Tired of hearing about how emerging technologies are going to disrupt insurance? Prognosticators see a future in which robots, artificial intelligence, drones, wearables, driverless vehicles, and other technologies will dramatically reduce risks, automate claims, and make the claims professional a relic of the past.
It’s more likely, however, that these technologies will provide new capabilities to augment and improve claims handling and leverage the expertise of professionals. Research and work with insurers has provided clues as to how the industry is thinking and acting regarding emerging technologies. Some implications for claims operations, risk, and specific lines of business will help to answer the question of whether emerging technologies will disrupt claims resolution or provide improvement.
Top Emerging Tech for Claims Operations
Claims is arguably the most complex part of the insurance business. Underwriters and others may disagree, but the sheer number of players in the claims ecosystem and the endless variety of claims make a strong case. Technology has always been important, but emerging technologies present even greater opportunities to enhance claims operations. That promise is demonstrated through a few examples.
A lot has been said about the potential of drone use in claims. From inspections to catastrophes to damage assessment for more typical claims, this technology offers great potential, and insurers already are using it. The “internet of things” (IoT) is making inroads with consumers, businesses, and governments. Devices that monitor pipes for leakage or freezing, sensors on machines that provide alerts, or embedded chips that track the location of packages or vehicles are just a few examples of how the IoT is now in use. Augmented or virtual reality (VR) may seem like a stretch, but at least one insurer is using VR for worksite safety training. Artificial intelligence (AI) has wide applicability to improve identification of fast-path claims, identify and investigate fraud, and spot litigation propensity. New payment technologies and gamification are currently used in claims environments.
Implications for Risk and Claims
The risk landscape is poised for significant alteration over the next five to 10 years. Technology to monitor and connect every insurable person and thing in real time unleashes the potential to improve risk management and reduce claims, sometimes dramatically. And the claims that do occur will have new dimensions. The things that can be lost, damaged, or stolen will change, while more real-time information about a loss will be available to claims professionals. Exploring the evolving areas of the connected world provides insight into how risk and claims will change. Here are a few examples.
Smart homes and buildings. Consumers and businesses are buying devices to monitor and manage energy and environmental factors, automate interaction with home appliances or machines in factories, and prevent or mitigate accidents. This trend will continue as manufacturers and service providers strive to make everything “smart.”
Connected and autonomous vehicles. Telematics and automated driver assistance systems already are contributing to improved vehicle safety. Real-time video and data recorders will become more common as tools for claims professionals, much like black boxes in airplanes. Autonomous vehicles are predicted to drop accident rates by up to 90 percent while creating new risks like hacking or vehicle failure.
Smart agriculture. Farming already is highly automated in terms of plowing, planting, weed/pest control, and harvesting. But the IoT promises to bring new levels of precision monitoring to agriculture, resulting in higher crop yields and resistance to crop failure.
Lines of Disruption
Unfortunately, there are scenarios in the connected world that may increase customer risk. For example, cyberrisk may significantly increase if connected devices are hacked. Beyond that, there are other lines of business that could be disrupted.
Personal lines. It seems all the buzz around emerging technologies is about how it will change our lives. We will live in smart homes, ride in driverless vehicles, get advice from virtual assistants, and track our daily habits via wearables. All of this has big implications for personal lines. Claims frequencies will decrease; severities will improve. New risks will emerge that require education and new specializations for claims professionals. New tools—such as artificial intelligence, smart glasses, and drones—will be available to the claims community, so auto, homeowners, and other personal lines will be affected. But the biggest initial implications will be in operations. The potential implications for risk are a little further out, chiefly because of the dependence on consumer adoption of emerging tech, which will take more time.
Commercial and specialty lines. There may be more immediate implications for commercial and specialty lines than personal lines. When businesses adopt new technologies, the implementations will be broader and more controlled. Consider autonomous vehicles for fleets versus individual autos, or IoT devices throughout a company’s factories versus a home. For claims, this means that insurers will partner with their customers to be more proactive in identifying and mitigating losses. Claims professionals will more closely partner with their loss engineering colleagues to assist policyholders. And when losses do occur, claims professionals will have more information to act on, perhaps relying less on witness statements and more on real-time data.
Workers’ compensation. Emerging technologies have great potential to reduce workplace accidents and enhance treatment programs for injured workers. Wearables, VR, AI, and other technologies will become essential to workers’ compensation. Safety training for employees and contractors has the potential to reduce accidents. The development of treatment plans for injured workers will be aided greatly by big data and AI. Adherence to treatment plans will improve via wearables and smart home devices. Gamification technologies can provide compliance incentives, reduce claims costs, and promote faster return to work.
So will the emerging technologies described here disrupt claims? Probably not, at least not in the short term. However, there are many ways that these technologies will accelerate the pace of change and contribute to transformation over time. In the end, the combination of highly trained and experienced claims professionals and emerging technologies will prove to be the winning formula for insurers and customers alike.