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Although nobody has a crystal ball, several technology trends that have already started to reshape the property/casualty insurance industry over the past couple of years will likely mature and transform the landscape in 2019:
More Insurance Companies will Embrace the Cloud
For insurers, the journey to cloud-based SaaS solutions started with support functions like payroll and HR, and is now well underway for front-office and CRM functions. The next wave of the cloud journey gets to the heart of insurance mid- and back-office core operations systems. Small insurers have been early adopters to get the scale and cost benefits of cloud; but larger insurers are now focusing on innovation and speed-to-market.
Ecosystems will Crystallize Further
There is a growing appetite for collaborating across the insurance value chain through standards-based, plug-and-play integrations. Venture capital has helped create an ecosystem of innovative InsurTech vendors. However, with a few exceptions, we don’t have many standards in the industry, making it difficult for insurers to collaborate and form strategic partnerships with the vendor community. Efforts to standardize are slowly but surely moving forward and gaining momentum, and there is hope that emerging platforms and technologies like blockchain can help accelerate this. The pace and scope of such progress remains to be seen.
Insurers Mature from Collecting Data to Taking Insightful Actions and Driving Optimization
Insurers are eager to utilize their data foundations to optimize operations and make better decisions. Insurers hold a treasure trove of data, but the focus so far has been on making that data available in real-time to the right decision-makers—sometimes with effective decision-support visualizations. This is starting to have a business impact—for example, identifying areas where the book of business has too many concentrated risks (e.g., hail, hurricane) and strategically diversifying the portfolio. Insurers are also beginning to use data to identify top customer pain points, such as delays in settling their claims. So far, very little operational optimization has actually taken place. But in 2019 and beyond, companies will see significant levels of automation and some early examples of AI-driven decision making.
Insurers Will Leverage Big Data to Address Emerging Risks
Historical data is no longer sufficient or may simply not exist to help insurers accurately underwrite 21st century risks. Therefore, companies are starting to leverage big data and analytics to create new risk products and expand existing ones to better cover these kinds of risks. In addition to cybersecurity, such risks include supply chain failures and pandemics as well as parametrizable risks (e.g., travel delays and crop failure related to seasonal rainfall). This is an exciting application of data-driven possibilities which we expect to see grow in 2019.
Digitization Will Evolve into Digital Transformation
With all the digital tools and capabilities available to them, property/casualty insurers can accomplish more than ever before when it comes to day-to-day workload and processes. The digitization of the insurance industry is well underway and involves using a customer-friendly user experience and digital wrapper for applications such as selling personal auto insurance through direct sales and self-service. In 2019, there will be a shift from mere digitization toward a more robust digital transformation, as companies look to evolve their capabilities. Digital programs will start delivering true business agility by unshackling business experiments from IT processes.
This freedom to accelerate will enable insures to offer entirely new value propositions that were simply not possible before, such as insurance that constantly flexes based on how a small business is changing and what kind of risks it is taking (e.g., moving dangerous cargo). While digital user experiences, automated processes, and omni-channel self-service have delivered the early waves of customer value, the next wave lies in fundamentally changing and expanding the insurance value proposition from risk transfer to prevent, protect and recover services.
As these trends develop further in 2019, they will open new doors for the insurance industry to continue its mission of protecting society and consequently itself.