What Insurance Will Look Like in 2030

Imagine car insurance premiums that increase if you drive a more dangerous route to work. Imagine life insurance on a pay-as-you-live basis, where rock climbing will increase your premium and a yoga class will decrease it. Imagine automobiles that can use internal diagnostics to measure the extent of damage from an accident — and an artificial digital personal assistant that walks you through the simple claims process.

It’s all part of McKinsey & Company’s vision of insurance in the future, offered in this fascinating report Insurance 2030 — the impact of AI on the future of insurance.

“Artificial intelligence has the potential to live up to its promise of mimicking the perception, reasoning, learning, and problem solving of the human mind. In this evolution, insurance will shift from its current state of ‘detect and repair’ to ‘predict and prevent,’ transforming every aspect of the industry in the process,” the report states.

What’s Driving The AI Revolution?

The report highlights four major trends: the increase of data from connected devices; increased prevalence of robotics; open source data; and advancements in cognitive technologies.

The advent of interconnected devices is particularly interesting because it has the potential to offer a personalized risk score based on people’s daily activities. “The penetration of existing devices (such as cars, fitness trackers, home assistants, smartphones, and smart watches) will continue to increase rapidly, joined by new, growing categories such as clothing, eyewear, home appliances, medical devices, and shoes,” the report said. “The resulting avalanche of new data created by these devices will allow carriers to understand their clients more deeply.”

Are Insurers Ready for AI?

They better be or they’ll be left behind. McKinsey suggests that insurers prepare for the coming changes in numerous ways. Don’t think this is simply something for your IT team. “Instead, board members and customer-experience teams should invest the time and resources to build a deep understanding of these AI-related technologies,” the report said. McKinsey also says that hiring the right talent is paramount to getting this right. Employees resistant to the technology will fail, while those open to it are more likely to succeed.

The next generation of successful frontline insurance workers will be in increasingly high demand and must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process but rather a mix of semiautomated and machine- supported tasks that continually evolve.

“The next generation of successful frontline insurance workers will be in increasingly high demand and must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process but rather a mix of semiautomated and machine- supported tasks that continually evolve,” the report said.

This All Sounds Familiar

Risk & Insurance recently spoke with Ari Libarikian, senior partner at McKinsey & Company (one of the authors of the study) for our own deep dive into how AI is transforming insurance underwriting. He didn’t mince words: “Artificial intelligence will fundamentally disrupt and transform insurance underwriting. Carriers are now able to better predict losses, provide advice and help customers prevent risks. AI is allowing that in a much bigger way than was ever possible before.”

He also stressed that insurers need to get comfortable with changing their day-to-day workflows in order to succeed: “People have been doing their job one way for years or decades and now they need to do things differently,” said Libarikian. “That’s the No. 1 roadblock to carriers capturing full value of this new technology. It’s not the science, it’s the human change management side of things.”

Further Reading: There’s so much more in the Insurance 2030 report, like deep dives into how AI will affect distribution, underwriting, pricing, and claims. We also urge you to check out this series of Accenture blog posts examining how AI will help insurers cope with a new array of risks; as well as this Forbes article making the a claim we’ve known for years: “Insurtech isn’t boring.” &