AI-trends in the insurance sector – how to be successful players in the industry of the future.

  • 14/06/2021  |
AI-trends in the insurance sector – how to be successful players in the industry of the future.

The adoption of AI and new technologies is becoming a crucial matter for insurers, who are starting to embrace emerging technologies and accelerating the process towards digital transformation – but it is becoming more and more clear that in the next ten years AI technologies will have a significant impact on all aspects of the industry, creating an entirely new business landscape.

An overview of what the future of insurance will look like is provided by an interesting report published by McKinsey, titled Insurance 2030 – The impact of AI on the future of insurance Future, which focuses on the growing relation between insurance and AI seen from the point of view of the insurers, and provides an in-depth examination of future challenges and opportunities. From new, advanced technologies to developments and improvements of already existing ones, the report offers an overview of the AI-related trends that will reshape the insurance industry over the next decade, tries to describe the scenario of the industry in 2030 and proposes some guidelines from insurers to be ready for the years to come.

Starting with the trends shaping the insurance sector, McKinsey outlines some core drivers of the changes within the industry, which are:
the growth of the amount of data created from connected consumer devices, in addition to the already existing ones, which will allow insurers to understand the clients better and offer customized solutions.
the increased prevalence of physical robotics, offered by future innovations such as the development of 3-D printing and drones, that will consequently change customer expectations and habits.
the creation of open-source and data ecosystems, enabled by open-source protocols that allow data to be shared across industries. So, various entities will come together to create ecosystems to share data for multiple use cases under a common regulatory and cybersecurity framework.
the evolution of cognitive technologies, to be applied in a wide variety of applications, becoming the standard approach for processing data streams.

As a consequence, for the trends and applications of these new technologies, AI will have an important impact on all aspects of the insurance industry, from distribution to underwriting and pricing to claims. Advanced technologies and data will affect distribution and underwriting, with policies being priced, purchased, and bound almost in real time, bringing major changes across the insurance value chain.

At the same time, however, AI can also challenge risk mutualization, which is the structure for many players of the industry – as well as for many RGI’s clients. This offers interesting opportunities to see how insurers could combine both elements, for example with caps/floors rates.

Moreover, a specific focus should be made on corporate AI which will provide high value for corporate insurance, with multiple immediate use cases such as tracking devices for transport companies, and private insurance.

The report proposes some steps that will be key to prepare for the accelerating changes in the industry, starting as soon as possible.

Get smart on AI-related technologies and trends: Although the shifts in the industry will be tech-focused, it will be up to board members and customer experience teams – rather than IT – to build a deep understanding of the AI-related technologies.
Develop and begin implementation of a coherent strategic plan: insurers must decide how to use technology to support their business strategy.
Create and execute a comprehensive data strategy: Data is fast becoming one of the most valuable assets for any organization, and for insurance companies it is even more important to have a data strategy for the next ten years.
Create the right talent and technology infrastructure:  To ensure the organization views advanced analytics as a must-have capability, carriers must make measured but sustained investments in people and skilling.

Anyways, on top of these four main guidelines offered by the report, there are also some different strategies that could be taken, according to the critical mass of RGI clients:
Creating the skills: in particular, leveraging skills across network. For example, for major players, the focus should be to create IT synergies and therefore skills among countries covered. This concept is true especially for the corporate line of products.
Partnerships: partnering with provider or with tech companies, for large and smaller players.
Selecting specific expertise: Selecting where to play and where to partner. The smallest clients will most probably focus on client relationships skills.

Therefore, while AI grows, insurers should consider reshaping their workforce, as well as creating an ecosystem of partners. In fact, it will be crucial to have the right skills and capabilities that will help to “win the talent war”, having both the right people and the right set of partners, in order to have shared capabilities, offer the best solutions for our clients, and be able to face the challenges and the transformations that will happen in the oncoming years.

To conclude, as AI becomes more deeply integrated, insurers have the opportunity and responsibility to respond to the changing scenario, to become successful players and drive the industry of the future.

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