The Future of Insurance

The rapid evolution of the industry will be fueled 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 the future, insurers can take several steps now to prepare for change.

1. Keep up with AI-related technologies 

Although the shift in the industry will be tech-focused, board members and customer-experience teams should invest the time and resources to build a deep understanding of these AI-related technologies. Part of this effort will require exploring hypothesis-driven scenarios in order to understand and highlight where and when disruption might occur and what it means for certain business lines.

2. Develop & begin implementation of a strategic plan

Building on the insights from AI explorations, Insurers must decide how to use technology to support their business strategy. The senior leadership team’s long-term strategic plan will require a multiyear transformation that touches operations, talent, and technology. Some carriers are already beginning to take innovative approaches such as starting their own venture-capital arms, acquiring promising insuretech companies, and forging partnerships with leading academic institutions.

In addition to being able to understand and implement AI technologies, we also need to develop strategic responses to coming changes. As many lines shift toward a “predict and prevent” methodology, carriers will need to rethink their customer engagement and branding, product design, and core earnings. Auto accidents will be reduced through autonomous vehicle usage, in-home flooding will be prevented by advanced devices, buildings will be reprinted after a natural disaster, and lives will be saved and extended by improved healthcare. Likewise, autonomous vehicles will break down, natural disasters will continue to devastate coastal regions, individuals will require effective medical care, as well as support when a loved one passes. As these changes take root, profit pools will shift, new types and lines of products will emerge, and how consumers interact with their insurers will change substantially. Winning insurers of the future will create and enact strategic plans that position their brand, products, customer interactions, and technology successfully to take advantage of the new economic structure on the horizon.

3. Create and execute a comprehensive data strategy

Data is fast becoming one of the most valuable asset for any organization. The insurance industry is no different: how insurers identify, quantify, place, and manage risk is all predicated on the volume and quality of data they acquire during a policy’s life cycle. Most AI technologies will perform best when they have a high volume of data from a variety of sources. As such, we must develop a well-structured and actionable strategy with regards to both internal and external data. Internal data will need to be organized in ways that enable and support the agile development of new analytics insights and capabilities. With external data, carriers must focus on securing access to data that enriches and complements their internal data sets. The real challenge will be gaining access in a cost-efficient way. As the external data ecosystem continues to expand it will likely remain highly fragmented, making it quite difficult to identify high-quality data at a reasonable cost. Overall, data strategy will need to include a variety of ways to obtain and secure access to external data, as well as ways to combine this data with internal sources. 

4. Create the right talent and technology infrastructure

In augmented chess, average players enabled by AI tend to do better than expert chess players enabled by the same AI. The underlying reason for this counterintuitive outcome depends on whether the individual interacting with AI embraces, trusts, and understands the supporting technology. To ensure that every part of the organization views advanced analytics as a must-have capability, we must make measured but sustained investments in people. The insurance organization of the future will require talent with the right mind-sets 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 organization 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, many organizations will design and implement reskilling programs. As a last component of developing the new workforce, organizations will identify external resources and partners to augment in-house capabilities that will help carriers secure the needed support for business evolution and execution. The IT architecture of the future will also be radically different from today’s. Insurers should start making targeted investments to enable the migration to a more future-forward technology stack that can support a two-speed IT architecture. Rapid advances in technologies in the next decade will lead to disruptive changes in the insurance industry. The winners in AI-based insurance will be insurers that use new technologies to create innovative products, harness cognitive learning insights from new data sources, streamline processes and lower costs, and exceed customer expectations for individualization and dynamic adaptation. Most important, carriers that adopt a mind-set focused on creating opportunities from disruptive technologies—instead of viewing them as a threat to their current business—will thrive in the insurance industry in 2030.