The flagship event InsurTech Connect 2023 recently concluded, marking a pivotal phase for the insurance sector. The buzzing transformation narrative spurred by AI technology was a hot topic, yet so were the imminent industry challenges. As leaders navigating your organizations through these turbulent times, understanding these dynamics is vital which is exactly what we stand for here at this blog.
Emerging Trends in the InsurTech Industry in 2023
Dissecting the Successes in InsurTech in 2023
Incorporating New Technology: AI at the Helm
Artificial Intelligence (AI), especially generative AI, is no longer just a novel idea. This revolutionary technology has become a tidal wave of innovation, forever altering the landscape of the insurance industry. According to a report from MarketsandMarkets, the AI in insurance market is projected to grow from USD 1.3 billion in 2019 to USD 11.6 billion by 2024. This technology is transforming underwriting, claims processing, fraud detection, and customer service operations.
While this holds tremendous promise, the transition is not without its challenges. Legacy systems, deeply embedded in many insurers’ operations, threaten to potentially slow the pace of AI adoption. A thoughtful plan for generative AI integration is paramount for overcoming this hurdle.
Wouldn’t you like your insurance company to navigate through these challenges and come out on the other side more robust and forward-looking? That’s exactly where AI enables us to focus our thoughts and actions.
Exploiting New Sales Channels: The Emergence of Embedded Insurance
Improving the shopping experience is the key to driving growth. Nowhere is this truer than in the emerging field of embedded insurance. This type of insurance, when intricately woven into the online purchasing process, can generate an immense boost for your business.
- Integration with e-commerce platforms: It’s all about delivering a seamless user experience. Just imagine – while customers are purchasing goods online, they are also offered insurance related to the product, all within the same platform. This not only simplifies the insurance-buying process but also paves the way for fresh sales leads.
- Partnering with fintech or digital-first companies: Such collaborations opens up a world of possibilities! Insurance companies can tap into fintech firms’ customer base, offering them embedded insurance covering a wide range of financial products and services, thereby capturing new markets.
- Implementing usage-based insurance models: With the advent of connected devices, insurance companies can tailor policies based on the data these devices provide. This innovative approach leads to personalized, usage-based policies that cater to individual needs, generating incremental sales.
Embracing these products can ensure that everyone benefits. However, it’s worth noting that if insurance companies want to thrive in 2023 and beyond, they need to move away from obsolete quoting technologies. Modernizing tech infrastructures is essential for insurers to remain competitive and relevant in this fast-evolving landscape.
What is Not Working and Not Going Well in InsurTech in 2023
As we delve into the current challenges facing the InsurTech sector in 2023, it’s essential to analyze three pressing concerns: The value generation for investors, the technical debt of insurance companies, and the impact of global crises on innovation.
The value proposition for investors:
While InsurTech has become an attractive field for investment, there are concerns over its ability to generate sustainable value for investors. According to Bloomberg, some InsurTech start-ups have struggled in their transition from promising disruptors to profitable entities. Despite the initial hype, InsurTechs face headwinds like market saturation, and competition from traditional insurance companies implementing their tech advancements.
Addressing Insurance Companies’ Technical Debt:
The digital transformation journey has been a double-edged sword for many insurance companies. While technology promises substantial innovation, it also creates a layer of technical debt. This burden points to the cost of future rework needed due to hasty adoption of technology solutions. IBM suggests that technical debt can have severe consequences like increased operating costs, reduced system flexibility, and hindered productivity if not strategically managed.
Global Crises and Innovation:
External factors, such as global crises involving war and economic instability in Ukraine and Israel, have ripple effects on the InsurTech landscape. Geopolitical conflicts impact the cost of capital, foreign investments, and risk perception for companies. According to a report from McKinsey, these factors can potentially stall innovation as companies turn their focus towards risk mitigation and crisis management.
In this rapidly changing environment, it’s crucial that insurance industry leaders understand these dynamics to navigate the path forward effectively.
The Rising Tide of AI Integration: A Closer Look
If you cast your eyes around at InsurTech Connect 2023, it was clear that AI, particularly Gen AI, was ubiquitous. Every vendor seemed eager to incorporate gen ai components into their presentations, proving that AI was not just an industry buzzword but a game-changing tool for their services.
