Insurance predictions: How the insurance industry might look in the future

self driving cars

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From the increased use of drones, Google’s self-driving car, the Nest thermostat and an array of wearables such as Fitbit, and it often seems like the future is already here in 2016, yet these tech-embracing innovations which are already revolutionising the insurance industry are just the tip of the iceberg. And of course the key to the future, as always, has been sectors embracing ever-changing technology and moving with the times.

Historically the insurance industry has been perceived as something of a stuffy, almost institution-like dinosaur as can often be depicted by popular culture and the media, however of late it’s taken steps to ‘get down with the kids’ as it they say and begin to embrace emerging trends like a true hipster.

 

Even some of the older insurance guard believe the future of the industry will march to the beat of the techno drum, with many primarily talking up the imminent arrival of driverless vehicles to a street near them and you, soon.

But then they did proceed to go off track a bit (albeit temporarily) by then banging on about motorists in their 90s returning to the wheel in cars constructed from bamboo or papier mache (yet most importantly, fully automated so those that had given up conventional driving could, effectively take up where they left off-ish), before redeeming themselves by predicting the advent of 3D-printed vehicles.

However all of this made us start to really think about the way technology (amongst other vital factors) could impact the insurance landscape in the future. One which might, theoretically, evolve beyond all recognition.

The ‘future’ is an apt word to use in this insurance context though, as what is the definition of insurance other than safeguarding our assets/material interests against unpredictable events which have not yet happened but are likely to according to research, statistics and calculations; and essentially future scenarios which if nothing else, are for the most part out of our control.

Indeed, why does the insurance sector exist if not as a tool for mitigating the costs and damage associated with a single incident occurring for an individual or organization? And it’s not as though insurance is a new concept – the Babylonians developed an early form of insurance that was recorded in the famous Code of Hammurabi as early as 1750 BC. We can only imagine what they’d make of the contemporary insurance world.

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So, we’ve already established that insurance is based around managing unseen risks and sharing risk exposure across an expansive volume of individuals or organisations, and is therefore discovered at the very core of community activities in that sense.

From the largest, broadest picture to the smallest, modest scale, insurance is fundamental to daily life in developed nations, enabling individuals and businesses to manage their existence with a measure of security. With this in mind how do we envisage the way in which insurance policies, procedures, practices, protocols and provisions will shift in the future, and what factors will predominantly influence the future of the sector?

Well, experts fervently believe (and foresee) an insurance landscape grouped into the five main categories, which are namely; Shifting Principles, Emerging Technology, Escalating Pace of Change, Evolving Nature of Risk and Changing Demographics, with rapidly developing technological advances more often than forming the future catalysts for the all-enveloping change.

Simultaneously the industry will have to steel itself for the challenges which lie ahead, which are forecast to comprise of ever-complicated regulations, market developments, the prominence of digitally-savvy insurance policy consumers, sales and distribution and services/systems.

Rewinding to the digitally-savvy consumers, and as has been the case for a while now, the omnipresence of smartphones and tablets have made it possible for customers to connect directly via self-service, where before this wasn’t a viable option, together with a time and place convenient for them. Which is why more than ever before that it’s imperative insurance providers respond accordingly to service their customers in this way. And it’s the key Millennial demographic who’ll be at the vanguard of this movement, demanding greater transparency and lower costs/higher returns regarding their insurance products.

‘Millennials’ are, statistically-speaking, those aged between 18 and 34-years and make-up today’s heaviest (and ostensibly, most reliant on) tech users and first adopters when it comes to new tools and ideas being put into everyday circulation and currency.

Which, understandably, makes them ideally placed to give a perspective on how they see this evolution taking place, and what it will mean for them. Having said that, commentators from all generations can easily predict what is needed at a high level.

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Capgemini, in collaboration with Pegasystems conducted a recent study which was designed, in part at least, to speak to this next generation of would-be insurance product policyholders and ask them what they think will be the most important technological breakthroughs during the next decade, and moreover just how it might affect them in terms of their insurance premiums.

