The influence data and technology have had on the industries that leverage them is undeniable. However, some insurers still believe — even in 2019 — that their industry is somehow insulated from those effects. Unfortunately, those who still hold onto those beliefs will likely find themselves facing some hard truths.
Technology and the innovation economy will have an increasingly significant impact on the way insurance is handled, and those who embrace a data-driven future will be the ones leading the pack. In the coming year (and beyond), insurers will be pressed to answer a variety of questions unique to the digital age, the most pertinent of which may be these three:
• How will work be defined when the nature of employment is rapidly changing?
• What’s the right way to cover people with income that comes from several sources that change on a daily basis?
• How should insurance handle the shift away from traditional ownership?
Technology and data will influence the way all three of these questions are answered in one way or another. By embracing each, insurers can open themselves up to more innovative ways to serve and cover their customers.
Insuring Modern Economies
Recent innovations haven’t just transformed existing economies. They’ve created brand new ones, all of which already affect the insurance industry in some fashion. Here are two of the biggest.
Automation: The automation economy will have arguably the biggest impact on the insurance industry because its effects will be wide-ranging. A McKinsey study found that half of existing workplace responsibilities can be automated, meaning that the ripple effect of automation has only just begun.
Automation can also be used directly within the industry to improve administrative efficiency and overall accuracy. Amazon has already embraced machine learning, using it to modernize its warehouse. And while automation can be a boost to workplace efficiency, it’ll also drastically change the nature of risk in the workplace.
Furthermore, automation could expand the scope of auto insurance and worker’s compensation, though what that ultimately looks like is unknown right now. When it comes to the automation economy, nothing is free from its impact.
Access: It won’t be long before the sharing and subscription services usurp traditional notions of ownership. Companies like Spotify and Netflix have already changed how we access music and movies, but we’re also starting to see other attitudes about ownership change.
Need proof? Just look at auto and home ownership. In auto’s case, a Lyft study found that 250,000 of its customers got rid of their cars in 2017 in favor of ride-share services. As for homeownership, U.S. Census data reports that those numbers declined in 90 percent of U.S. cities from 2000 to 2015. Each statistic illustrates that ownership isn’t as alluring, or attainable, to American consumers as it once was.
The access economy is also challenging the definition of work. According to Gallup, 57 million Americans draw some form of income from the gig economy. The continued rise of independent contracting means how those businesses cover those employees will need to change as well.
Insurers need to adapt to these changing definitions and economies or face the risk of being outpaced by the competition. The best way to do this is to embrace innovative economies to assess risk and process claims. Just as data and technology drive these new economies, they will also fuel the insurance industry — and those who fail to get on board will soon find themselves left in the dust.
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