The insurance industry is still at the precipice of a revolution and technology advancement. The insurance industry is set to be revolutionized in the coming years by a host of advanced technologies such as artificial intelligence, connected devices, as well as blockchain. Here are some of the top predictions for how these emerging technologies will shape the future of insurance:Here are some of the top predictions for how these emerging technologies will shape the future of insurance:

AI and Machine Learning

AI and machine learning are already being implemented in insurance but the applications will grow significantly in the future. Due to the use of AI in processing large quantities of data, the underwriting process will be more precise, and the insurers will be able to develop individual approaches to policyholders and offer recommendations for the prevention of potential losses. Self-service through chatbots and robo-advisors are going to advance significantly, handling client relations and policy suggestions. The use of AI will also help reduce fraud cases and speed up the claims process for the insurance companies and save them money. 

The largest changes may be achieved in the area of risk evaluation and pricing. Connected devices and data analytics will make it possible for insurers to price policies according to real time risk profiles. The change to usage-based insurance will help good drivers to pay less while helping insurers to better match premium levels to the loss ratios they experience.

Internet of Things (IoT)

Increasing use of sensors and Internet-connected objects will lead to such radical concepts as usage-based insurance, etc. Homes, vehicles, and other commercial buildings fitted with smart connected devices will allow the insurers to constantly monitor the assets. If a leak or electrical issue is found, then preventive measures could be taken immediately. It is not out of the question that insurers may use drones in the aftermath of disasters to expedite the claims processing.  

The availability of 5G networks that will offer broader connectivity will boost IoT uptake. Insurers will possess a large volume of data for improved risk evaluation, while policyholders will receive more loss prevention information and services made possible by smart devices with enhanced speed and capacity.

Blockchain

Blockchain could solve some of the insurance industry’s biggest issues in terms of efficiency, security, and transparency. Blockchain has the potential to remove significant barriers to communication and data distribution across multiple parties by implementing a distributed, unalterable record of transactions. This could reduce the time spent on paperwork to enhance the speed of claims and underwriting. Smart contracts might self-execute elementary claims and the like.  

The other area where insurers are looking at blockchain is data management by storing customer information securely. The use of cryptography makes it very difficult for records to be altered. Implementing blockchain could prevent fraud in areas such as storing documents such as medical or vehicle records. Blockchain can even support parametric or peer-to-peer decentralized insurance models.

Quantum Computing

The principles of quantum physics are used to revolutionize the information processing system in a computer. Insurers have high expectations since it is a new technology that has not reached the level of practical utilization. What Quantum says it will do is process staggering amounts of risk data at a speed faster than classical computers can handle. This could lead to highly specific, high-fidelity risk models to support custom coverage and pricing. It may also accelerate intricate procedures such as the optimization of asset and investment portfolios.

It is partly due to such promise that quantum, as it becomes more developed, could potentially disrupt actuarial science and realign the competitive dynamics in the way that hype suggests. But widespread adoption is likely still at least a decade away. The industry is also slowly gearing up to invest in order to understand use cases and build up internal capabilities to stay relevant. Some of the biggest players in the market of quantum computing might dominate the market for a long time, those who learn it as the first.

InsurTech Partnerships

The introduction of new players into the insurance industry means that existing players cannot relax as they used to do. As a result, most are now developing strategies to acquire, invest or partner with InsurTech startups. These collaborations offer attractive opportunities to gain exposure to new technologies. Carriers provide startups with funding, regulatory information, and access to customers.

This we will see a clear blurring of the line between InsurTech and the incumbent. Direct selling channels will increase as insurance providers begin to incorporate digital channels. The use of AI and smart contracts may reduce employment but may also reinvent employees to offer value-added services that have been enhanced by technology. Control will evolve since existing frameworks are not suitable for new capabilities. In the end, it is the consumer who gains the most from the new products and performance that these seemingly unfriendly partners deliver through technology.

Ongoing Investment and Adoption

Some of the technologies like quantum appears futuristic AI, IoT and blockchain on the other hand will receive a continuous increase in adoption over the next ten years. It is only lately that incumbent insurers have realized the extent of this technological disruption. Adoption of new systems and processes are not going to be an immediate shift, however, spending is increasing at a very fast pace. 

As for the consumer side, the demand is indeed high for even more sophisticated and more unique offerings from the insurers. New generations, especially the younger, digital generation, expect convenient customer service, usage-based insurance policies and a harmonized integration of technology when they are out to purchase an insurance policy. Companies that will be in a position to leverage these new technologies will be in a position to gain market share as the technological advancement begins to redefine the competition.

The highly mature insurance industry will need time and more resource investment to transform the existing IT systems to suit the new technologies. Change will not happen at the same rate and will not be complete in every aspect. But within the next decade, the new technologies will beyond any doubt bring new opportunities for insurers and policyholders, which will improve underwriting, risk management, policyholder interaction, and overall customer relations. It therefore becomes clear that there is so much that insurers have to embrace in terms of technology and innovation in order to be relevant in the 21st century insurance market.