The Future of Insurance … AXA to Zhong An, Ingenuity and Lemonade … the shift to technology-based services that reduce risk
February 12, 2019
12It’s all about risk. Consumers fear it, insurers profit from it, and it’s impossibly hard to quantify.
While not the most glamorous of industries, insurance can be a life-saving protector, pooling everyone’s premiums to safeguard against some of our greatest, most unexpected losses. It is also one of the most profitable industries in the world, with over $2 trillion in annual revenues.
But risk is becoming predictable, which challenges the very concept of insurance.
By 2025, we’ll be living in a trillion-sensor economy, projected to generate bronto-bytes (1000 trillion trillion) of data. So as we enter a world where everything is measured all the time, we’ll start to transition from protecting against damages to preventing them in the first place.
But what happens to health insurance when your insurer is always watching? Do rates go up when you sneak a cigarette? Do they go down when you eat your vegetables? And what happens to auto insurance when most cars are autonomous? Or life insurance when the human lifespan doubles?
For that matter, what happens to insurance brokers when blockchain makes them irrelevant?
So what does the future look like for the insurance sector?
In October of 2016, a claim was submitted to Lemonade, the world’s first peer-to-peer insurance company. Rather than being processed by a human, every step in this claim resolution chain — from initial triage through fraud mitigation through final payment — was handled by an AI.
This transaction marks the first time an AI has processed an insurance claim. And it won’t be the last. A traditional human-processed claim takes 40 days to pay out. In Lemonade’s case, payment was transferred within three seconds.
However, Lemonade’s achievement only marks a starting point. Over the course of the next decade, nearly every facet of the insurance industry will undergo a similarly massive transformation. New business models like peer-to-peer insurance are replacing traditional brokerage relationships, while AI and blockchain pairings significantly reduce the layers of bureaucracy required (with each layer getting a cut) for traditional insurance.
Consider Juniper, a startup that scrapes social media to build your risk assessment, subsequently asking you 12 questions via an iPhone app. Geared with advanced analytics, the platform can generate a million-dollar life insurance policy, approved in less than five minutes.
AXA plans to cooperate with a centralized home hub whereby remote monitoring will collect data for future analysis and detect abnormalities. With remote monitoring and app-centralized control for users, MonAXA is aimed at customizing insurance bundles. These would reflect exact security features embedded in smart homes.
Wouldn’t you prefer not to have to rely on insurance after a burglary? With digital ecosystems, insurers may soon prevent break-ins from the start.
By gathering sensor data from third parties on neighborhood conditions, historical theft data, suspicious activity and other risk factors, an insurtech firm might automatically put your smart home on high alert, activating alarms and specialized locks in advance of an attack.
Insurance policy premiums are predicted to vastly reduce with lessened likelihood of insured losses. But insurers moving into preventive insurtech will likely turn a profit from other areas of their business. PwC predicts that the connected home market will reach $149 billion USD by 2020.
Car insurance premiums are currently calculated according to the driver and traits of the car. But as more autonomous vehicles take to the roads, not only does liability shift to manufacturers and software engineers, but the risk of collision falls dramatically.
But let’s take this a step further. In a future of autonomous cars, you will no longer own your car, instead subscribing to Transport as a Service (TaaS) and giving up the purchase of automotive insurance altogether.
This paradigm shift has already begun with Waymo, which automatically provides passengers with insurance every time they step into a Waymo vehicle. And with the rise of smart traffic systems, sensor-embedded roads, and skyrocketing autonomous vehicle technology, the risks involved in transit only continue to plummet.
- Research: 5 trends driving the future of insurance
- Digital and omnichannel
- Big data and analytics
- Legacy system transformation
- Insurtech and blockchain
- Research: Unpacking the InsurTech Landscape
- Report: Raconteur Future of Insurance
- Case study: How Lemonade reinvented insurance
- Case study: How Ingenuity uses AI
- Case study: ZhongAn, online in China