However, on closer inspection, you could see that this eagerness often translated into vendors making what could be considered “tactical” integrations of gen ai into their pre-existing frameworks. In essence, most vendors added a Gen AI button to their current solutions without holistically rethinking their approach or considering the true potential of a fully AI-led strategy. This could be seen as a classic application of what the Harvard Business Review explains as “paving the old cow-path” approach – introducing new technologies but failing to optimize the organizational practices around them (2021).
Nonetheless, this doesn’t imply that the AI current isn’t creating waves of value in the sector. A remarkable remark made by one of the conference’s keynote speakers, Niki Kouri-Maglaras, eloquently shifted the focus from AI’s potential threat to jobs to the empowering opportunities it provides. Kouri-Maglaras posed the question, “Will AI replace our jobs?” She then promptly answered, “A human who is an expert at using AI will take your job if you’re not getting ready”. This suggests that rather than fearing AI, professionals in the insurance industry should embrace it, as it promises to provide a competitive edge to those who successfully integrate and make intelligent use of it in their work. I felt that was particularly relevant in keeping your team and staff aware of how you are persuing the strategy.
Major Vendor News from Guidewire, Duck Creek, Majesco, EXL and Others Key Vendors
Over the past few months, there have been a series of significant announcements from major vendors servicing the insurance industry, reflecting a trend toward more intelligent, integrated, and customer-centric solutions.
Guidewire has been discussing the importance of embedded insurance, which is event-triggered coverage offered with the purchase of third-party products and services. This trend is seen as a game-changer, with the embedded insurance market projected to grow to $722 billion by 2030. Guidewire highlights the importance of open APIs that allow carriers to tap into new customer pools by integrating their offerings with major retailers.
Duck Creek Technologies, another significant player, held its Partner Summit ’23, where they announced winners of the inaugural Duck Creek Technologies Partner of the Year Awards. The awards recognized partners such as Accenture, Aggne, and Coforge for their contributions to the industry. These partners have been instrumental in integrating Duck Creek’s solutions into the broader insurance ecosystem, enhancing operational efficiencies, speeding up market access, and personalizing the policyholder experience.
Majesco also made waves with its Fall 2023 Product Release, which introduced several innovative solutions across its product suite. These include the Majesco Copilot, which integrates intelligence to boost productivity and inform decisions, and a unified billing system that merges P&C and Individual Life Billing. Majesco’s Data Lakehouse and Business Intelligence capabilities aim to elevate data intelligence and support decision-making across the industry.
Lastly, EXL’s LifePRO™ policy administration solution was recognized for its breadth of functionality in the Individual Life Insurance Policy Administration by winning the XCelent Award from Celent. LifePRO™ was highlighted for its data and analytical capabilities, interoperability, and product configuration strengths, which enable insurers to rapidly adapt to changing customer needs and market demands.
Moreover, Verisk Analytics announced its intention to acquire FAST, a provider of a SaaS suite of software tools for modernizing insurance company policy administration processes. This acquisition aims to assist life insurers in transitioning to more advanced technology stacks and augment Verisk’s suite of services.
Together, these developments depict an industry that is leaning heavily into digital transformation, with a strong focus on enhancing customer experience, operational efficiency, and product innovation.
Economic Headwinds and AI: Navigating the Path to Success in Insurance
As you assertively navigate your insurance firm through the rapidly evolving technological wave, economic headwinds such as high inflation, geopolitical uncertainties in Ukraine and Israel, and a surge in consumer debt simultaneously unfurl. So the question is, how do AI and advanced tools intertwine with these realities?
In this storm, AI emerges as a critical compass that can guide your firm. By employing AI for risk assessment, insurers like you can more aptly cater to markets grappling concurrently with inflation and war. With shifting circumstances, data-driven strategies, anchored by AI, become an invaluable tool in your navigation kit.
