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AI Trends Shaping The Future of Insurance

July 19, 2022

The disruption from COVID-19 changed the timelines for the adoption of AI by significantly accelerating digitization for insurers. AI’s underlying technologies are already being deployed in our businesses, homes, and vehicles, as well as on our person. Virtually overnight, organisations had to adjust to accommodate remote workforces, expand their digital capabilities to support distribution, and upgrade their online channels. While most organizations likely didn't invest heavily in AI during the pandemic, the increased emphasis on digital technologies and a greater willingness to embrace change will put them in a better position to incorporate AI into their operations.  

While many carriers are experimenting with AI, few have truly scaled their capabilities across the enterprise. As AI becomes more prevalent and algorithm creation becomes commoditised, carriers will be able to more fundamentally reengineer core processes to be more predictive in nature. AI will disrupt distribution, underwriting, claims, and service as core processes become AI-enabled, creating a “human in the loop” model that increases productivity and allows for higher-quality touch points with customers. Carriers have yet to fully realise the potential of their data assets—for example, claims histories and distribution interactions. In addition to reengineering core processes, leading carriers and ecosystem players will use the advent of AI to create products and services based on data and analytics.

The explosion of data from connected devices - In industrial settings, equipment with sensors have been omnipresent for some time, but the coming years will see a huge increase in the number of connected consumer devices. The penetration of existing devices (such as cars, fitness trackers, home assistants, smartphones, and smart watches) will continue to increase rapidly, joined by new, growing categories such as clothing, eyewear, home appliances, medical devices, and shoes. Experts estimate there will be up to one trillion connected devices by 2025. The resulting avalanche of new data created by these devices will allow carriers to understand their clients more deeply, resulting in new product categories, more personalised pricing, and increasingly real-time service delivery.

The impact goes further than tools and the evolution of the insurance technology data stack, it is also influencing the risk environment. By 2025, 3-D-printed buildings will be common, and carriers will need to assess how this development changes risk assessments. In addition, programmable, autonomous drones; autonomous farming equipment; and enhanced surgical robots will all be commercially viable in the next decade. By 2030, a much larger proportion of standard vehicles will have autonomous features, such as self-driving capabilities. Carriers will need to understand how the increasing presence of robotics in everyday life and across industries will shift risk pools, change customer expectations, and enable new products and channels.

Open-source and data ecosystems - As data becomes ubiquitous, open-source protocols will emerge to ensure data can be shared and used across industries. Various public and private entities will come together to create ecosystems in order to share data for multiple use cases under a common regulatory and cybersecurity framework. For example, 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.  

So how can insurers prepare for accelerating changes?  

The rapid evolution of the industry will be fuelled by the extensive adoption and integration of automation, deep learning, and external data ecosystems. While no one can predict exactly what insurance might look like in 2030, carriers can take several steps now to prepare for change; Get smart on AI-related technologies and trends, develop and begin implementation of a coherent strategic plan, and create the right talent and technology infrastructure.  

To ensure that every part of the organisation views advanced analytics as a must-have capability, carriers must make measured but sustained investments in people. The insurance organisation of the future will require talent with the right mindset and skills. The next generation of successful frontline insurance workers will be in increasingly high demand and must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process but rather a mix of semiautomated and machine-supported tasks that continually evolve. Generating value from the AI use cases of the future will require carriers to integrate skills, technology, and insights from around the organisation to deliver unique, holistic customer experiences. Doing so will require a conscious culture shift for most carriers that will rely on buy-in and leadership from the executive suite. Developing an aggressive strategy to attract, cultivate, and retain a variety of workers with critical skill sets will be essential to keep pace. These roles will include data engineers, data scientists, technologists, cloud computing specialists, and experience designers. To retain knowledge while also ensuring the business has the new skills and capabilities necessary to compete. As a last component of developing the new workforce, organisations will identify external resources and partners to augment in-house capabilities that will help carriers secure the needed support for business evolution and execution.  

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