The world we live in today is not at all the same as our parents'. Now, we’re experiencing global changes that are radically reshaping human behavior and the ways in which we interact.
Take for example, the common conversations we used to have with insurers and agents—you remember those people with the briefcases, luxury cars and nice pens who sketched policy illustrations on sheets of paper. Now we’re talking about 24/7, access-anywhere, digital customer experience, algorithms, artificial intelligence and the list goes on and on.
The intersection of technology and customer expectations is redefining the industry today, and in the days to come. Over the long-term, the next thirty or so years, the changes that will buffet the industry will be even more explosive. Macro forces that impact humanity as a whole will bring profound alterations to insurance.
Consider how the following risks will affect our planet, our race—and certainly the entire insurance eco-system between now and the year 2050:
- Work shifting from human-intensive activity to more technical, creative and intellectual tasks
- Increasingly threatening climate change
- Depopulation of rural areas
- Prolonged life expectancy
How will these risks impact insurance companies?
Depending on the lens through which you view these risks, they might be good for humanity, but they may also not be that good for insurance companies. Each one of the disruptors listed above could generate significant change—revealing significant opportunities or bringing about organization-threatening risks.
Labor is changing around the world thanks to automation in many industries—its impact will be felt in a number of ways over the coming decades. From a macroeconomic point of view structural unemployment is created by technological upheaval.
For example; automation reduces corporate need for staff making workers whose tasks are heavily focused on manual activities redundant. At the same time, the market is hungry for more technically skilled employees—like programmers, designers, and the like. The two opposing forces pull the working population apart, creating an ever-widening prosperity gap.
The gap presents great challenges for insurers, who might face a two-pronged assault on their bottom-line: one from the lack of skilled workers in an increasingly tech-savvy market, and two, from the reality that more and more people have no available income to buy insurance, and are, in fact, becoming increasingly reliant on unemployment insurance.
Changes in the job market also cause depopulation of rural areas which in turn causes insurers to focus on providing coverage for denser urban populations. Rural areas are not only emptying out, but those who are left behind must increasingly rely on canned products and microinsurance.
And, as we make strides in medical care and awareness around life-promoting activities, life expectancy is continually rising—to the point where many insurance companies are now rethinking their mortality tables.
The Internet of Things (IoT) is connecting sensors to us, to each other and to insurers at an exponential rate. It will soon be possible to do real-time underwriting based on actual live medical data and information about an application’s behavioral trends.
Companies like Dacadoo have innovative solutions-based hundreds of millions of hours of actual health data that can promote wellness and extend lives, benefiting both customers and insurers.
The cost curve of gene sequencing is dropping exponentially. Right now, a person’s genome can be read for about $200. Soon that will cost less than a dollar. When that tipping point is reached how will customers and insurers react?
Organizations could offer sequencing and disease prediction as a service. Underwriting quality and risk mitigation will become increasing granular. Coverage will become less expensive for some—very expensive for others—depending on the choices they make.
Genetic manipulation could significantly prolong people’s lives by making them immune to existing diseases. And what happens when we cure cancer, live to be two hundred, or even one day became immortal? What becomes of life or critical illness insurance then?
On top of all of that, consider climate change. The recent fires in the Amazon that are in the news and on our tablets everyday are forcing people to think about the importance of climate and our effect on it. This year’s monsoon season in India was 10% worse than the fifty-year average. 1600 people died between June and September.
In Canada, newspapers are filled with stories about wildfires raging in the west, flooding in the center and catastrophic species loss in the Atlantic. Right now, the G-7 is setting up a USD 22-billion budget to help the Amazon. How far away are the days when these forests—the ‘lungs’ of planet Earth—need to be insured or reinsured by governments
How can insurers utilize technology to deal with these risks?
There is a plethora of technologies that can help us adapt and thrive in our constantly changing future. Many insurers are now using predictive models to manage risk. They are leveraging the power of Big Data and Artificial Intelligence to generate business insights, and to identify at earlier and earlier stages the developing risks that will impact their business and the entire industry.
They have become data-driven enterprises—harnessing the power of all of their historical client data (policies, contracts, health records, etc) integrated with external data like census information and IoT inputs to fuel their analytics engines.
The end result may be, depending on privacy regulations of course, the ability for customers to use share a selfie pic that an insurer can ‘read’ and use as the basis for underwriting to produce an instant insurance quote—no questionnaire needed!
How will the insurance industry change in the future?
The changes we’re all trying to come to terms with over the next 5-10 years will be dwarfed by the tectonic shifts that macro trends will throw up in the next 30-50 years. A generation or two from now the industry may be unrecognizable.
Executives, if they aren’t already, need to be looking as far ahead as possible and imagining what business they will actually be in come 2050. What does risk mitigation look like in a world where populations are shifting, birth rates dropping and life expectancies rising?
How will AI change the game? As product development accelerates and underwriting and coverage become more granular, what will the customer experience look like?