Celent looks ahead and sees three alternative technology-driven futures for the insurance industry.
San Francisco, CA, USA November 28, 2005
In a new report, “Three Futures for Technology and Insurance,” Celent predicts how new technologies are impacting the future of the insurance industry. According to the report, there are three scenarios:
Utopian Vision, Nightmare Scenario, and Probable Future. In the “Probable Future,” there are significant improvements in information technology (better, faster, cheaper) and in other technologies (smarter, stronger, more useful). Insurers that recognize these changes in their business model will succeed; others will struggle.
| The Future | Information Technology | Other Technology | Insurance Model | Industry Response |
|---|---|---|---|---|
| Utopian Vision | 10X better, faster, cheaper | Smarter, stronger, more useful | Micro-pricing, ultrasmart underwriting, effective loss control |
Profits up, sustained by knowledge-based barriers to entry |
| Nightmare Scenario | Progress slows, Moore’s Law repealed | New technology disappoints or runs amok | New risks create large new losses | Stagnant industry, capital departs slowly |
| Probable Future | Steady and predictable progress in all areas | Smart monitoring and safer products | Better understanding of old and new risks, pricing improves |
Performance gap between good and bad insurers widens |
| Source: Celent analysis | ||||
To construct each of these futures, the report identifies the building blocks of information and other technology and the insurance model. Celent also makes projections about how these components could change and how insurers would react to those changes.
According to Donald Light, senior analyst and author of the report, “Insurers should prepare for the probable future, while seeking out the opportunities implied in the utopian vision and mitigating the risks implied in the nightmare scenario.” He added, “Having a single corporate point of view about technology and the future of insurance will establish a common set of assumptions and context for an insurer�s operational and strategic plans. Refreshing this point of view every few years will allow senior managers to think creatively about how to win in a world that is certain to change.”
The 22-page report contains one figure and two tables.
A table of contents is available online.
Celent
Celent’s service offering falls into two categories, consulting and research, each of which is dedicated to technology in the financial services industry. We help banks, brokerage firms and insurance companies use IT to enter new markets in the shortest possible timeframes. All of our services are geared towards facilitating better informed, faster decision making. For more information visit www.celent.com or contact [email protected].
