The insurance industry may not strike one as the most innovative out there — it certainly doesn’t have the reputation tech tends to elicit. However, as with most — if not all — sectors, the insurance industry has had to stay on top of developments both in Ireland and globally, and in technology and innovation to stay relevant. Here are some of the trends influencing the industry now and in years to come.
“In response to the pandemic, the insurance sector demonstrated huge resilience and their ability to adapt and innovate to overcome the obstacles presented,” says Jean Rea, partner, applied intelligence, KPMG. “Many insurers accelerated digitalisation of their customer experience including the transition from the traditional face-to-face models.
“For insurers to thrive within the sector, customer-centricity is crucial and as customer expectations evolve particularly when it comes to the level of service and personalised products demanded, insurers are continually innovating and embracing the technology available as they continue on their digital transformation journey.”
Climate Change
Climate change is now impossible to ignore for businesses in every sector of the economy, says Paul O’Brien, head of large clients at WTW Ireland. “Risks like severe storms and droughts are occurring more often and increasingly threaten lives and businesses, causing risks to property, global supply chains, workforces, and more.
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“At the same time, regulators, investors and consumers are looking for greater action to report and manage climate risk exposure. As recently highlighted by UN secretary-general Antonio Guterres: ‘Our world needs climate action on all fronts — everything, everywhere, all at once.’”
This means businesses need to understand exactly where they stand, what ‘transition’ risks they face and how they will be financially impacted as the world seeks to move to a lower-carbon future, says O’Brien. “The insurance world is matching these important and evolving demands by using technology and big data. High-level climate risk screening software can rapidly identify and quantify physical climate hazard exposure to buildings, infrastructure and supply chains worldwide.
“Probabilistic and diagnostic models can draw on decades of extreme weather data to estimate natural catastrophe impacts. They help insurers and companies identify potential risk hotspots and translate physical climate risk into a financial metric. The challenge is to ensure that modelling can account sufficiently for changing weather patterns and the range of potential future climate pathways.”
Insurtech
Ireland has a strong and vibrant insurtech community, says Rea. “Insurtech considers the use of technology to innovate within the insurance sector. This would include for example use of technologies such as data analytics, AI, Internet of Things (IoT) to improve customer experience, efficiency, reduce cost and so on.”
Insurtechs are driving change by effectively disregarding the historic limitations of traditional organisations, says O’Brien. “Without the burden of legacy systems, insurtechs are overcoming regulatory challenges to develop and implement agile new approaches to many parts of the insurance value chain. Insurtechs may increase customer satisfaction by streamlining the customer journey, for example by creating a better customer interface or billing system or allowing for a policy to be increasingly personalised.”
That kind of innovation forces the bigger players to adapt, says O’Brien, and we often see them acquiring or partnering with insurtechs. “This can be a win-win-win that sees the insurance company improve its tech, the insurtech access a bigger market, and the customer enjoy a better service.
“Insurtechs are adept at forming connections beyond insurance, like an app that connects health insurance with a wearable fitness tracker with workplace perks to join a gym. As other technologies like AI join the fray and the capabilities of IoT devices like drones, specialist sensors, and wearables improve, the disruptive clout of insurtechs will continue.”
Artificial Intelligence (AI)
The insurance industry has been using automated “robotics” processes to improve back-office processes in administration and claims for some time, but AI promises to be far more transformative, says O’Brien. “We are at the start of the journey, but as AI develops it will have a huge impact on how insurers interact with customers and predict their behaviour. Insurers depend on lots of data and AI empowers them to leverage and rework that information. They can be more agile in assessing and pricing risks, and in spotting new needs. And we can expect AI to play more of a role in underwriting — particularly for standard products for small and mid-sized businesses.”