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How insurers can prepare for accelerating changes

How insurers can prepare for accelerating changes

The rapid evolution of the industry will be fueled by the extensive adoption and integration of automation, deep learning, and external data ecosystems. While no one can predict exactly what insurance might look like in 2030, carriers can take several steps now to prepare for change. 

1. Get smart on AI-related technologies and trends

Although the tectonic shifts in the industry will be tech-focused, addressing them is not the domain of the IT team. Instead, board members and customer-experience teams should invest the time and resources to build a deep understanding of these AI-related technologies. 

Part of this effort will require exploring hypothesis-driven scenarios in order to understand and highlight where and when disruption might occur—and what it means for certain business lines. 

For example, insurers are unlikely to gain much insights from limited-scale IoT pilot projects in discrete parts of the business. Instead, they must proceed with purpose and an understanding of how their organization might participate in the IoT ecosystem at scale. 

Pilots and proof-of-concept (POC) projects should be designed to test not just how a technology works but also how successful the carrier might be operating in a particular role within a data- or IoTbased ecosystem. 

2. Develop and begin implementation of a coherent strategic plan 

Building on the insights from AI explorations, carriers must decide how to use technology to support their business strategy. The senior leadership team’s long-term strategic plan will require a multiyear transformation that touches operations, talent, and technology. 

Some carriers are already beginning to take innovative approaches such as starting their own venture-capital arms, acquiring promising insurtech companies, and forging partnerships with leading academic institutions.

Insurers should develop a perspective on areas they want to invest in to meet or beat the market and what strategic approach for example, forming a new entity or building in-house strategic capabilities is best suited for their organization. 

This plan should address all four dimensions involved in any large-scale, analytics-based initiative  everything from data to people to culture. 

The plan should outline a road map of AI-based pilots and POCs and detail which parts of the organization will require investments in skill building or focused change management. 

Most important, a detailed schedule of milestones and checkpoints is essential to allow the organization to determine, on a regular basis, how the plan should be modified to address any shifts in the evolution of AI technologies and significant changes or disruptions within the industry. 

In addition to being able to understand and implement AI technologies, carriers also need to develop strategic responses to coming macrolevel changes. 

As many lines shift toward a “predict and prevent” methodology, carriers will need to rethink their customer engagement and branding, product design, and core earnings. 

Auto accidents will be reduced through use of vehicles with self-driving capabilities, in-home flooding will be prevented by IoT devices, buildings will be reprinted after a natural disaster, and lives will be saved and extended by improved healthcare.

Likewise, vehicles will still break down, natural disasters will continue to devastate coastal regions, and individuals will require effective medical care and support when a loved one passes. As these changes take root, profit pools will shift, new types and lines of products will emerge, and how consumers interact with their insurers will change substantially.

Winning carriers of the future will create and enact strategic plans that position their brand, products, customer interactions, and technology successfully to take advantage of the new economic structure on the horizon. All of these efforts can produce a coherent analytics and technology strategy that addresses all aspects of the business, with a keen eye on both value creation and differentiation. 

3. Create and execute a comprehensive data strategy 

Data is fast becoming one of the most if not the most valuable asset for any organization. The insurance industry is no different: how carriers identify, quantify, place, and manage risk is all predicated on the volume and quality of data they acquire during a policy’s life cycle. 

Most AI technologies will perform best when they have a high volume of data from a variety of sources. As such, carriers must develop a well-structured and actionable strategy with regard to both internal and external data. 

Internal data will need to be organized in ways that enable and support the agile development of new analytics insights and capabilities. With external data, carriers must focus on securing access to data that enriches and complements their internal data sets. 

The real challenge will be gaining access in a cost-efficient way. As the external data ecosystem continues to expand, it will likely remain highly fragmented, making it quite difficult to identify high-quality data at a reasonable cost. 

Overall, data strategy will need to include a variety of ways to obtain and secure access to external data, as well as ways to combine this data with internal sources. 

Carriers should be prepared to have a multifaceted procurement strategy that could include the direct acquisition of data assets and providers, licensing of data sources, use of data APIs, and partnerships with data brokers. 

4. Create the right talent and technology infrastructure 

In augmented chess, average players enabled by AI tend to do better than expert chess players enabled by the same AI. The underlying reason for this counterintuitive outcome depends on whether the individual interacting with AI embraces, trusts, and understands the supporting technology. 

To ensure that every part of the organization views advanced analytics as a must-have capability, carriers must make measured but sustained investments in people. The insurance organization of the future will require talent with the right mindsets and skills.

The next generation of successful frontline insurance workers will be in increasingly high demand and must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process but rather a mix of semiautomated and machine-supported tasks that continually evolve. 

Generating value from the AI use cases of the future will require carriers to integrate skills, technology, and insights from around the organization to deliver unique, holistic customer experiences. 

Doing so will require a conscious culture shift for most carriers that will rely on buy-in and leadership from the executive suite. Developing an aggressive strategy to attract, cultivate, and retain a variety of workers with critical skill sets will be essential to keep pace. 

These roles will include data engineers, data scientists, technologists, cloud computing specialists, and experience designers. To retain knowledge while also ensuring the business has the new skills and capabilities necessary to compete, many organizations will design and implement reskilling programs. 

As a last component of developing the new workforce, organizations will identify external resources and partners to augment in-house capabilities that will help carriers secure the needed support for business evolution and execution. 

The IT architecture of the future will also be radically different from today’s. Carriers should start making targeted investments to enable the migration to a more future-forward technology stack that can support a two-speed IT architecture.

Rapid advances in technologies in the next decade will lead to disruptive changes in the insurance industry. 

The winners in AI-based insurance will be carriers that use new technologies to create innovative products, harness cognitive learning insights from new data sources, streamline processes and lower costs, and exceed customer expectations for individualization and dynamic adaptation. 

Most important, carriers that adopt a mindset focused on creating opportunities from disruptive technologies instead of viewing them as a threat to their current business will thrive in the insurance industry in 2030.

Bona Pasogit
Bona Pasogit Content Creator, Video Creator and Writer

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