Perhaps the first thing which strikes us is the underlying fact that the research undertaken revealed the extent to which many of the new generation of insurance consumers perceive technology as a direct enabler, as opposed to a cursory glance or otherwise relatively isolated component of the eventual policy-enabling process, as well as the precursory insurance provider relationship and bond-forming aspect.

As a means of highlighting this the survey determined that some 46% of people polled were of the unswerving opinion that by 2025 their passports will store detailed digital data which, aside from keeping tabs on what specific countries we might be travelling to and from, will also cite and log the very destinations within a particular country we explore.

Whilst from the outset this doesn’t sound all that relevant to anything, the more you think about it the more you can begin to imagine the potential of this, especially in terms of future travel insurance lines. Insurance providers could, hypothetically, offer travel policy premiums which are sourced via (and effectively depend on) up-to-the minute information on a specific region’s crime rate, weather patterns or even the number of claims that have been made at any given time. There is a distinct possibility that bespoke, dynamically-adjusted and chronologically-revised premiums and danger alerts could become a reality during the next few years.

Addressing the future of home insurance products and taking some pointers from the insights expressed by this core Millennials target audience, and the sight of insurance company-chartered drones above our urban and rural areas is set to become a common occurrence. So much so that a figure of 21% of those questioned who fell into the 18 – 24-years sub-category thought it highly likely that drones would (and for that matter, should) be facilitated by home policy providers to assist them processing claims over the next 10 years, and a notion which would have been literally unheard of just a few years ago.

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But then only a few months back, and when sizeable chunks of the North of England were submerged as a result of catastrophic (and unprecedented) winter storms and subsequent near biblical levels of flooding, an increasing number of buildings, home and contents-offering insurance firms utilized drones to afford themselves an exacting airborne perspective on the extent of the damage, with a view to ascertaining which policy claims were legit and which weren’t.

From a motor insurance angle of the future – and as touched on earlier – the seeming advent of driverless vehicles will turn the sector on its head, as the matter of responsible parties is set for a radical shake-up, courtesy of a seismic tech intervention which has been on the cards for a while now.

Of course, these are just a few of the potential ways in which technology will hold the key to future insurance products, yet it’s also worth considering the extent to which technology, as it continues to evolve, can be adapted by insurers indirectly to inform and enlighten them, as well as instructing them on better ways in which to interact with their policyholders and would-be product consumers.

As a point in question, a significant 49% of the respondents to the aforementioned study (and who admitted that they’d willingly wear ‘smart’ clothes in a future society) confirmed that they would frequent said tech-laden attire for NFC (or Near Field Communication to give it its full title) services provided by retailers or transport operators, as contactless support systems gather momentum.

On a similar note, more than one-third (or 36% to be precise) of those Millennials polled for their views said they’d be prepared to go that step further in adopting new means of identification (and subsequent transactions of any nature) by agreeing to wear ‘smart skin patches or tattoos’; freely conceding that they would do so as a preferred means of personal authentication such as a laptop/tablet password.

Conversely there’s the counter argument which demands our attentions too, with the fundamental concern being over whether or not the widespread adoption of ‘smart’ technology would heighten existing security risks, and as a by-product of this then compromise the current competitively-priced premiums we pay.

Having said that, this would only ever be settled when adjudging the extent to which such tech is both implemented and applied in the future. One element is beyond reasonable doubt though, and that is technology WILL alter our perceptions of the future and systematically instil unprecedented change in the way we conduct our insurance business in whatever arena we seek to do this going forward.

It may manifest by way of the means in which we gather information directly from consumers to shape tailored premiums, or maybe by evaluating their use of technology to conduct a risk assessment. Either way it’s clear that insurance providers will need to get on board the technological express or risk being left at the station, and if opting for the former, remember to adapt to all timely revisions to the industry as and when they materialise. As ever, the single most threat to any sector as relatively conservative in its approach and application is to see the technology revolution as a threat, or indeed as a problem which needlessly necessitates a large investment in complex infrastructure to solve.

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