We live in a time of rapid technological change, and industries of all kinds are being disrupted across the globe. The exponential growth of new technologies has enormous potential to transform the way we do business and it’s having a major impact on the insurance industry. In this climate, it’s vital to continually question mindsets and to strive for innovation.
“The key message is, ‘If you don’t disrupt yourself, somebody will disrupt you,’” suggested Jason Silva, futurist and host of National Geographic’s Brain Games, at the Property Innovation Summit that took place in May 2017.
Impact of Technological Advancement
Exponentially emerging technology is redrawing boundaries and challenging the idea of what is possible in myriad ways. Take the rise of artificial intelligence (AI), the Internet of Things (IoT), and Big Data, for example. These trends could permanently change the face of property insurance in the very near future.
Consider that 75 percent of insurance executives believe that AI will either significantly alter or completely transform the overall insurance industry in the next three years, according to an April 2017 Accenture survey. The Internet of Things is also gathering pace, with Gartner predicting there will be more than 20 billion connected things by 2020, up from eight billion this year.
“In the next six months, we’re going to generate more data than we’ve generated in all of human history up until this point,” explained Silva. “We’re currently processing like one percent of that data. Increasingly, we’re going to be able to process more, and what that does is give us all kinds of insights about the state of things.”
What It Means for P&C
So, what does all of this mean for property insurers specifically? We’ll have feedback about the health of our homes, offices, and other buildings that simply never existed before.
“People can extend all kinds of sensors into their homes to create a kind of nervous system,” suggested Silva. “Sensors in our homes can tell us the health of our homes and predict bad things happening to our homes before they happen.”
Some insurers already are exploring the possibility of incentivizing people to install smart sensors for fire and flood detection in their homes in return for lower premiums. As we build a real-time picture and start to develop more effective techniques for data analysis, this could lead to powerful predictive capabilities to circumvent common disasters for homeowners.
The prevention of fires, floods, and other catastrophic events is a win-win scenario for insurers and insureds. Sensors can detect burst pipes and automatically alert plumbers to fix them. The next step is to collate wider data and predict when a pipe or another component needs to be replaced before it gives way and causes damage.
This nexus of AI, Big Data, and IoT also has similar potential ramifications for the auto and health insurance sectors. We’re talking about an unparalleled new level of insight with powerful preventative potential.
Embrace Change
As robo-advice, new pay-as-you-go models, and sensor-based coverage impact insurance, the transformation is clearly underway. A full 86 percent of insurance CEOs believe that technology will completely reshape competition in the industry or have a significant impact over the next five years, according to PricewaterhouseCoopers.
In order to jump onboard with this rapidly evolving new paradigm, insurers must keep an open mind and consider partnerships with emerging technologies. Go beyond meeting expectations to scale new heights of customer experience. There’s no doubt that striving for innovation brings great risk, but who better to quantify and manage risk than insurers?
The insurance industry must overcome its traditional conservatism, update aging infrastructure and legacy systems, and embrace new technologies that can deliver real value for customers.
“Today, exponentially emerging technologies are transforming what’s possible,” said Silva. “They are helping us overcome and transcend even biological limitations. The very rules of what it is to be human are up for grabs.”
The insurance industry could be at the forefront of this transformation, helping to improve lives, boost safety, and prevent disasters. The extension of sensors into our homes, cars, and even our bodies brings the opportunity to collect and analyze data that, combined with AI, could transform the world for the better.