Data and technology will unlock new doors for insurance businesses
The technologies, insights and investments for insurance technology transformation all seem to be in place.
Drones buzz overhead as they meticulously record every angle of a warehouse below. It’s not the set of a blockbuster action movie; it’s the start of a P&C insurance renewal.
This scenario is just one example of how new technologies are changing the way insurance businesses collect, analyze and process data. As a result, they are (theoretically) able to underwrite a wider range of risks using data from a wider range of sources.
Consider the drone-generated images that could be used to create a data-set to inform the underwriting of a policy delivered to the customer in a matter of hours, which is a fraction of the time previously required.
In fact, insurance is changing right in front of our eyes with technologies such as artificial intelligence, automation, cloud and blockchain opening new doors.
But capitalizing on these innovations, and harnessing the attendant data, is a massive challenge facing the industry. I believe the following technologies will be the most transformative in the years to come, which means insurance organizations will need to stay updated on developments or risk falling behind.
Artificial intelligence
For decades, there have been claims that data is “the new oil” that will transform the world and create enormous benefits for businesses and customers alike. After a slow start, artificial intelligence seems to be the secret sauce that will make it possible to deliver on this promise. By combining richer data sets with artificial intelligence, businesses can see and predict upcoming risk and business trends.
Indeed, the use of artificial intelligence has boomed in recent years. Still, some insurance operations are falling behind. A survey by McKinsey found that in 2022, 50% of firms across the world had tried to use artificial intelligence in some way, up from 20% in 2017.
In the coming years, we will see this technology scale even further and enter core processes including distribution, underwriting, claims and servicing. We also will see new data assets, like claims histories and distribution interactions, being put to work.
Cloud
Cloud technology is already having a tremendous impact on reshaping insurance. “It has enabled us to integrate with our suppliers and partners faster and also helped us to build virtual marketplaces, thus opening a new source of revenue from our services,” one carrier executive recently told me.
In addition, cloud technology goes hand in hand with making the most of all of the data available. Cloud is necessary for enabling the type of compute power that is needed to fully understand and make use of the incredibly large data sets that are transforming insurance. Not only is cloud beneficial for data analysis, it benefits all core systems, helping insurers create new products and provide better customer services.
Moreover, cloud technology will play a role in determining which actors in the ecosystem will become key players by facilitating connections and information sharing between customers, distributors, insurtechs, carriers and reinsurers.
Blockchain
As blockchain becomes more widely adopted, it will help carriers effectively manage customer data in a safe and consistent manner and simplify current issues such as identity management and verification.
For example, reinsurance contracts can be secured on the blockchain through smart contracts, where the flow of information and payments between insurers and reinsurers is simplified. Or, by moving insurance claims onto a secure ledger, the technology can help eliminate common sources of insurance fraud.
Most insurance companies will increase or maintain current tech spending levels in 2023, according to a Gartner report. In another report by Deloitte, it was revealed that nearly three-quarters of respondents anticipated additional spending for artificial intelligence, and seven out of 10 expected strong growth in the acquisition of data.
Cloud and blockchain are on a similar trajectory. The technologies, insights and investments for a transformation of the insurance industry all seem to be in place. But implementing them will be no small feat. Businesses will have to face legal and regulatory hurdles that might slow down adoption. Even so, the insurance industry is pushing forward with technology transformation, and I think it’s safe to say that the next five years will see more change than we ever have before.
Pete Horst is the chief technology officer at Accelerant, makers of a data and technology platform that helps members better understand risk, benefit from insights, and handle operational and regulatory complexity. Before he joined Accelerant, Pete was VP Engineering for Qlik, the business analytics platform that Pete brought to the cloud.
These opinions are the author’s own.
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