As we step into the second half of 2024, the InsurTech landscape is poised for significant advancement. Emerging technologies such as AI, machine learning, and large language models are set to revolutionise risk assessment, underwriting, and customer experiences. Meanwhile, there is a growing emphasis on ESG considerations bubbling up under the surface.
InsurTech Analyst‘s Harry Slade sat down with a host of industry experts to talk all things InsurTech, and open up on what to expect from the industry as we head into H2 2024.
What role will AI play?
One of the most prominent talking points is the transformative role of AI and machine learning in reshaping the insurance sector. Formerly seen as a gimmick, or even just a buzzword, its role is now seen as an imperative for excellence in regard to risk selection and decision-making as Melanie Hayes, COO and co-founder of KYND explained.
“InsurTech companies have the opportunity to help drive innovation and operational excellence for the sector with the help of machine learning-powered technologies that enable consolidated insights from large volumes of varied data such as policy information, insurance claims data, historical exposure data and cyber accumulation risk among many others. These solutions, provided by progressive InsurTechs such as KYND, can process and structure data to offer insurers insights that lead to improved risk selection, profitable decision-making, enhanced portfolio resilience and reduced costs and loss ratios,” she stated.
These views were echoed by Jenny Cohen Derfler, CEO & co-founder of Air Doctor, which has been rapidly adding AI into its operations in recent years.
The platform, which is known is known as the must-have travel companion, has heavily embraced AI to make healthcare more accessible and seamless on the go – and it will continue to follow that trend as we look into H2.
Derfler explained, “Air Doctor is prioritising the integration of AI across all our systems to streamline operational management and enhance the customer experience. This allows us to consistently provide travellers with swift and high-quality medical care, ensuring they receive timely assistance wherever they are.”
It is no surprise then that AI adoption is only going to continue to skyrocket as we look forward to H2 – with an improved customer experience at the forefront of that.
Positivity is crucial in insurance customer experience, with one negative interaction prompting 50% of customers to switch to a competitor, according to Zendesk.
Additionally, 75% of customers expect companies to utilise new technologies for better interactions. Accenture’s findings show that digital experiences are widely embraced across generations, with 71% of customers aged 55 and older preferring to process claims through digital platforms, such as voice or chat, rather than in person.
“These technologies have the potential of delivering a better overall product experience and improved lifestyle navigation to the consumer with services becoming increasingly data-dependent and personalised,” dacadoo CEO and President, Peter Ohnemus remarked.
Insurers are realising that leveraging AI not only enhances operational efficiency but also plays a crucial role in meeting the evolving demands of their clients.
As digital experiences become the norm, the ability to offer seamless, personalised interactions will set industry leaders apart from their competitors.
Companies that invest in robust AI-driven solutions are poised to gain a significant competitive edge by improving both their customer service capabilities and their risk assessment processes, ultimately fostering greater customer loyalty and satisfaction.
Mike Scott, Sales Manager at Novidea explained, “AI has been the biggest hot topic in the Insurance and InsurTech sector for a while now and for good reason. Whilst the concept of AI and its usage is not new, insurance companies on the whole are still investigating where this technology can be best placed in their organisations to better serve their customers, as well as increase efficiencies and enhance the use of data.
“The core use of widely available Generative AI (Gen AI) technologies such as ChatGPT have helped companies improve their customer experience (real-time assistance through chatbots, responding to complaints/queries etc), however, it is expected that InsurTechs will begin providing the market (if not doing so already) with new ways to deploy AI tech assist in the underwriting process to evaluate risk profiles more effectively and alert the market to potential risks that may not have been captured previously,” Scott added.
However, despite the obvious use-cases and bravado around the technology, David Howland, CMO at Earnix gave a stark warning around AI’s adoption.
“As AI becomes more entrenched in insurance operations, the need for responsible machine learning (ML) practices becomes paramount. Insurers must balance the accuracy of their AI models with accountability and transparency. At Earnix, we are taking proactive steps towards achieving this balance with an experimental module to showcase our commitment to creating a future where AI empowers, rather than discriminates. As the insurance industry embraces AI, ethical considerations must remain at the forefront,” he commented.
ESG considerations
As we look into H2, it is impossible not to shine a spotlight on ESG.