High inflation could potentially delay investments in AI. Conversely, over time, AI can optimize efficiencies and slash costs, yielding substantial Return On Investment. A debt-riddled population might lean away from purchasing insurance, impacting your revenues. Here, AI can be a game changer, accurately underwriting risks tied to individual debt levels and serving up customized products that meet your customers’ unique needs. Geopolitical tensions in regions like Ukraine and Israel can inflate global insurance costs, especially in sectors like health and travel insurance. However, the intelligent use of AI for dynamic risk assessment and competitive policy pricing could buffer your firm against these fluctuations.
Indeed, the future of insurance unfolds as a complex tapestry of technology innovation and industry-specific economic challenges. Leveraging innovative tools like AI and acknowledging these challenges early on will not only equip your firm to weather these high tides but also thrive amidst the constant change. The journey might be daunting, yet, remember, embracing AI can transform these headwinds into tailwinds, propelling the insurance industry to new heights.
How to Make Sense of it All?
The 5 Enivitible AI Milestones
Understanding the 5 major milestones this industry will go through for GenAI is critical for drafting a great strategy.
1. Acceptance and implementation: The adoption of GenAI in insurance is not an if, but when. early adopters are already generating impressive results, and broader acceptance within the industry seems inevitable.
2. Customization and individualization: Leveraging data from numerous touchpoints, AI allows for an unprecedented level of customization in insurance products. As this trend progresses, the one-size-fits-all insurance policy could soon be a thing of the past.
3. Decision-making empowerment: GenAI brings the capability to rapidly analyze vast volumes of data, presenting analysed outputs, and aiding executives in making informed business decisions. Guided data-driven decisions would become the industry norm.
4. API Enabled Rules Engine: At this level, every company will have some aspect of GenAI Large Language Model Business Rules Engine to translate high-level executive outcomes into every action and transaction on the systems of record.
5. Digital Worker Replacement: AI can automate several manual tasks, enhancing operational efficiency, while cutting costs and improving customer experience. However implementation can come with its own set of challenges like staff training and system compatibility. But this represents the single greatest ROI for Insurance Companies as roughly 38% of the premium goes into human labor, and everyone still hates their insurance company. If Digital workers can do the same job at a fraction of the cost, or better work at the same quality but 24/7/365 or 100 times faster, this will be a massive shift in labor in this marketplace.
Despite formidable seals of approval from InsurTech Connect 2023 and experts alike, AI’s breakthrough in the insurance industry is also navigating its way through inevitable backdrops. High inflation, increasing consumer debt, and geopolitical tensions, including the situations in Ukraine and Israel, add layers of complexity to this journey.
Embarking on the Journey: Harnessing AI in Insurance
Imagine yourself as an insurance executive looking out onto the horizon of possibilities –a brave explorer venturing into the uncharted territory of AI. The uncertainties of navigating the General AI (GenAI) launch may seem daunting, and it’s okay to feel this way. Remember, every hero needs a guide, and that’s where we, Aktinora, step in.
As trusted companions on this journey, we, at Aktinora, understand the complexities of integrating GenAI into your insurance processes. Recognizing your concerns, we’ve crafted the Aktinora GenAI Assessment – a compass designed to illuminate the path ahead and eject any clouds of uncertainty.
Our expert-designed assessment will help you fathom the impact of GenAI on 61 distinct value centers of insurance. By categorizing which areas will likely face disruption, and which are at risk of obliteration, we provide you with a navigation chart through this sea of change. Navigating these choppy waters may not be easy, but with Aktinora by your side, you can be more equipped to face the oncoming waves.
Think Aktinora, as your trusted helmsman, guiding your way through this looming disruption. You, the insurance executive, stand at the helm of your vessel, ready to steer your company towards a future teeming with opportunities. The enemy, uncertainty about harnessing GenAI, dwindles under our combined efforts.
Don’t let uncertainty wear you down. Transformation is often born from confronting the unknown, and in the face of transformative AI, you have the power to drive change.
The first step can always be the toughest, but with Aktinora’s guidance, it doesn’t have to be. Schedule a session with one of our experts today to understand the potential impact and immense possibilities GenAI can bring to your organization. Harness the power of GenAI, blaze your trail, and move from the bleeding edge to the leading edge of insurance innovation.