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Accelerating Changes and Turbulent Times: How should Insurers Prepare

In the rapid evolving Insurance Industry, extensive adoption and integration of automation, deep learning, and external data ecosystems will fuel the growth of the Insurance sector. While it is difficult to predict exactly what insurance might look like in 2030 and aftermath, insurers need to take several steps now, to prepare for the change, that is but inevitable.

Canny Insurers to Get on AI-related technologies and set the trends

Although the veritable shifts in the industry will be tech-focused, addressing them is not the domain of the IT team. Instead, top management and customer-experience teams should invest the time and resources to build a deep understanding of these AI-related technologies. Part of this effort will require exploring hypothesis-driven scenarios in order to understand and highlight where and when disruption might occur—and what it means for certain business lines. For example, insurers are unlikely to gain many insights from the limited-scale Internet of Things (IoT) pilot projects in discrete parts of the business. Instead, they must proceed with purpose and an understanding of how their organization might participate in the IoT ecosystem at scale. Pilots and proof-of-concept (POC) projects should be designed to test not just how the technology works but also how successful the carrier might be operating in a particular role within a data- or IoT-based ecosystem.

Develop and begin implementation of a coherent strategic plan

Building on the insights from AI explorations, insurers must decide how to use technology to support their business strategy. The strategic leadership team’s long-term plan will require a multiyear transformation that touches operations, talent, and technology. Some insurers are already beginning to take innovative approaches such as starting their own venture-capital arms, acquiring promising insuretech companies, and forging partnerships with leading academic institutions.

Insurance companies want to own and nurture start-ups with 100% stake from the current 10% cap the regulator IRDAI has put on holding. They wish to buy all 100% in InsurTech companies, which align with their business.

Insurers should develop a perspective on areas they want to invest in to meet or beat the market and what strategic approach—for example, forming a new entity or building in-house strategic capabilities—is best suited for their organization.

Lately, though, the Insurers have dedicated teams to monitor new technologies to be able to understand their true potential for disruption and are keen to invest in technology companies that they perceive can disrupt the insurance industry.

This plan should address all four dimensions involved in any large-scale, analytics-based initiative—everything from data to people to culture. The plan should outline a road map of AI-based pilots and POCs and detail which parts of the organization will require investments in skill-building or focused change management. Most importantly, a detailed schedule of milestones and checkpoints is essential to allow the organization to determine, on a regular basis, how the plan should be modified to address any shifts in the evolution of AI technologies and significant changes or disruptions within the industry.

In addition to being able to understand and implement AI technologies, insurers also need to develop strategic responses to coming macro-level changes. As many lines shift toward a “predict and prevent” methodology, insurers will need to rethink their customer engagement and branding, product design, and core earnings. Auto accidents will be reduced through autonomous vehicle usage, in-home flooding will be prevented by IoT devices, buildings will be reprinted after a natural disaster, and lives will be saved and extended by improved healthcare.

Likewise, autonomous vehicles will also break down, natural disasters will continue to devastate coastal regions, individuals will require effective medical care, as well as support when a loved one passes. As these changes take root, profit pools will shift, new types and lines of products will emerge, and how consumers interact with their insurers will change substantially. Successful insurers of the future will create and endorse such strategic plans that position their brand, products, customer interactions, and technology successfully to take advantage of the new economic structure on the horizon.

All of these efforts can produce a coherent analytics and technology strategy that addresses all aspects of the business, with a keen eye on both value creation and differentiation.

Create and execute a comprehensive data strategy

Data is fast becoming one of the most—if not the most—a valuable asset for any organization. This holds true to the insurance industry as well: how insurers identify, quantify, place, and manage risk is all predicated on the volume and quality of data they acquire during a policy’s life cycle. Most AI technologies will perform the best when they have bulk data from a variety of sources. As such, insurers must develop a well-structured and actionable strategy with regard to both internal and external data. Internal data will need to be organized in ways that enable and support the agile development of new analytics insights and capabilities. With external data, insurers must focus on securing access to data that improvises and complements their internal data sets. The real challenge will be gaining access to these sets of data in a cost-efficient way. As the external data ecosystem continues to expand it will likely remain highly fragmented, making it quite difficult to identify high-quality data at a reasonable cost. Overall, data strategy will need to include a variety of ways to obtain and secure access to external data, as well as ways to combine this data with internal sources. Insurers should be prepared to have a multifaceted procurement strategy that could include the direct acquisition of data assets and providers, licensing of data sources, use of data Application Programming Interfaces (APIs), and partnerships with data brokers.

Create the right talent and technology infrastructure

In augmented chess, average players enabled by AI tend to do better than expert chess players enabled by the same AI. The underlying reason for this counterintuitive outcome depends on whether the individual interacting with AI embraces, trusts, and understands the supporting technology. To ensure that every part of the organization views advanced analytics as a must-have capability, insurers must make measured but sustained investments in people. The insurance organization of the future will require talent with the right mind-sets and skills. The next generation of successful frontline insurance workers, especially frontline sales (FLS) 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. Generating value from the AI use cases of the future will require insurers to integrate skills, technology, and insights from around the organization to deliver unique, holistic customer experiences. Doing so will require a conscious culture shift for most insurers that will rely on buy-in and leadership from the executive suite. Developing an aggressive strategy to attract, cultivate, and retain a variety of workers with critical skill sets will be essential to keep pace. These roles will include data engineers, data scientists, technologists, cloud computing specialists, and experience designers. To retain knowledge while also ensuring the business has the new skills and capabilities necessary to compete, many organizations will design and implement reskilling programs.

As the last component of developing the new workforce, organizations will identify external resources and partners to expand in-house capabilities that will help insurers secure the needed support for business evolution and execution. The IT architecture of the future will also be radically different from today. Insurers should start making targeted investments to enable the migration to a more future-forward technology stack that can support a two-speed IT architecture.

Conclusion:

Rapid advances in technologies in the next decade will lead to disruptive changes in the insurance industry. The winners in AI-based insurance will be insurers that use new technologies to create innovative products, harness cognitive learning insights from new data sources, streamline processes and lower costs, and exceed customer expectations for individualization and dynamic adaptation. Most important, insurers that adopt a mindset focused on creating opportunities from disruptive technologies—instead of viewing them as a threat to their current business—will thrive in the insurance industry in 2030.

About the Author 

                

Mr. Paramesh Kumar S has a diversified work experience of 27 years. He has worked with McMillan Press as an Editor for 2 Years, 22 Years in various Capacities in leading Insurance Companies including LIC, HDFC, Reliance, Exide Life. He was heading South India for the Training needs of Apps Daily, mobile App. The company, before joining Manipal.

Currently, he is associated with MABFSI since November’16 as Assistant Professor with Life Insurance vertical.

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