With increasing awareness and regulatory pressure, insurers are now recognising the importance of integrating ESG factors into their strategies.
This shift is not just about compliance but about leading with purpose and responsibility in a rapidly changing world, where consumers and stakeholders are now more enamoured than ever with altruism.
By incorporating ESG principles, insurers can not only enhance their corporate reputation but also drive sustainable growth and meet these rising expectations of both stakeholders and customers.
Ashleigh Gwilliam, Director of Insurance Industry Growth at FullCircl explained this phenomenon, “Research finds that CEOs believe ESG should be integral to company processes and receive higher levels of compensation when adapting them into their strategy, but investors still see environmental and social programs as ‘nice to have’ and are less likely to invest in businesses that have them in place, due to an expectation of increased costs.
“However, a focus on short-term profit generation over long term sustainability has led to the failure of many businesses, and with a growing consumer pressure on companies to display a ‘greener’ image businesses are going to have to adapt to survive.
“The financial services sector is the protagonist of economic growth and stability, banks are already having a positive impact by favouring lending to companies with ESG strategies and I expect, and welcome, a growth in underwriting decisions considering a company’s position.”
This sentiment is already being seen by industry incumbents, with dacadoo’s Ohnemus explaining that the firm sees ESG considerations as “fundamental.
“In our view, ESG considerations are fundamental to any Life & Health insurance operator. These operators have a vested interest in promoting a better environment, which reduces health risks, social initiatives that lower mortality risks, and strong governance practices that ensure stable returns on capital,” Ohnemus remarked.
But what exactly will firms be considering when they look to implement ESG into their offerings in H2? Novidea’s Head of Customer Success, Paul Richmond gave his view.
“There are two perspectives to take into account when discussing ESG. The first being the InsurTechs own ESG strategy. We are seeing many more potential customers ask questions at the RFP stage, on what a technology partner is doing in this area. Whilst it may be fair to say that for some it is still may be a tick box exercise, many customers deem this high on their list of questions and it is important that their provider’s values align.
“The second area of interest growing significantly within the ESG space is the opportunity this market presents to InsurTechs. Whether that be a platform to measure an entity’s carbon footprint, ways to reduce and measure omissions, or creative projects to fund carbon removal – InsurTechs such as Ecologi, Watershed, and Claims Carbon have created both strong brands and services,” Richmond concluded.
Novidea anticipates a rise in the integration of ESG data into existing InsurTech offerings, including using APIs to enhance company data with detailed ESG metrics.
Richmond explained, “Where we expect to see an uptick, is augmenting ESG data within their existing offering. This could be leveraging APIs to enrich company data with scope 1, 2 and 3 information, using open source data on companies to check whether this supports their strategic risk profile, and even down to the risk level itself, using data enrichment to support creation of the quote, whether that be through subjectivities, increases to premiums or wordings and clauses.”
Utilising risk ESG considerations to support your risk strategy is therefore seen as a tantalising proposition for insurance firms.
Risks come with multiple dimensions, and the ESG aspect is a relatively new addition to risk analysis within the insurance sector.
Therefore, if industry incumbents can successfully leverage ESG data and analytics, they will gain a unique advantage on their competitors when serving markets in volatile climates.
Earnix’s Howland, explained the transformative potential, stating, “InsurTechs have the unique ability to provide the precision and advanced analytics necessary to help carriers continue to serve markets highly impacted by climate. In states like Florida where private insurers have cut homeowners coverage in areas most vulnerable to natural disasters or withdrawn from the state entirely, it is increasingly important to leverage tools that allow for precise risk assessment. With catastrophic storms continuing to increase in frequency and intensity, this issue will persist, and insurance companies will continue to cut their losses or lose business to more nimble, more efficient competitors.”
Looking ahead
The second half of 2024 presents a dynamic landscape for InsurTech firms across the space. With a growing emphasis on AI, the customer experience, and ESG considerations, firms must position themselves to adapt to the changing dynamics.
With legacy systems seemingly on the way out, and the rise of Gen-Z as consumers, companies are now adjusting to the times or lagging behind.
It’s a modern world, and historical market significance is no longer enough to survive in the land of disruptors.
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