Trends to watch in 2024: Insurtech

December 20, 2023 6:50 AM

A person works at a laptop computer at home in an arranged photograph taken in Bern, Switzerland, on Wednesday, April 1, 2020. The Covid-19 pandemic has triggered a seismic wave of health awareness and anxiety, which is energizing a new category of virus-fighting tech and apps.

Digital Insurance reached out to insurance professionals about insurtech related trends and uses for the next year.

The responses have been lightly edited for clarity.

Tanner Hackett, CEO and founder of Counterpart

Having been slow to embrace technology over the last few decades, this year will be a tipping point for traditional carriers that are finding it more and more challenging to operate profitably in these increasingly volatile market conditions. The lack of investment is particularly relevant in claims management, which has seen little attention compared to distribution and underwriting infrastructure.

Expect to see more carriers focus more resources and attention on claims management insurance and risk mitigation in a bid to compete with an increasingly aggressive plaintiff's bar.

Ty Harris, CEO of Openly

Increasing adoption of technology related to severe storm damage. This can range from better understanding of risks at the time of underwriting (e.g., machine interpreted photos of roofs, drone inspections, etc.) to quicker and more precise claims handling (e.g., proactive outreach just before or after a storm, knowing when there was and wasn't hail in a given location, etc.).

Janthana Kaenprakhamroy, CEO and founder of Tapoly

Artificial Intelligence and Machine Learning: These technologies empower insurers to process vast datasets, automate operations, tailor products and services, and elevate the customer experience. AI and ML find applications in risk assessment, policy pricing, fraud detection, and claims optimization.

Chatbots: These software applications replicate human conversations, serving as valuable customer service tools. Chatbots offer insurers the advantages of cost reduction, increased efficiency, and enhanced customer satisfaction. They handle tasks such as answering inquiries, generating quotes, processing payments, and addressing complaints.

Blockchain: As a distributed ledger technology, blockchain ensures secure and transparent transactions. Insurers can leverage blockchain to combat fraud, streamline processes, and bolster trust. Applications include smart contracts, peer-to-peer insurance, and parametric insurance.

IoT-Based Data Collection: This involves the utilization of internet-connected devices and sensors for data collection and transmission. IoT-based data collection empowers insurers to refine risk management, offer usage-based insurance, and deliver value-added services. Examples include monitoring driving behavior, tracking health conditions, and assessing environmental factors.

Bryan Davis, EVP and Head of VIU by HUB

The fusion of technology, collaboration, and customer-centric approaches defines the path forward for the insurance industry in the coming year.

1. Holistic Financial Wellness Through 'Permission': Advances in technology, including AI and APIs, are facilitating partnerships between insurance companies and financial institutions. By gaining 'permission' to engage customers on their financial health, these collaborations empower customers to access a more holistic and seamless approach to financial wellness. Wealth advisors and insurance professionals can now offer comprehensive guidance in a single location, ensuring that decisions align with both financial and risk needs.

2. Innovative Solutions for Emerging Climate and Cyber Risks: The insurance industry is proactively responding to the challenges posed by climate change, natural disasters, and cyber threats. Innovative solutions include advanced risk modeling and analytics, parametric insurance offerings from carriers, and a deeper level of collaboration and partnerships. Sharing data, expertise, and capabilities has become crucial in adapting to the changing landscape and addressing emerging needs effectively.

3. Seamless Customer Experiences Through Technology Evolution: As technology evolves, creating opportunities for personalized and convenient experiences, the omni-channel broker is uniquely positioned to capitalize on these capabilities. This trend emphasizes the ongoing commitment to delivering holistic and customer-centric solutions that align with the dynamic needs of the modern insurance landscape while maintaining the human element capable of providing personalized advice and addressing unique needs.

Darcy Rittinger, chief risk officer at Cover Genius

1. A Refinement of Embedded Protection

There will be a significant trend toward greater customization of products that align with specific customer needs and demands. This evolution will be driven by the integration of alternative data sources and diverse distribution channels. Companies will harness these advancements to create more tailored and relevant products, ensuring that coverage meets customers when and where they need it most. This shift towards enhanced customization is set to change the way businesses engage with their partners and customers, fostering a more dynamic and responsive approach to product development and distribution.

2. The Rise of Parametric Insurance

We anticipate a growing adoption of parametric insurance which will advance risk assessment and claims processing by providing a faster and more precise approach. However, the success of parametric insurance depends on the wants and interests of the end customer, coupled with their awareness of the product. An innovative avenue for adoption could involve integrating gamification and interactive elements to captivate consumer attention and interest.

