What the Future Holds for Insurance
What changes lie ahead for the rest of 2023? That’s a question that Insurance Journal’s “On Point” podcast host Peter van Aartrijk discussed with David Smith, founder and chief executive of Global Futures and Foresight, late last year. Smith is a leading futurologist and strategic thinker, and together they examined what the insurance industry and other businesses can expect in 2023, from artificial intelligence (AI ) to the post-pandemic workplace.
Technology and its impacts are always at the top of mind, Smith said, who is making his third guest visit to the “On Point” podcast.
“Social attitudes are changing, which is a good thing in many ways, although it’s challenging for boomers,” Smith said. “But how we think about our privacy, how we think about engaging, and who we’re prepared to engage with is changing quite substantially.”
The older generation of workers have grown their careers in an era of rapidly changing tech and consider themselves “vanguards,” Smith said. Today, we have gone beyond simply using tech and into a new era in which the processes themselves have become digital, more automated, and more reliant on artificial intelligence.
“So we’ve got to move away from, if you like, the processes of being an insurance business on one end or the other to the cognitive end of what it is to be a human engaging with human beings,” he said. That means focusing on the things humans do best, such as creativity, relationship building and communications, while letting tech manage the rote processes, he said.
Using AI to prevent and predict loss is of particular benefit to the insurance industry, according to Smith.
“A predictive and preventative approach, as opposed to a compensation approach, is what the insurance industry is ultimately going to be about,” Smith said. He said that if it’s all about risk management, it can’t be about compensation for loss. The industry has to be able to articulate the benefit, he added.
Articulating the benefit is a big challenge on the selling end.
“Oh, if something didn’t happen, do you want to pay [premium] if in fact something didn’t happen? Whereas if something did happen, and you’ve got to pay or compensate for it, at least you recognize there was some value in that relationship and in the contract.”
Smith said it could come down to predicting very specific, individual risks in real-time based on behaviors.
“So maybe we could say we can prevent you going around the back of that lorry (truck) and running that child over because there are cameras in the street connected to the car, connected to our behaviors,” he said. “We know we won’t brake in time, so we warn you.
How do we prevent that? Do we start braking the car early? Do we take it over from you? So, the interesting challenge is where do we leave off and where do we allow technology to take over?”
AI could also help brokers provide other more proactive added benefits for their clients.
“Quite frankly, it’s probably beyond the width of many of us to know how to blend well-being, health and life, P&C and travel insurance in the right mix, almost on a real-time basis for a client. But technology can,” Smith said. “So why don’t we focus on how to be increasingly knowledgeable and valuable for the client by using technology to help us predict what they want to achieve, to augment what we already know about what they’ve said they want to achieve, and therefore be seen as a more valuable person.”
If the industry can focus on the client in terms of what their aspirations are, then their insurance partners can think about how to help them be more successful in that space, he said.
“It’s a bit like, if you define yourself as in railroads, you went bust. So then you define yourself in transport, (and then) you went into airlines and other areas of movement, and you didn’t go bust,” Smith added. So, it’s about defining what it is to be a broker going forward. “I think it’s probably one of the most important things, and you could probably argue that for the whole industry.”
Looking at the progress and innovation of certain technology just in the past decade shows that almost anything is possible in the very near future, he said.
“If you’re walking down the street and three minutes ago there was a call to the police for a mugging, do you flag that through to someone who’s your client — who’s just about to walk down that street — and say, ‘Don’t do that, turn around, go the other way.’ I mean, that’s the level at which you can introduce technology,” Smith predicted.
In the past, people have viewed technology and automation as a potential threat to jobs, but that’s not how the evolution of technology has played out. Instead, people are free to pursue those particular human skills to the benefit of clients and businesses.
“We’re not very good at doing things in straight lines. It’s boring and repetitive,” Smith said. But there are some things that technology is better at than humans. “So, stop fighting it and become better at what humans do,” he said.
That means focusing on what humans do best — relationships and building trust with other humans.
“It’s heartening to hear you say that the role of the human being in the insurance world will still be highly relevant despite all this or in light of all the new technologies,” said van Aartrijk.
Part of the challenge is building and retaining ongoing relationships, Smith added. Rather than only seeing clients to make a sale or address a catastrophe, their insurance partners should aim for more.
“It’d be hard for you to tell me that they’re not able to generate more revenue as a consequence of that relationship, especially when you’re bringing value to your client, their family and their business on a very regular basis.”
Technology and AI will only get better at making predictions and connecting people, Smith added. The shift to working from home during the pandemic is just one example of how technology allowed companies to reimagine the way they do business.
Even before the pandemic, there was a shift toward more work-from-home and hybrid operations, but the necessities of the pandemic accelerated that trend. Hybrid work has become “the norm,” Smith said. Now, we appreciate that work can be carried out anywhere that’s appropriate and that collaboration doesn’t have to be limited to the people in a room, he said.
“The obvious thing is the death of distance. We don’t see remoteness as being an issue anymore,” he said. “We come together when we need to come together. We’re remote when we need to be remote,”
But the pandemic also made people more aware of the need to prepare for massive events and potential risks, he added.
“There’s so much knowledge and data that we’ll have about someone’s circumstance, therefore the risk and the increasing and decreasing amount of that risk can be updated in real-time,” Smith said. “That’s quite exciting.”