Editors note:
AI, blockchain, analytics, BI, automation & emerging technologies will fundamentally change how risk is assessed, how products are developed & how customers interact with insurers. Value chains will be adjusted to accommodate, and insurers and brokers that are not only able to integrate these advances into their current value chains but also develop entirely new ways of doing business will be the leaders in the industry in the coming decades. However, even as the industry moves in this direction, the role of humans will not diminish. Instead, it will take on a more analytic, consultative and advisory role, evolving beyond pure risk evaluation.
New technologies, from enhanced data capture, particularly in the personal insurance space, to risk analytics and machine learning to digital enablement and automation are expected to fundamentally change how insurance is distributed, how risk is assessed, how products are developed, and how customers interact with insurers for servicing. The change will impact not only the traditional back-office functions but also middle- and front-office functions as well.
Over the past two decades, many back-office functions have become increasingly optimized and automated, not only in the insurance industry but broadly across all financial services. This trend is increasingly starting to affect other portions of the value chain as well and there is little reason to believe that the majority of existing functions will not be either automated or enhanced with AI or analytics over the coming ten years. For instance, front office roles such as underwriting, distribution, claims, and even pricing actuarial roles will see many of their core functions either augmented with increasingly specialized data or even wholly replaced. Advances in data collection from specialized sensors and the prevalence of IOT devices have made many personal insurance lines more and more commoditized; there is little reason to believe that these same advances will not come to the commercial space as well. Some insurers are already creating functions like a ‘hybrid actuary’ that is responsible for not only impacting pricing decisions but also using the data being gathered on a commercial scale to guide strategies for new products and services. Increasingly, preventative and risk advice services are being created as a way to harness the increasing amount of data and develop a fee-based source of income as downward pressure on standard commercial product rates increases.
Additionally, back-office functions that have previously been augmented or highly optimized will move into straight-through processing models supported by chatbots for customer contact, with steps in the value chain like submission clearance and issuance being fully automated for most major commercial products. As this happens and expense ratios are driven down, only those carriers which can fully utilize analytics and data-augmented decision making in their underwriting process will be able to price effectively in the market. Many middle and back-office functions could see their manually processed volume decrease by as much as 80%, leading to faster turnaround times and a widening gap in customer service between carriers and brokers that embrace digital enablement and those who do not.
Finally, all of these changes will have an impact on the skills and capabilities required within the insurance workforce, particularly for front and middle office roles. There will be an increasing need for technology-based skills and less of a reliance on cognitive-based skillsets as algorithms do some of the ‘heavy lifting’ for underwriters and actuaries. However, more social and emotional skills will need to be paired with this automation trend, increasing the need for creativity and social intelligence in the insurance workforce. As technological expertise is increasingly intertwined with human expertise, the human side of the equation will need to focus on broad insight generation, advisory roles, and relationship management, moving further into a consultative role rather than purely a risk evaluation role.
