (which is the accumulated results and wisdom of the larger pool of similar investors with similar goals) to provide real-time advice on how the investor should proceed.
Advances in IoT and AI will enable more, efficient, accelerated and personalized processes across the entire product lifecycle in insurance. Insurers will have greater insights into their customers, enabling them to create more granular products with targeted pricing, while lowering their risk. In the wealth industry, these advances will usher in an era of automated real-time advice.
The benefits of all stakeholders will be profound. Clients will get better and faster service and advice, while advisors will be able to more effectively deliver value at the times when clients are most interested. The future is bright for those companies who take the modernization steps necessary to embrace the IoT and AI revolution when it arrives.