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The insurance universe is no longer predictable

Before it was a stable and predictable business, but it is no longer so. Growing without sacrificing profitability is a challenge, climate change is affecting various types of risk, distribution has become omnichannel and customers ask for customized products.

At the same time, technology continues to advance and an entire ecosystem of new players threatens to revolutionize customer acquisition. Consequently, those responsible for the sector are forced to make strategic decisions for deliberate and aggressive strategic decisions to get ahead. Gradual changes or the illusion of avoiding them are no longer viable options.

Adding to the difficulty of meeting these challenges is the acceleration of the pandemic. Customer and employee demands changed more in 24 months than in the last twenty years. This put enormous pressure on the sector and insurers had to adapt, in some cases overnight. The pandemic had its ups and downs, but the pace of change remained relentless.

Trends linked to AI

Artificial Intelligence technologies are already being installed in companies, homes and vehicles, and also in our personal lives. The COVID-19 disruption has changed AI adoption times by accelerating digitization in insurers.

Virtually overnight, organizations had to adapt to accommodate remote workforces, expand their digital capabilities to facilitate distribution, and update their online channels.

While it is true that most organizations have not invested heavily in AI during the pandemic, the growing emphasis on digital technologies and a willingness to embrace change will put them in a better position to incorporate AI into their operations.

Closely tied to (and sometimes powered by) AI, four fundamental technology trends will reshape the insurance industry over the next decade.

data explosion

In industrial fields, equipment with sensors has been common for a long time, but in the coming years the increase will be enormous. Penetration of current devices (such as vehicles, fitness trackers, home assistants, smart phones and watches) will continue to deepen, but new categories such as apparel, bedding, home appliances, medical devices and footwear will be added. Experts estimate that by 2025 there will be up to a trillion (million) connected devices. The resulting flood of new data created by these devices will enable operators to better understand their customers, leading to new product categories, more personalized pricing and increasingly real-time service delivery.

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The essence of insurance

The insurance industry is made up of companies that perform risk management in the form of insurance contracts. The basic concept of insurance is that one party, the insurer, guarantees payment for an uncertain event in the future. In turn, the other party, the insured or policyholder, pays a lower premium to the insurer in exchange for said protection against that uncertain event.

As a business, insurance is considered a slow-growing and risk-free sector for investors. While this idea is not as strong today as it was in the 1970s and 1980s, it is still generally valid compared to other financial sectors.

Not all insurance companies provide the same products or target the same clientele.

Among the most important categories are accident and health insurers; property and claims; and financial guarantors. The most common types of personal insurance policies are auto, health, home, and life.

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Do not just say

Despite the disruptions and new competitors trying to take advantage of them, the good news for many insurers is that they continue to have a competitive advantage that others cannot easily replicate. In most market segments there is room for many players, but because not all competitive levers are available to everyone, insurers often focus on one of five areas:

1 – digitization, data management and integration;

2 – brands and distribution;

3 – innovative and quality products;

4- strategic associations;

5 – effective structures.

Unfortunately, while most insurers try to focus on their strengths, they also often underinvest in these areas and don’t act aggressively. They tell clients that they have to fully fund and support their actions and take responsibility for the results. In other words, commitment without action doesn’t get you far.

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Importance of physical robotics

The field of robotics has seen many impressive achievements in recent times, firsts that will continue to change the way humans interact with each other and with the world. Additive manufacturing, also known as 3D printing, will profoundly transform manufacturing and commercial insurance products as well.

By 2025, 3D-printed buildings will be commonplace, and insurers will need to assess how that alters risk assessments.

Furthermore, programmable and independent drones, autonomous agricultural equipment and advanced surgical robots will all be commercially viable in the next decade. By 2030, a large number of conventional vehicles will have autonomous functions, such as self-driving. Insurers will need to understand how the increasing presence of robotics in everyday life and across industries will change risk levels, change customer expectations and enable new products and channels.

Advances in cognitive technologies

Convolutional neural networks and other deep learning technologies currently used primarily in image, speech, and unstructured text processing will eventually be used for a wide variety of applications.

These cognitive technologies, which are based in part on the human brain’s ability to learn through decomposition and inference, will become standard procedure for processing the incredibly large and complex streams of data that will be generated by “active” insurance products tied to the market. behavior and activities of an individual.

With the increased commercialization of these types of technologies, insurers will have access to models that constantly learn and adapt to the world around them, enabling new product categories and engagement techniques, while responding to changes in risk. or implicit behaviors in real time.

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in distribution

The experience of buying insurance is faster, with less active participation by the insurer and the client. There is enough information about individual behavior, with AI algorithms that create risk profiles, so that the time to complete the purchase of an auto, commercial or life policy will be reduced to minutes or even seconds.

Auto and home insurers have long offered instant quotes, but will continue to refine their ability to immediately issue policies to more customers as telematics and Internet of Things (IoT) devices in the home proliferate and mature. pricing algorithms.

Many life insurance companies are experimenting with simplified issue products, but most are reserved for the healthiest candidates and cost more than a comparable fully underwritten product.

As AI becomes embedded in life insurance and insurers are able to identify risk in a much more granular and refined way, we will see a new wave of mass market instant issue products.

business transformation

Disruptive technologies, changing demographics, rising customer expectations, increased regulatory oversight, and new competitors present serious challenges – even serious dangers – for insurers. Maintaining relevance and viability imposes bold, strategic and urgent change on them.

To be successful, insurers must understand what is feasible and take appropriate action to deliver immediate value and long-term growth. From strategy to implementation, our team of global professionals has the business knowledge and technical skills to help insurers transform.

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