The insurance industry is on the brink of a major transformation. As we step into the year 2030, the impact of artificial intelligence (AI) and advanced technologies on insurance is becoming increasingly evident. In this article, we will explore the future of insurance as it embraces AI and technology, reshaping every aspect of the industry.
The Shift from “Detect and Repair” to “Predict and Prevent”
Traditional insurance has often followed a “detect and repair” approach, where claims are processed after an incident occurs. However, with the advent of AI and deep learning techniques, insurance is moving towards a “predict and prevent” model. This shift is revolutionizing the industry and transforming how insurance companies operate.
Four AI-Related Trends Shaping the Insurance Industry
To understand the future of insurance, we must first examine four core technology trends that are reshaping the industry:
1. Explosion of Data from Connected Devices
The increasing penetration of connected devices, such as cars, fitness trackers, smartphones, and home appliances, is generating a massive amount of data. This data allows insurers to understand their clients more deeply, resulting in new product categories, personalized pricing, and real-time service delivery.
2. Increased Prevalence of Physical Robotics
Advancements in robotics, including 3-D printing, autonomous drones, and self-driving cars, are transforming industries and changing risk assessments. Insurers must adapt to these developments and understand how they impact risk pools, customer expectations, and product offerings.
3. Open Source and Data Ecosystems
As data becomes ubiquitous, open-source protocols and data ecosystems are emerging to facilitate data sharing across industries. This collaboration allows insurers to access valuable data from wearable devices, connected homes, and automobiles, enabling more accurate risk assessment and pricing.
4. Advances in Cognitive Technologies
Cognitive technologies, such as convolutional neural networks, are evolving to process large and complex data streams. These technologies will become the standard approach for underwriting and pricing insurance products tied to an individual’s behavior and activities. Carriers will have access to constantly learning models that can adapt in real-time to changes in risks and behaviors.
The State of Insurance in 2030
AI and its related technologies will have a seismic impact on all aspects of the insurance industry. Let’s take a closer look at how AI will reshape distribution, underwriting and pricing, and claims processes.
The experience of purchasing insurance will be faster and more streamlined, with less involvement from insurers and customers. AI algorithms will create risk profiles based on individual behavior, reducing policy purchase times to minutes or even seconds. Auto and home carriers will refine their ability to issue policies instantly, leveraging telematics and IoT devices. Life carriers will develop mass-market instant issue products as AI permeates life underwriting.
Underwriting and Pricing
Manual underwriting will become obsolete for most personal and small-business insurance products. AI and deep learning models will automate the underwriting process, leveraging internal and external data sources. Regulators will review AI-enabled models, ensuring appropriate data usage and determining approved rate bounds. Carriers will offer real-time pricing based on usage and dynamic risk assessment, empowering consumers to make informed decisions.
Claims processing will still be a primary function of carriers, but automation will replace more than half of claims activities. Advanced algorithms will handle initial claims routing, improving efficiency and accuracy. IoT sensors and data-capture technologies, such as drones, will replace manual methods of first notice of loss. Claims triage, repair services, and customer interactions will be automated, reducing processing times to minutes. Carriers will focus on risk monitoring, prevention, and mitigation using IoT and new data sources.
Preparing for the AI-Driven Future
To thrive in the AI-driven future of insurance, carriers must take proactive steps to prepare for the upcoming changes. Here are four key strategies for success:
1. Get Smart on AI-Related Technologies and Trends
Board members and customer-experience teams should invest time and resources to gain a deep understanding of AI-related technologies. Exploring hypothesis-driven scenarios will help identify areas of disruption and develop strategies to stay ahead of the curve.
2. Develop and Implement a Coherent Strategic Plan
Carriers must align technology with their business strategy, creating a multi-year transformation plan that touches operations, talent, and technology. Investing in insurtech companies, forming partnerships, and building in-house strategic capabilities are viable approaches to drive innovation.
3. Create a Comprehensive Data Strategy
Data is the lifeblood of AI. Carriers must develop a comprehensive data strategy that encompasses both internal and external data acquisition. Leveraging data from connected devices, wearables, and open-source data ecosystems will enable carriers to make data-driven decisions and enhance customer experiences.
4. Build the Right Talent and Technology Infrastructure
The insurance organization of the future requires talent with the right skills and mindsets. Carriers should invest in upskilling their workforce and embracing emerging technologies. Integrating skills, technologies, and insights from across the organization will enable carriers to deliver unique customer experiences and remain competitive.
The future of insurance lies in embracing AI and advanced technologies. By shifting from a “detect and repair” model to a “predict and prevent” approach, insurers can transform every aspect of the industry. The four AI-related trends shaping the insurance industry, along with proactive preparation, will position carriers to thrive in the AI-driven future. With the right strategic vision, talent, and infrastructure, insurers can navigate the changing landscape and provide innovative solutions to their customers.