Reading a recent report by Novarica on adoption of emerging technologies in the insurance industry, I was struck by a few curiosities. Primarily, I found it interesting that adoption of these technologies does not appear to be happening equally across all functions of the insurance business. Most adoption is occurring within the underwriting and claims processes. On one level, this is not surprising, when you consider that it is relatively easy to perform a cost/benefit analysis against these two functions; and is often, therefore, easier to gain funding for projects related to these two areas. However, there appear to be quite a few missed opportunities here – areas where forward-thinking carriers could leverage tools available now to make their businesses stronger today and into the future.
Many of the technologies covered in this report, such as big data, machine learning, predictive analytics, and telematics, are associated with large volumes of data. Done well, customer intimacy, digital engagement, pricing, and rating all rely on large amounts of information, and were barely mentioned as processes against which these technologies were deployed. Carriers have been trying to develop customer intimacy and increase retention for decades. More information about people and companies is available now than ever before; however, these were not called out in the Novarica report as areas where these technologies have been widely adopted. Product development in insurance includes identifying new types of risk and loss; however, the possibility of mining this information from big data and utilizing artificial intelligence and predictive analytics to determine areas that could be profitable does not appear to be gaining significant traction either. These would seem to be low-hanging fruit for P&C carriers looking to create opportunity through innovation.
Many insurance company executives report that they are worried about the disruption that many of these emerging technologies will cause. Yet, as this Novarica report notes, few of these executives report acting on those worries to prepare for an uncertain future. Maybe the difficulty of measuring benefits received from customer intimacy, digital engagement, and pricing/rating efforts is inhibiting investments in these areas. Or, perhaps it’s simply a fear of the unknown. It could also be the result of a lesson learned in many industries: that early adopters often reap the greatest benefits, but pay more dearly for emerging technologies while fast followers reap many of the same benefits at lower costs. Whatever the reasoning, it’s time to get off the fence and start planning for these and other emerging technologies to become mainstays of the insurance industry.
Big data, predictive analytics, and AI aren’t new. They’ve all been around for some time, and other industries quickly took advantage of them to find new ways to develop products, win new business, and increase customer satisfaction. We are fast approaching the day when companies will invest in these technologies not because they are early adopters, but because it will be a standard cost of doing business. When that day comes, carriers that see the value of emerging technologies too late will incur the costs but reap few of the benefits as they fight merely to catch up. The time for insurers to invest in open platforms designed to accommodate a changing world, and all the emerging technologies to come, is now.