Forecasts by analysts on market developments, industry, technological trends are usual in this period of the year, and the broad availability of data has accustomed us to increasingly accurate outlooks, although the coronavirus has highlighted how an unexpected event, the so-called ‘black swan’, is always right at the edge to disrupt everything and create unexpected perspectives.
The forecasts for every type of industry we were reading about this time last year, for example, obviously did not take into account the pandemic and could not foresee the speed-up in digitalization that would occur, even in a field like insurance, traditionally one of the slowest to adapt.
According to Bain & Company, need is the mother of invention and today “companies are rushing to develop new digital capabilities in an effort to build resilience and tools for the post-pandemic future.” The advisory firm has identified 10 hot technology trends for the coming year, quite a few of which are affecting the insurance industry and one in particular is an insurtech trend, the so-called ‘tailored insurance’ one.
Bain & Company’s ranking
As indicated in the infographic, the technological trends identified by Bain & Company (the result of an analysis carried out with 100 technology companies and start-ups) are very precise and also particular, even unusual, partly affected by the pandemic and widely interconnected.
At its best, AI is not new to the tech trends over the last few years, yet in this ranking we are talking about ‘edge AI’: these are AI, algorithms, developed to ‘run’ on the devices in the user’s hands, on the devices gathering the data. The benefits of edge computing include lower bandwidth commitment and increased efficiency by processing information closer to the users and devices that require it, rather than sending that data for processing to central locations in the cloud. The massive change in network traffic following the lockdown, resulting from home office, digital communications, distance learning, etc., are accelerating the shift already underway toward edge computing.
The inclusion of 5G in second rank is not surprising: the advent of this new ICT standard was only a matter of time, driven not so much by tech as ‘political’ issue, yet the era of this technology clearly needs to begin now. This technology will become an enabling factor for many applications wherein the pandemic has made clear the usefulness, for example those in the field of telemedicine, a sector that also strongly affects insurance industry.
Health technologies will be one of the most important trends for the foreseeable future, Bain lists ‘Health Data’ at number seven: the health data market is expected to reach $70 billion by 2025, almost six times the value of 2016. The rapid acceleration in health data collection (which will explode even more thanks to 5G and edge AI) offers the industry an unprecedented opportunity for intelligent use of health data to radically improve patient care.
Unheard of in this ranking, as technological trends, are the ‘circular economy’ and ‘zero waste’, both topics gaining momentum in a new sensitivity to sustainability issues generated by the pandemic. Technology can do a lot in these areas, and insurance companies can also find new business models: according to Bain, within a few years circular economies will replace linear economies, there will be a shift from transactional relationships based on the sale of products to a production and consumption model that involves sharing, leasing, reusing and recycling existing materials and products. This model of asset circulation offers new space for the development of insurance products, some startups are already moving in this direction.
Tailored Insurance, the future for car insurance
The trend that insurance companies should focus their attention on, especially in Italy which is always among the largest black box markets, is undoubtedly that of ‘tailored insurance’, a new way to mean UBI, Usage Based Insurance.
What exactly is meant by tailored insurance is easy to guess: it deals with the utmost customization of the policy, a tailored policy for the client, made possible today by the smart use of data analyzing the driving behavior of the driver and thus allowing the calculation of a very precise risk profile. Data collected through telematics in an increasingly efficient way, but that’s not all, the smartphone is becoming the new leading player at the service of UBI and driver safety.
Thanks to telematics, the UBI insurance market is expected to reach $126 billion by 2027, but perhaps even more considering there will be 3.8 billion smartphone users by 2021, enabling insurers to leverage sensors and tracking technologies built into smartphones to collect real-time data and better understand their customers’ driving routines. Ultimately, this will give insurers the opportunity to offer more competitive and innovative behavior-based insurance programs while promoting driver safety.
US based startup TrueMotion, for example, identifies good and risky drivers and settles rewards using drivers’ behavior ratings. Yet an additional app from the company uses signals from smartphone sensors to detect car accidents and provide contextual accident data. Customers can submit a claim from their phones, simplifying the insurer’s claims processes. In TrueMotion app, users can see their driving behavior score and how many times they drove while distracted, hit the brakes too hard or got into dangerous situations.
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