Jim Fowler, chief technology officer at Nationwide

The risks of Generative AI will catch up to the hype. Companies will wrestle with the cost, capability gaps, and risks associated with Generative AI. The headlines in 2024 will skew away from its potential.

Generative AI will lead to an explosion of malware variants as it becomes easier to refactor old versions. The required reaction time to closing critical vulnerabilities will continue to get shorter.

Third party staff augmentation firms will feel demand pressure as companies turn to coding copilots to increase developer productivity.

Damian Rourke, Partner, Clyde & Co Manchester (UK)

AI-driven claims fraud detection will make major advances in 2024

The integration of AI in insurance fraud detection marks a significant progression in the industry's ability to tackle a perennial challenge that costs it billions every year. In the next five years, it is likely that AI will evolve an increasingly sophisticated ability to detect and counter deepfakes and shallowfakes.

While AI is revolutionizing the insurance industry's approach to fraud detection with machine learning, optical character recognition, and natural language processing, its ultimate effectiveness will depend on continuous evolution and ethical oversight.

Sam Krishnamurthy, VP of corporate systems, Crawford and Company

AI's role in automating claims processes will expand significantly, revolutionizing claims management and aiding in climate risk mitigation. Technologies such as IoT sensors in homes, part of insurtech solutions, will play a key role in predicting and preventing losses, though adoption may present challenges. A subset of AI, Generative AI, will be crucial in processing large volumes of claims efficiently, accurately evaluating coverage against documentation and policy terms, and enhancing the effectiveness of desk adjusters in managing inspections, thereby accelerating claim resolutions and bringing better outcomes for policyholders and clients.

Despite AI's advancements, the "human in the loop" approach remains essential, providing the empathy, ethics, and context that AI cannot offer. This collaboration underscores the critical need for an ethical AI framework, highlighting the significance of a balanced and empathetic approach in the insurance industry for responsible AI utilization.

Tony Agresta, general manager of Nearmap

1. Insurers are leveraging location intelligence and embedding those solutions within systems to allow for deeper insights and learnings, empowering insurance companies to respond to their surroundings in a more meaningful way. With this integration carriers can predict loss including the likelihood of a claim and the magnitude/severity of that claim. AI attributes about the quality of properties will play a greater role in predictive loss including vegetation, fire risk, number of buildings on the property, debris and other important characteristics.

2. 3D imagery is an area for growth and deeper analysis by insurance carriers. The ability to navigate around a property, visualize proximity to neighboring properties and, most importantly, see changes in slope will create increased accuracy in underwriting and improve the claims experience. These insights will drive greater accuracy into the underwriting process, post-storm damage assessment, validating damage claims & streamlining the claims process, risk assessment, and fraud prevention.

3. Climate change and increasing natural disasters are top of mind for us all, in 2024 and beyond. Insurtech and AI attributes will be increasingly used to fuel improved predictive loss models to mitigate and predict climate-related risks with an emphasis on predictive insurance analytics. Applying a historical archive of imagery will be essential in this type of analysis to see change over time. Predictive loss analytics will become a set standard in order to better prepare for the physical and systemic effects of climate change.

4. Geographic information systems (GIS) and the data they generate in insurance will be vital for insurers to address challenges associated with underwriting, reinsurance, corporate governance, sales and marketing, claims handling, and customer service. Mapping and aerial companies will focus on making data layers easier to visualize inside of GIS tools. By creating, managing, analyzing, and mapping huge datasets and then relating them to the world around us, insurers will glean valuable insights about spatial patterns and relationships.

Alok Bhargava, Americas insurance data & analytics leader, EY

The insurance industry is about to undergo a major transformation, thanks to the transformative capabilities of GenAI. Already making waves in claims processing, underwriting, marketing and beyond, GenAI represents just the tip of the iceberg. As we head into 2024, its momentum is set to accelerate, ushering in an era of unprecedented innovation, productivity, and efficiency across the entire insurance chain.

Current experiments with GenAI showcase its remarkable ability to drive more personalized customer experience across insurance value chain. But this is just the beginning. A wave of advancements is on the horizon, bringing even more intricate and refined applications to critical domains like marketing, claims, underwriting, finance, actuarial, and software development.

The future of insurance lies in the evolution of GenAI from experimental tools to pervasive and indispensable applications. Its potential to fundamentally reshape decision-making, enhance operational efficiency, and elevate customer experiences is boundless.

