According to three McKinsey partners – Ramnath Balasubramanian, Ari Libarikian , and Doug McElhaney who collaborated on Insurance 2030 – The Impact of AI on the Future of Insurance– there are four, tightly coupled technology trends which “will reshape the insurance industry over the next decade.” These are:
- Explosion of data from connected devices – Cars, fitness trackers, home assistants, smartphones, and smart watchesare already providing data to users and third parties – including insurers.The list of connected items will expand soon, including: clothing, eyewear, home appliances, medical devices, and shoes.
- Increased prevalence of physical robotics – In the next decade, 3-D-printed buildings, autonomous drones; self-driving cars; autonomous farming equipment; and enhanced surgical robots will be common and could change risk assessments
- Open source and data ecosystems– public and private entities will come together to create ecosystems in order to share data and analysis organizations – Amazon, Apple, Google – could port data directly to insurance carriers,
- Advances in cognitive technologies– will become the standard approach for processing incredibly large and complex data streams that will be generated by “active” insurance products tied to an individual’s behavior and activities.
Combined, these trends have dramatic impacts. The question is: How long will this take to seriously impact the business of insurance.
The short answer is: It’s already happening. The authors focus on 2030 for a complete re-vamp of the business of insurance, with a recognition that the majority of technology is already in place.
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So what does 2030 insurance look like? The authors break it out by functional components
With the agreement of the client, insurers will have sufficient data and algorithms to create risk profiles. For automobile or life policies, quotes will be instantaneous and issuance “will be reduced to minutes or even seconds.”
The capabilities will change the roles of agents and brokers substantially. First, “The number of agents is reduced substantially as active agents retire and remaining agents rely heavily on technology to increase productivity.” Thi value of the distributor remains, “given that each interaction will be tailored to the exact current and future needs of each individual client.”
Manual underwriting becomes an artifact of the past for the virtually all of the cases. AI and Machine Learning is part and parcel of the technology stack.
Regulators will have a different role, reviewing “machine learning-based models, a task that requires a transparent method for determining traceability of a score.”
The functions remain the same, but with substantially fewer workers – ranging 70 to 90 percent fewer; more in personal lines. This also reduces the processing time.
Technology will replace manual inspections. Automobiles will have technologies which can capture and replay results. For buildings, drones will replace manual evaluations.
Prior to accidents, Internet of Things (IoT) functionality can issue alerts to prevent breakdowns and damages.
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This is all very Jetsons, but reality is already underway. The McKinsey partners suggest the following:
- Get smart on AI-related technologies and trends. This requires participation from all levels, with realistic evaluations of the utility of the technologies and the capability of current personnel and structures.
- Develop and begin implementation of a coherent strategic plan. Following on the explorations, senior leaders need to determine how technology could support the business strategy. This could result in significant changes and new investments.
- Create and execute a comprehensive data strategy. Data are valuable assets. These come from inside and outside the organization and require consistent updates and access methods for internal and external users.
- Create the right talent an technology infrastructure. Required changes require new skills for insurance organizations. “Developing an aggressive strategy to Attract, cultivate and retain a variety of workers with critical skill sets will be essential to keep pace.”
The bottom line is that this will be a substantial change in the business model and all attendant requirements. We are seeing the tip of the iceberg now, but the growth is likely to be exponential. Owners, directors, executives, and line workers will all be playing new roles in a short period of time.
Editor: Insurance-Canada’s next Technology in Actionevent is AI: The Foundation of Next-Gen Insurance being held in Toronto on 30 May 2018. Practitioners, consultants, and technology suppliers will focus on AI and the roll out of the Next Generation of Insurance