Insurtech in 2019: 4 questions whose answers will show the way

The past few years have seen feverish growth in visibility of insurance’s digital transformation. But as the movement gains in maturity, what’s next? I looked at a range of predictions to see if a roadmap is emerging for the direction of the industry. Here are some of the most pressing questions:

Is AI’s breakout on the way?

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Vehicles move slowly in rush hour traffic on the US 101 freeway in this aerial photograph taken over the Sherman Oaks neighborhood of Los Angeles, California, U.S., on Friday, July 10, 2015. The greater Los Angeles region routinely tops the list for annual traffic statistics of metropolitan areas for such measures as total congestion delays and congestion delays per peak-period traveler. Photographer: Patrick T. Fallon/Bloomberg

Artificial intelligence is cited as the solution to many of insurance’s problems. It promises faster, fairer decisions; shorter customer service queues; and more. But what about moving beyond identification as a solution and into implementation? “Virtually every entity that has a place in the insurance industry found a discussion thread around AI [in 2018],” writes SMA’s Karen Pauli. “However, 2019 will be the year that AI steps out of the headlines and into business-problem resolution.” In fact, 60% of insurers say they are currently investing in “AI-based technologies to improve operational processes,” according to research from Accenture and Oxford Economics, by far the most popular of nine areas.

Where will insurance competition come from?

Uber is one of the most-discussed companies on Earth, for many reasons: its normalization and digitalization of hired rides, its forays into food delivery, its labor-relations mixups, its problematic corporate culture. But, for insurers specifically, as EY notes in its 2019 Outlook, the proliferation of this company and its follow-ups have “created new types of insurance covering individual riders and every ride.” That could herald a new trend towards tech giants getting into insurance themselves – not the least of which is Amazon, which is already partnering with Chase and Berkshire Hathaway on a health venture. “Today’s technology giants have just as much customer data [as insurers], including information that goes far beyond basic risk profiles and financial status,” say authors David Hollander and Ed Majkowski. “This gives them a strong foundation for entering a variety of financial services markets, [including] insurance.”

How does product development absorb digital advancements?

The proliferation of sensors hold the promise of a world of customer data and information that insurers couldn’t fathom in the last generation. But with that information comes the question of whether or not traditional products can absorb and operationalize this new world – not to mention serve the customers that live in it. “How can agility and time-to-market be improved to remain competitive and differentiate in an increasingly fluid society and marketplace?” asks Deloitte in its 2019 insurance industry outlook. The firm cites research indicating that an increasing number of customers want coverage they can activate or deactivate as needed, or insurance that activates immediately at point of sale. “The rise of connectivity [has] generated a massive amount of real-time data and turned the insurer’s relationship with policyholders from static and transactional to dynamic and interactive,” authors write. “There is a broader, more foundational challenge confronting carriers – the ability to continue changing to keep up with ever-shifting conditions in the economy and society at large.”

Have insurtech winners already been identified?

Savvy industry observers have identified the wave of insurtechs entering the sector over the past few years – and the corresponding increase in investment dollars spent and partnerships formed, as a temporary phenomenon, while the industry processes what’s workable in the short and long terms. Now, “we are seeing distinct winners in the insurtech market who are reaching the shore, but the rest – the vast majority – are not making it,” writes Deb Smallwood of SMA. It’s important to note, she adds, that fewer successful startups doesn’t mean there’s a lack of interest in digitalization. In fact, technology investment is higher than ever. Rather, this means the heavy activity the past few years will be transferred from ideation into operation. “Insurers have collectively started to sort through the flood of information for the best possibilities and select the most promising solutions,” Smallwood continues. And, she predicts, “we will see another wave of a different size and color in the future. As new computing trends, 5G, AI (among others), and even quantum computing gain traction and become more feasible and pervasive, a new wave will pick up speed.”

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