Joel Albarella, head and founder of New York Life Ventures, New York Life’s corporate venture capital business

Joel Albarella -New York Life Ventures.jpg

We expect 2024 to be yet another year of tremendous opportunity for incumbents. The potential at the intersection of insurance and technology remains robust and we can expect a continued confluence of talent and capital for the best ideas.

Incumbent enablement will continue as a prevailing theme and 'how' partnerships are developed will replace 'what' is pursued as the core operating question. We, of course, are excited about the opportunity AI represents, particularly for established carriers with massive longitudinal data assets.

Terrance Williams, president and chief executive officer of TruStage

This year looked different than some leaders were predicting at the end of 2022. The generative AI boom has been at the forefront in the minds of some and the recession economists have been predicting for months, has yet to come. As such, there are still a lot of unknowns for our industry and for customers moving forward in to 2024. 2024 is going to be an interesting year.

We are paying particular attention to middle-income Americans. There are challenges ahead for specifically those middle-income earners, and many of our partners, including credit unions, have programs in place to help people build greater financial stability and literacy. Our role as insurers is to help all customers prepare for the unexpected while planning for the future.

Kieran Stack, head of managed shared services and insurance operations, Digital Client Solutions group at Aon

Generative AI:

AI will undoubtedly be top of mind for all C-Suite executives in 2024. There is a lot to unpack with AI and there are multiple steps in the insurance value chain where AI can be of huge benefit.
Building AI tools and models to support a more efficient and accurate Customer Risk Assessment and pricing process will likely be a key focus area along with leveraging AI to identify customers more at risk of cancellation.

Data:

Data continues to be critical right across the entire insurance value chain. In order to better leverage AI and other automated process implementations, companies will need to constantly assess their data models and invest in enhanced ways to source, ingest and analyze data.

Servicing:

Continued investment in digitization of the customer servicing processes focused on enhancing the customer experience to drive retention and profitability. Much of this work will likely focus on three key areas:

1. Automation of repeatable processes such as invoicing and certificates of insurance issuance

2. Increased leveraging of OCR tooling in the management and processing of digital documentation

3. Investment in digitized self-service offerings for mid-term service requests (think endorsement, cancellation or ad-hoc cert requests)

Rose Hall, head of innovations, Americas, AXA XL:

There's going to be a lot of movement in the coming year due to the shift (dip) in startup funding. Less money floating around in the cosmos lately, funding being cut, and startups being devalued, resulting in a shrinking of the pool of Insurtechs. This means less competition from startups against big incumbent insurers, but also less entrepreneurial insurtech with whom we (incumbents) can partner to enhance both of our businesses. I think it some ways this presents challenges to the insurance industry, and in some ways opportunity for the incumbents to scoop up some of those entrepreneurs (companies and people) to bring that innovation in-house.

As for IoT, it needs to go beyond "can and cool". We put IoT on this or that because we "can", and what's the outcome? Look how "cool". Industries are asking for more than shiny-blinky objects to measure their business results. They want analytics and insight to manage those results. Once the "coolness" shine is off of the IoT, many are asking what they do with this information? Is it actionable? Does it change their risk or their business results? Unless IoT providers solve for this, they will fall into obsolesce. E.g. If a telematics solution only collects data about one's driving but doesn't provide instruction or intervention on how to correct it, its relatively purposeless.

As for GenAI, this will be commonplace before we know it, and those who get there first, are ahead in the finite game of appearing innovative and disruptive. But those who get there BEST (with the most integrity, morality, and accuracy) will win the infinite game of long term success and resilience and sustainability.

Michelle Buswell, SVP and chief operating officer at LGA

Michelle Buswell of Legal & General America

In 2024, advances in operations technology will be vital to the industry's continued reimagination of the partner and customer experience. Those companies that are the easiest to do business with will win!

Tools such as artificial intelligence, machine learning, natural language processing, etc. can and should be used to shorten cycle times across the value chain in new business, in force processing and claims to eliminate the need for manual work and correspondence with faster, more proactive insights to partners and customers.

At LGA, we're incorporating these tools to reduce cycle time as well as predict and solve problems before they occur. One example is leveraging a sophisticated optical character recognition capability to extract structured and unstructured data to be ingested into source systems without human intervention, which is currently saving us about 17 hours a day in processing time.

Jeff Sippel, EVP and CIO, Northwestern Mutual

This year has been a revolutionary year for generative AI, and as we look to the year ahead, its impact on our lives – both personally and professionally – may be profound. At Northwestern Mutual, we recognize that AI offers capabilities that can drive productivity and unlock new information and resources. And with those capabilities come important questions. Namely, we know that consumers do business with companies they trust, and preserving that trust is paramount. Moving into 2024, it will be critical for companies, if they haven't done so already, to create an AI governance framework to ensure AI is used responsibly within their organizations.

