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October 21, 2021

From the Dais Research Team

McKinsey on the future of insurance

In McKinsey’s latest report on insurance, they explore 5 trends that will have an industry-shifting impact on insurance. These advances represent a significant opportunity — as we’ve seen with recent insurtech funding — but the changes also pose an existential threat for insurers that are slow to adapt.

Read: Top tech trends in insurance

Key tech trends

Applied AI

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AI is poised to fundamentally reengineer almost every part of the insurance process. At its first level, it will partner with people to increase productivity and help insurers take advantage of their data assets. Leading insurers with quality AI will also create new products and services based on data and analytics. 

Dais Insight: AI feeds on data, and the capability of AI will be determined by the quality and quantity of the available data. Insurers’ ability to capture and use data is going to be the bottleneck, and the highly successful insurers are going to be the ones who are already working on this data problem.

Key tech trends

Distributed infrastructure

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With aging core systems, insurers around the world have significant tech debt that is holding back their digitization and innovation efforts. There’s a rapid shift underway to move everything to the cloud, which enables more rapid product launches and larger data set analytics, ultimately enhancing the customer experience and bottom line profitability. Cloud-native insurers will act as a connection hub for customers, insurtech, carriers, and reinsurers.

Dais Insight: We’re seeing a significant specialization when it comes to cloud applications; the capabilities that were once housed in core systems are being distributed into multiple systems, such as CRM, marketing automation, claims, and online tools of all types.

Key tech trends

Trust architecture

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Insurers are a store of highly sensitive data, and as insurance products continue to evolve so will the need for sharing high volumes of data securely. Blockchain technology will play a crucial role in this evolution as it will help carriers better manage and secure customer data and simplify identity management and verification.

Dais Insight: One of the greatest opportunities becoming available through blockchain technology is the stability and trust realized by insurance to geographies that are historically difficult to insure. Low stability and low predictability make it difficult to insure developing countries, which in turn makes them even more vulnerable to risks. Trust architecture makes programmable insurance possible and can help create more stability in developing countries.

Example Application

Dynamically adjusting premiums and benefits

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A continual connection to the policyholder opens up new opportunities for products that dynamically adjust to policyholder needs. For example, today people have life insurance, critical-illness protection, disability coverage, and long-term-care coverage, but in the future the lines between these coverages will blur as insurers offer umbrella coverage across all the risk categories that adjust to each individual’s needs. Increases in data sources and data reliability will enable insurers to price and adjust accurately as customer needs shift. 

Dais Insight: Programmable insurance that can adapt in response to changes in incoming data creates all kinds of UX problems, such as keeping people informed of their current coverages. We are seeing some companies move in this direction — such as travel insurance that automatically turns on when you leave the country — but wider applications of programmable insurance face some real challenges.

Example Application

Insuring automated businesses

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As automation matures and the need for human oversight lessens, we will see new business structures emerge that require wholly reconsidered coverages. A fully automated warehouse, for example, will have no lights and very low workers compensation needs, but cyber and AI malfunction will pose a significant risk to which insurance will need to adapt. 

Dais Insight: This is the next step beyond the current cyber coverage challenge with which the industry is wrestling. As these technologies continue to change the business landscape, the speed of innovation will continually reveal new risks, and, as the cyber challenge is now showing us, insurers unprepared for the new risks will pay a high price.

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