The year ahead for insurtech: transformation gathers speed

As 2018 gets underway, it is time to reflect on the developments that have shaped the insurance sector over the past year and shed some light on predictions for the next twelve months. The technological innovation that has transformed insurance processes will gather speed in the coming year, leading increasing resources to be directed into the exploration of how technology can disrupt and augment the insurance sector.  

As such, my predictions for 2018 are as follows:

1)      Artificial Intelligence. Appetite for artificial intelligence (AI) based solutions will continue to grow in 2018 leading to improved customer experience in the insurance sector. We have seen chatbots transform customer service in a range of industries over the past decade, and these digital agents will continue to gain traction in insurance by working through messaging apps to facilitate low-level enquiries such as calculating claims and selling insurance. This will be accompanied by increased human collaboration with AI, as human agents will become more comfortable and familiar working alongside the chatbots, thus heightening efficiency and productivity in the insurance sector.

2)      Internet of Things. There were approximately 6.4 billion devices connected to the Internet of Things (IoT) in 2016. In 2017, that figure grew to 8.4 billion. Not only is this trend set to continue at a rapid pace through 2018, we can also expect to see IoT creating innumerable opportunities for the insurance sector. Data collected and analysed through IoT can facilitate a better understanding of a customer’s risk profile, smarter marketing and more accurate pricing, which will continue to transform the way insurers do business with their policyholders.

3)      Cybersecurity and the cloud. As cybercrime becomes more sophisticated and the need for built-in security measures intensifies, cyber risks will remain front of mind for insurance firms in the coming year. Indeed, when it comes to cyber security, the insurance sector has somewhat lagged behind other financial services sectors with regards to investment into countering the growing cyber risk. But as the volume and breadth of cyber attacks increases (the WannaCry ransomware attack in May 2017, for example, impacted over 200,000 systems across different sectors worldwide), insurance firms will need to make cyber preparedness a priority in the coming year.  The price of not taking this threat seriously could simply be too high, especially as insurers hold a vast amount of personal data on individuals.  

4)      Distributed Ledger Technology (DLT). 2017 saw blockchain’s supporters extolling its capacity to revolutionise financial services and its critics decrying it as a technology that is not yet mature enough for large-scale application. Despite being founded on provenance and ownership, some of those critics doubt that this nascent technology can be as trustworthy as we are told. Regardless of these differing opinions, DLT has captured the interest of many in insurance over the last year. In 2018, we expect to see the sector begin to move from the proof of concept stage to live uses of DLT, particularly in terms of simplifying underwriting and providing greater transparency to the claims process.

5)      Productivity. The recent OBR report released alongside the Autumn Statement highlighted the issue of low productivity in the UK. 2018 will provide an opportunity to combat this challenge, particularly as Brexit looms. The growing sense of urgency around the preparations, paired with the imminent decline in the imported labour on which the UK relies, is likely to incentivise a faster adoption of technology and automation. This will result in growing investment in new technologies, providing an opportunity to bolster the UK’s position as a technology hub, which in turn will direct investment to an area with burgeoning potential: insurtech.  Already, 64% of the 25 largest insurance companies worldwide have funded insurtech, and we can expect to see that figure rise to 80% in 2018.