Sears Merritt, head of enterprise technology & experience, MassMutual

In 2024, AI will continue to evolve and integrate into our daily lives at a rapid pace. As companies grow in their understanding of actionable ways AI can be used that are both effective and appropriate for their stakeholders, they'll also need to understand and adhere to legislation as well as map out their own ethical standards – as we have – to protect their businesses and consumers. As a mutual company created to help people secure their future and protect the ones they love, MassMutual's priority is our policyowners, so we are exploring relevant Generative AI use cases that lead to more personalized, pertinent and modern customer experiences.

Adrian McKnight, chief digital officer, WNS

My big prediction for next year is reimagining insurance with the combination of AI and the internet of things and sensors. That ability to move more into the prevention space, rather than the coverage of loss, but actually to prevent the loss will be much stronger next year, through the combination of those new technologies.

Vasudevan Veeraraghavan, chief information officer, Greater New York Mutual

Vasudevan Veeraraghavan of GNY Insurance Companies

The prediction is, you're gonna see more use cases using Gen AI starting to flesh out. You're going to see some good results out there, number one.

Number two, you're going to see a lot of consolidation from how, because in every area, if you look at data, if you look at actual core platforms, there's a lot of offerings, but it's matured at a point where you're going to see a lot of consolidations happening next year. That means a lot of it is going to be API driven. That consolidation will also happen because it is going to be interconnected through APIs.

Jason Landrum, global chief information officer, Sedgwick

Over the last several years, the insurance industry has adopted technology more rapidly than at any previous time. I expect this development to continue in 2024. Generative AI has the potential to change how we in the insurance industry think, work, process and interact with stakeholders. It is transforming the claims process, creating improvements in customer service, claims handling, underwriting, modeling and more.

Insurtech solutions will, I believe, increasingly leverage large language models (LLMs) to promote efficiency and shorten cycle times. In the next couple of years, companies will continue to mature in their use of LLMs and such applications will become more commonplace.

Jason Kaminsky, CEO, kWh Analytics

Expect a continued focus on underwriting profitability among insurtechs, rather than on growth at all costs. Companies that are taking a differentiated view of risk and are focused on writing profitable business will be attractive partners and acquisition targets.

Ellen Carney, principal analyst, Forrester

Ellen Carney of Forrester Research — Ellen Carney, principal analyst at Forrester Research.

Less than 1% of insurers will see tangible, direct benefits from generative AI (Gen AI). As a result of ChatGPT's recent popularity, insurers are keenly interested in Gen AI. Many hope it will substantially benefit their operations, customer service, marketing and sales, and IT.

However, genAI is a very new technology. Insurers' present AI capabilities reveal a substantial gap, and Gen AI will be no different. This will make it hard in 2024 to obtain tangible and direct advantages, such as "10% of revenue is attributable to Gen AI." Expect to see insurers experimenting with Gen AI in areas like chatbots, employee-facing tools to summarize data and content development, particularly in marketing. To make the most of the Gen AI opportunity, insurers should include it as part of their wider AI strategy, experiment with employee-facing use cases, and be cautious of the coherent nonsense it can generate.

Guy Goldstein, CEO and co-founder, NEXT Insurance

The insurance industry will witness a significant shift as the expectation for simpler digital solutions grows among both customers and agents.

The value of streamlined digital experiences will no longer be seen as a luxury but will gain market momentum, driving insurers to increase their investments in technology and explore potential collaborations with technology providers. This heightened focus on technology will enable insurers and agents to develop a deeper understanding of their customers, resulting in superior customer satisfaction. By leveraging the capabilities of generative AI and other advanced technologies, insurers will significantly enhance their ability to serve both customers and agents. These technology investments will not only streamline the purchasing and servicing process for customers but also provide agents with powerful tools that offer a notable advantage. These tools will simplify their job, enabling them to efficiently serve clients and drive business growth.

Insurance startups must shift their focus from solely pursuing profitability to striking a balance between profitability and growth.

Applying the valuable lessons learned from the challenging economic environment of 2023, such as cost-cutting measures, operational streamlining and adhering to strong unit economics will be crucial for success in the new year. Startups should proactively identify and implement strategies that enable them to continue growing at a fast pace without compromising the new fundamentals of strong unit economics metrics. By doing so, they will be better positioned to navigate the changing economy and stay ahead of the game.