From loss compensation to loss prevention

What you must first realize is that insurance anno 2030 is more a data business than anything else. Data are acquired through the Internet of Things, social media, smartphones and wearables. The data are then stored in the cloud, blockchain, Interplanetary File System (IPFS) and the like. Today data are transferred via Application Programming Interfaces (APIs) and processed through technologies like big data analytics, artificial intelligence and machine learning. 

Insurers are increasingly using AI for underwriting, pricing and claims management. Are we supporting or replacing insurance employees with robo-advisors today? Well, we already partially did that in 2022. Back then Kate, at bank-insurer KBC, was already much more than just a chatbot. Kate augmented employees’ daily tasks and made sure no customer got left behind.

Professor of Digital Strategy at Vlerick Business School

One big technology showstopper, though, was systems integration. Many financial services companies resulted from M&As, joint ventures, and partnerships. Over the years they developed different IT systems that didn't always work together well. Today, this problem has been more or less remedied. Enterprise architectures and IT backbones support the promises of technologies, such as AI as a solution to help deliver seamless customer, partner and employee experiences.

Insurers today are almost completely transparent, thanks to the demands of regulators, who wanted more competition, more openness in the sector. So in recent years different kinds of regulations were implemented to create this openness.

On the one hand, there is regulation with an indirect impact, such as the European GDPR. This privacy regulation gives you the right to know what type of data are stored about you, what it is used for and the logic being applied to it to make decisions. Today insurers have a full picture of their customers and can tell me how they assess my risk, determine my premium and what they do in case of damage. On the other hand, regulation with a direct impact, like the PSD2 that applied to banks in 2022, requires insurers in 2030 to share data with anyone entitled to receive it. 

Of course, they only share this information if I, as the insured, consent to it. And I do so only if the insurer can better serve me. Many today would prefer insurance companies to help prevent loss, rather than compensate it. This opens an opportunity for many generalist insurers.

For example, people want to stay healthy. So the objective for insurers today, anno 2030 is to keep the insured healthy with all kinds of digital services, such as medical assistance, fitness monitoring, dietary advice, specialized apps, wearables and smart devices. Another example: drivers, obviously, prefer not to have car accidents. So why not teach them to drive better via digital technology, based on data from their and other smart cars? Or why not prevent burglaries, as an insurer, by securing the insured home and neighborhood?

This way, insurers do what customers want most: predict and prevent loss. They can achieve this by  unveiling a range of services, bespoke to the customer, within the different areas of insurance coverage: mobility, health, retirement, etc. This would create one seamless customer experience, where the insured enjoys all those services through one digital platform, leveraging an ecosystem of partners.

Similarly, insured parties today know exactly what they are paying for, namely, support to prevent risk, through regular contact. This also gives the insurer more positive touch points, improves its relationship with the customer and increases customer satisfaction and loyalty.

Insurers find plenty of technological solutions to provide these services from insurtechs. They have grown to become technology partners for insurance because while they had the new technology, they lacked customers, the brand recognition and the financial resources. Big tech companies have also become partners. Insurers continue to use their cloud services. And in return, big tech, with customer consent (and a push from the regulator), shares data with the insurer, making it easier for the insurer to build on and extend its services.

Although big tech has not taken over the insurance world, it is fully intertwined with the economic system so that insurers have not been pushed out. In other words, insurers continue innovating to leverage these partnerships. 

On the one hand, there are some insurers that were and are still strong in covering niches. The generalist insurers that are growing and thriving have open mindsets that encourage innovation and creativity. Insurers must focus on what else the customer wants: how they can create an offering that the customer won't pass up. To bring this about insurers will have to exploit proprietary data, big-tech data and insurtechs. They will also have to develop digital platform initiatives that deliver and scale.

This, by the way, is why decentralized approaches failed. Rather than decentralizing and democratizing insurance, recentralized apps took over. And then someone came along and aggregated those recentralized apps and bundled them together. This was achieved by the generalist insurer, in partnership with big tech and insurtechs.