Insurance is a rapidly evolving industry that's shifting to meet its clients' changing needs. However, this evolution is being heightened by several emerging trends, particularly technological advancements. This is evident by the surge in insurtech funding globally. According to CB Insights, over the last three years, insurtech funding has risen from $1.46 billion to $2.44 billion in the US, representing a 60 percent increase.
Similarly, investment in the sector tripled in Asia, going from $140 million to $506 million. Thus, the future of insurance is closely tied to technology. Several technological advancements, such as artificial intelligence, the Internet of Things, trust architecture, personalization, and data mining, are influencing how insurers relate to their clients and the products and services they offer.
For instance, insurers are taking data collection much more seriously to effectively identify their consumers' needs while offering customized pricing, advice, and coverages. Insurers are achieving this by collecting data from IoT devices such as wearables and other smart devices. Thereby shifting insurers' focus from consumer segments to individual consumers' needs.
Insurers are aiming to improve their users' satisfaction through the personalization of insurance policies and make stable margins and more accurate risk assessments. One insurance firm, Beam, has adopted IoT technology for dental insurance. They provide their customers with smart toothbrushes that track their dental health and use this data to create personalized insurance plans. Thus, Beam claims this allows them to offer rates that are 25 percent cheaper than competitors.
Further, artificial intelligence (AI) and robotic process automation (RPA) are set to transform the insurance landscape. According to McKinsey, artificial intelligence will transform every aspect of the insurance industry by 2030. These changes would unfold gradually as advancements in AI capabilities and data processing emerge, as well as the creation of newer data channels, making the insurance industry more efficient.
Companies like Lemonade, an insurtech company, have already developed a business model that utilizes behavioral economics and AI as its foundational elements. AI effectively addresses paperwork and brokers, while its behavioral economics capabilities reduce instances of fraud, reducing costs, time, and effort.
Additionally, AI could effectively improve existing methods of anti-money laundering, fraud prevention, pricing, and underwriting. Moreover, AI also offers data collection opportunities that will truly create automation in insurance companies and enhance personalization. Shift Technology, a software company, is currently offering AI-based anti-claims fraud detection software to address various challenges that insurance companies face.
Similarly, insurers globally have begun adopting telematics to evolve their auto offerings. This evolution is also poised to extend to other product offerings such as health, life, commercial lines, and property as developers continue to improve upon the specificity and frequency of data capable of being shared through IoT devices. Customers would also accurately provide insurers with data regarding their needs. Thus, allowing insurers to understand risk and provide clients with real-time services effectively.
These emerging technology trends will drastically alter the nature of insurance in the coming years while significantly increasing the sector's worth by opening it up to billions of dollars in revenue, which would be achieved through reduced operational costs and improved operational systems, among others. Furthermore, as insurers continue adopting these new technologies, consumers will benefit from improved and streamlined offerings.
