Insurance game changers to watch in 2019

In 2019, we move from chess to checkers, where cerebral far-reaching strategies give way to the “here and now.” In particular, artificial intelligence (AI) and blockchain will be seen as concrete tools that satisfy what really matters: making money, saving money and delivering a superior customer experience.

This is sure to be an exciting year in insurance, as we shift our thinking . As we shift our thinking away hypothetical what-ifs to practical use cases, and from the misconception of technology as a replacement for humans, we can focus on leveraging tools such as AI, blockchain, and data science to enhance our own capabilities. Putting these innovations to work, insurance can also expect to see a new focus on the development and maturation of firms in the start-up space.

Of course, 2019 will not be without uncertainties and untapped potential as we as an industry wrestle with the future direction of concepts such as chatbots and client experience strategies.

What follows are the potential game changers in insurance in 2019.

AI finds its purpose, working with humans

AI is not the cure-all for insurance. It’s not going to replace humans at least not in the foreseeable future. It’s not magic, nor is it an infallible prognosticator. In 2019, the reality of this is going to sink in, with a focus on where it should have always been in the first place: how this technology can help humans, not replace them.

In underwriting, we will see more augmentation such as AI- and machine learning (ML)-based systems that provide just-in-time intelligence to underwriters. This can enable some level of straight-through processing for lower-risk lines of business such as renters. We will also see data insights used more prevalently with uses beyond marketing, such as understanding fraud profiles for insurers during underwriting.

Some of this is already in place, but in 2019 we will see the seeds planted by the forerunners bloom into flowers for the masses. More companies of various sizes will jump in now that the science fiction has given way to reality.

In claims, AI will continue to grow but at a greater volume including aiding first notice of loss (FNOL), adding advanced natural language understanding to automate most if not all of the manual entry (and re-entry) around it. Automation and data will more thoroughly and accurately predict fraud, and reserving will see critical mass.

Computer vision, a technology that allows computers to interpret their surroundings, made significant progress in 2018. Advancements will continue in 2019, but with greater emphasis on adoption versus proof points. Like many of these predictions, the insurance industry wants to adopt AI/ML, and computer vision is no exception. Whether it be drones providing a high-level view of catastrophe (CAT) losses, or mobile devices aiding adjusting, these ideas are now taking center stage and proving value to the industry.

In short, technology will help humans input information more quickly and accurately, provide insight, and assist in recognizing problems. This is augmentation, not replacement. The age of the machines helping humans effectively has begun.

Blockchain finally links together

Blockchain adoption has struggled because too many people want to create it, which misses the point entirely. The adoption of blockchain cannot and will not be driven by any single entity. It’ll be driven by the collective understanding of the industry and that critical mass depends on a variety of partners connected to an industry-defined set of blockchain instances. In 2019, blockchain will begin to make an impact because the ecosystem is finally beginning to understand that the industry needs to define parameters and best practices (e.g., RiskBlock Alliance).  Once solved, we’ll see real breakthroughs with blockchain as everyone thereafter simply has to plug in.

Data science moves to the forefront

Data science is no mystery to insurance, but in 2019 it will move to the forefront as exploratory work gives way to stronger data science methods that progress business initiatives. This will become a reality this year as insurance experts continue to educate themselves, both formally and informally, about data science. It’s also worth pointing out that educators are becoming much better at teaching the subject in every passing year.

The uses for data science are already well-documented but require some repeating: AI/ML (and all its uses), fraud detection, underwriting insights, catastrophe modeling, and customer insights. Since AI and ML are the foundation of the progress we will see in 2019, it stands to reason that data science will lead the way.

Start-ups shut down

Assuming the industry requires adoption versus exploration in 2019, it’s logical to conclude that start-ups will stop “starting” and instead move into growth mode, headlong towards maturity. This implies a few will thrive, many will cease, quite a number will merge, and others will be acquired by insurance companies, larger technology companies, or larger financial services firms.

The boats we’ll miss in 2019

What will not happen is almost as important as what will in 2019. Here are a few things insurance probably still won’t have figured out:

Firms are missing out on the incredible potential of chatbots because insurance still sees them in the context of customer communication. To many, chatbot technology is a nice trick, but not a strategic part of the future. However, when chatbots are combined with ambient computing, they can change the entire way we interact with systems and each other. This starts with employees, agents, and brokers, not customers. Imagine a call center conversation where a chatbot directs the right information at the right time to the call center without the agent typing frantically while simultaneously trying to maintain a meaningful conversation with the customer. This is the future we continue to miss because we’re focused on website chats instead.

Related to chatbots, the industry will likely also fall short in improving the client experience, despite what’s being written and spoken about at conferences and in the trade press. The problem is methods like Design Thinking and customer journey mapping are fundamentally rooted around technology, which is a little like picking your data after you pick your hypothesis. There are practical reasons for this, e.g. the business also must run the business, making it difficult to learn and advance customer experience methods. Nevertheless, the fact remains that we continue to miss the boat on transformative customer experiences and 2019 will regrettably be the same.

Now or never?

If we as an industry fail to achieve these goals (or at least some of them), insurance will retreat almost entirely to the old ways of doing things. The industry is only enamored with shiny objects for so long and without business benefit, 2018 will have been the last year of excitement. However, if we continue to constructively evaluate our current progress with tangible goals and implementation strategies, we can unlock the potential of the technology that once seemed like a distant ambition.

Frank Neugebauer (frank.neugebauer@capco.com) is a partner at Capco, a global management and technology consultancy dedicated to the financial services industry, and is head of the firm’s insurance practice. These opinions are his own.

Also by Frank Neugebauer: Computer vision in insurance: See the future now