Looking to the Future of Insurance in the 2020s
Rounding the corner to the start of a new decade affords us an opportunity to reflect on the breathtaking milestones the insurance industry has achieved over the past ten years, and imagine the incredible advances that lie ahead in the 2020s… and beyond. As insurance technology has evolved, consumer tastes and behavior have changed quite remarkably as well, influencing how we view insurance and laying the groundwork for broad changes to come.
As always, DRC works hard to stay abreast of the changes in our sector and incorporate these innovations into our products and client work. Here are several developments we expect to come into sharper focus as we enter the new decade.
Customer Game, Customer Rules
We believe the single biggest disruptive force in our industry will be changing consumer preferences and requirements. For many years, insurance has operated with the same relatively narrow parameters of service offering, without taking into account the flexibility and adaptability of products and services that may be more relevant to consumers.
Leading with millenials, a top challenge for the insurance industry will be adapting customer propositions to how consumers engage with their insurance companies, principally through personalized, tailored, mostly-mobile digital communication, while simultaneously developing non-insurance products providing additional value to consumers. Disruptive services such as HiMarley, a frictionless texting platform that connects insurers with their partners and end consumers, will become the norm.
Preventative Insurance Through IoT
Rather than managing claims after an issue arises, the next decade will see the definitive emergence of preventative insurance, principally enabled through sensors and the Internet of Things. Predictive technologies will warn customers and alert insurers before problems even occur and will become more closely intertwined with premium-setting and actuarial activities.
For example, more and more insurers are partnering with smart home device producers such as Nest and Ring to build product tie-ins and provide discounts to users who install the devices in their residences. These devices, along with sensors in cars, proximity-based fitness trackers and watches, mobile phones, etc. provide a wealth of information that can be used predictively to warn of impending risks as diverse as a basement flood or individual cardiovascular event and create preemptive interventions to mitigate damage.
Taking Advantage of All That Data
Simultaneously, the windfall of new data provided by this constellation of devices will help insurers to better understand their clients and help the latter design new products and services. Insurers will use an increasingly broad array of Artificial Intelligence tools to make underwriting easier, manage risk more thoughtfully, minimize cases of fraud and introduce new efficiencies.
AI, for example, will become instrumental in minimizing fraudulent claims. Identifying and flagging unusual patterns that a human auditor might overlook will accelerate fraud detection and substantially reduce the cost base for insurers. Shift Technology, for example, has a solution already in place with more than 70 carriers that analyzes multiple data sets to generate a highly-accurate “fraud score.”
Extrapolating to the next level, in the future, a platform on customer smartphones could alert consumers when it appears they’re about to do something that could increase their premiums, and in certain situations even warn their insurers in advance.
Blink-Of-An-Eye Purchase Experience
The entire purchase experience will be one area that will change the most in the next decade. Traditionally, the buying of insurance has been based on a buy-and-annual-renewal cycle, with little variability. Increasingly, however, insurance will become more dynamic, based on customer needs at a particular time. For example, vehicle insurance will shift to usage-based, as increasing numbers of people will use their cars on a less-than-daily basis. As people travel more and stay in permanent residences for less time, new insurance products for home-sharing services such as AirBnB will emerge and evolve as well.
As AI increases the speed with which underwriting decisions can be made, so too will the relationship between consumers, insurance agents and carriers. Cycle times for purchasing a policy will be mostly automated, online and reduced to a matter of seconds with zero paperwork.
Few areas of insurance will experience more profound change in the next decade than the claims function. The process of making a claim in the first place will be completely revolutionized, as technologies such as IoT sensors or drones can immediately relay an accident situation in real-time to a carrier, triggering a claim. In the future, self-driving cars may even direct themselves to repair stations, alert emergency services or in some cases even self-repair.
Claims processing will also change dramatically. The rapidity of computer processing speed, coupled with new technologies like Blockchain will unlock huge efficiency increases and save time and resources and instantaneous claim processing and payment pioneered by companies like Lemonade will become the norm.
Looking Into The Future
Despite our industry’s reputation for moving slowly, these advances are well on their way to changing the insurance sector as we know it. If you check back with us in ten years for our 2030 predictions, we’re confident a review of the previous decade will make our current prognostications seem laughably unambitious. The real answer is that while we can’t predict the future, we can observe trends emerging that will change how consumers interact with their carriers, increasingly rely on technology to predict and prevent claims before accidents happen, and better manage those that do. It’s certainly a great and exciting time to be in this business!
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