Artificial intelligence - and lately #chatgpt – are on everyone’s lips. More fundamentally, a few weeks after the #openai and #chatgpt, Microsoft and Google also positioned themselves on the topic with the resources that we know them to have. In all sectors, the oracles are predicting the end of entire lines of industrial, marketing, communication but also IT-related jobs. The many studies which have been issued on this question are contradictory from one to other. I was told not so long ago on the sidelines of a meeting that up to 25% of insurance activities could become entirely automated within the next 3 years, according to one of such studies. The magnitude of the alleged shift should not be underestimated. This statement implies that, for a quarter of the current activities, human activity will be at least greatly reduced or even totally replaced by IT tools! Yet, an #insurance client assured me a month ago that exiting legacy was not an option for multiple reasons, associated with costs, of course, but also with the many types of risks of such a big bang change CIO generally does not want to activate, and with the need to prevent service interruptions and preserve business continuity. Torn between their long-term vision, the need to embrace innovation to remain competitive, and ROI objectives, how will insurers approach artificial intelligence?
What are the main change catalyzers for the industry in 2023?
Instead of fantasizing (yet another time) about the Great Technological Change, better rely on facts and on a nuanced perspective of our near future IT. Two types of exogenous change, plus a third, internal change, are likely to have a real, serious, and measurable impact on the insurance industry in the next three years.
Firstly, regulatory change is inevitable for the industry. Whether it is European or national regulation, the main driver of change for the insurance industry is compliance. Recently, the PRIIPS #regulation has pushed insurers to position themselves on - and sometimes to rethink about – how they communicate with their clients. PRIIPS requires market players to communicate in a defined and clear manner about the packaged insurance products that they offer, with a particular emphasis on those returns that are based on a volatile third-party asset. This is a tangible example of the importance and direct influence of sector regulation on the ways in which insurers address their customers. The response might indeed imply technique and #technology, but, as a matter of fact, they constitute for implementing regulatory change.
Although they may seem harmless and remote, regulations in other domains can happen to have also considerable side effects for the sector. The years 2020-2025 will be very rich in this regard. For example, take the European Commission's goal to create sectoral Data Spaces to turn Europe into a Data giant. It is easy to understand how the entire insurance sector will be impacted by a proactive Data policy supported by the Commission and by private players. It will therefore be necessary to think together, between partner and competitor players, on how to collaborate in order to nurture, for example, the "European Health Data Space" which has yet to be brought to life, following the European Health Data Space Regulation proposal from the European Commission. The Belgian consortium of insurers #assuralia has already taken a stance on this issue, sharing a common position among Belgian insurers toward the European Institutions. The Commission therein aims to improve data exchange in order to provide European actors a better understanding and addressing of their market, stimulating competition, with due respect for personal data protection law. Knowing that health data are sensitive data, this questions the way European insurers will grasp this topic. Here again, the implementation of peculiar regulations will be possible only with the support of robust IT tools. Among other things, it will be necessary to identify what data can be shared, with whom, how, within what timeframe, and in what format, etc. This constitutes a huge technical and legal challenge for the coming years.
Apart from the regulatory changes that apply to insurers from the outside, there is a second factor of change that insurers cannot control: we, the consumers, and our new habits! Changes in consumer habits, and therefore in the insurance products consumed, are a second very powerful driver of change for insurers. Today's insurance consumers, because we must define customers as consumers who no longer hesitate to compare insurers' products and values, have fairly high profiling expectations. They expect to be addressed (almost) personally, to be known well, and to have their needs met in a differentiated way. The new insurance consumers are younger, and they are also more connected. Over the past few years, it was impossible to miss that large insurance companies launched brands and products entirely online, with totally dematerialized underwriting processes. This is proof of the digitalization of insurance offers, which target new audiences by meeting their needs, which are also new. These younger audiences are also sensitive to ecological and political issues. It is important for them to combine consumption, fair prices, and moral values. The new youth also questions legacy models of ownership and mobility, thereby paving the way for interesting use cases and innovative products.
Is it AI.nsurance or IT.nsurance that really is key?
Finally, it is true that technology is shaking up our clients' businesses every day. Missing the (moderate) turn of AI in the insurance sector would definitely be a mistake! The combination of an abundance of available data (whether public, private, proprietary, or not), of its data processing and analysis to better understand the habits and desires of their customers, and the productivity gains linked to IT investments, makes us realize that the driver for adapting to a changing world is a good command of IT tools. The possibilities for supporting insurance through IT innovations are numerous:
- Automation can speed up the underwriting process, make claims reporting more efficient, and cut the costs associated with repetitive and low-added-value activities.
- Data engineering is of paramount importance to connect scattered data, expose it to the right users, make it understandable to non-expert teams, and build up trends or new products from there.
- AI could be trained to answer typical customer questions, help detect fraud, support underwriting work
Insurance, pensions, and mutual protection are stable sectors of our economies. They are affected by external and internal changes, that much is for sure. However, the fantasized big bang, and even more so when associated with the AI buzz of the past few weeks, seems to take the more nuanced form of controlled development. IT helps modernize the insurance industry. It enables the design of new products at a fair price by leveraging the power of the available data and IT tools. The automation of administrative tasks and the better definition of workflows reduce the time to market of new products. IT departments have at their disposal #rpa (Robot Process Automation) tools, cloud tools made available by the giants of the sector (#gafam are positioned on this point, far ahead), well-mastered #bigdata platforms, and recently AI on which to rely.