Insurance Technology Trends 2023
The development and implementation of new insurance solutions in the P&C insurance industry are already well underway in 2023. From better supporting service providers to improving the customer experience for policyholders, users can expect new innovations, upgraded insurance products, and more to be introduced by insurance companies, technology companies, and supportive partners around the globe. This year, the insurance market and the solution ecosystem will also continue to evolve with new achievements and business models to meet real-time requirements.
Based on these projections, Guidewire experts are weighing in on the most important insurance technology trends anticipated for 2023 and beyond.
What’s New in P&C Insurance Technology?
The conversation regarding the top P&C insurance technology trends always starts by addressing needs. Here are some of the most pressing questions surrounding P&C in 2023:
How is insurtech shaping the future of insurance?
What insurance challenges can insurtech solve and what changes are expected?
How will digital insurance innovation continue to fuel digital transformation?
With these questions in mind and many others, our P&C experts outline the most important new trends projected this year.
New Technology Trends to Expect This Year
1. The Use of Embedded Insurance – Everywhere
Laura Drabik, Chief Evangelist, Guidewire Software
Embedded insurance is event-triggered insurance coverage that’s offered with the purchase of third-party products and services. It’s the travel insurance offered when you book a Norwegian Cruise, the Apple warranty for your iPhone 13, or auto coverage to go with that spiffy new Cybertruck.
It’s also a serious game-changer. According to a report from InsTech London, the embedded insurance market is expected to grow to $722 billion by 2030—six times its size today. McKinsey estimates that up to 25% of all personal line-premiums could be generated through embedded ecosystems in that time frame. For auto, it could top 30% or more.
Enabled through open APIs, embedded insurance gives carriers access to whole new customer pools by weaving their offers directly into the purchase of consumer products from major retailers at the exact moment consumers are most likely to purchase coverage.
In the coming months, look for more partnerships like the one between Swiss RE and IKEA, or between Farmers’ digital insurance brand Toggle and Toyota. In Toyota’s case, embedded insurance may be used as a gateway for multi-lining policyholders with auto, home, renters, and recreational vehicle coverage the auto giant already offers.
2. The Rising Importance of Brokers and an Increase in Technology Purchasing & Claims Sharing
Roger Arnemann, SVP & GM, Guidewire Analytics, Guidewire Software
The role of brokers has decreased slightly in some personal and small commercial lines markets as customers increasingly went directly to insurers and MGAs; but large premium increases at renewal are prompting a drastic change in the customer experience – millions are considering their insurance options more carefully across carriers, line sizes, deductibles, and coverage terms. Supporting these needs are exactly what brokers do best!
Given that 2022 marks the worst financial performance for the insurance market as a whole in more than a decade, technology purchasing will focus on proven offerings with a clear track record of compelling and rapid return on investment (ROI). Additionally, insurers will accelerate their willingness and effort to identify loss reduction opportunities that can be found most powerfully through pooling their data together. In times like these, the industry is better served collaborating rather than competing.
3. A Significant Consolidation in Insurtech and Proportionally More Investments in Claims
Zachary Gustafson, General Manager, Claims & InsuranceNow, Guidewire Software
The most recent era of cheap money and willfully speculative venture theses is behind us, and in the immortal words of Warren Buffet, “It’s only when the tide goes out that you learn who has been swimming naked.”
The massive insurtech investment in the past half-decade has spawned far more new companies than are viable in a more constrained macroeconomic cycle. While equity owners would prefer not to transact in a down market, some will have no choice and will cease to exist – through acquisition, mergers, or worse – with no guarantee that the new ownership will persist or invest in its prior business model. Buyers should carefully consider the long-term prospects of a vendor before contracting, especially the validity of extended use for new P&C insurance products. At minimum, they need to have an exit plan in the event of an unfortunate turn.
Much of the buzz in the market over the past few years has been focused on the front end of the insurance lifecycle:
Unique product offerings
As economic reality shifts to more focus on safety and profitability, insurers will begin to turn their attention inward. Chief Claims Officers, whose initiatives have been buried on the corporate priority list in recent budget cycles, will find more a more receptive audience to ideas affecting loss adjustment expense and indemnity accuracy. Internal teams and vendor partners with compelling business cases for cost reduction, particularly those driven by reliable analytics, will have much to offer in the current environment.
4. Expect a New Operating Model for Claims and Significant Improvement for Digital Engagement with Customers
Brian Desmond, Chief Marketing Officer, Guidewire Software
Innovative insurers will design a new operating model for claims, encompassing talent, process, and technology and begin executing on that strategy in 2023. It’s more relevant to think about how the industry will be better 5 years from now, and where there will be meaningful progress to that end over the next 12 months. Claims is a great area to focus on as a dollar saved contributes a dollar to the bottom line. The technology exists to make claims processing much more efficient and better overall. What’s required is focus and execution.
Additionally, most insurers will significantly improve how they digitally engage with customers. Making insurance as easy to engage with as Amazon is easy to say but hard to do. Insurers get it. Vendors get it. We are all working on it. The improvements are there for everyone to see and I think that will accelerate in 2023.
5. 2023 Will See a Return to the “Old Normal”
Eugene Lee, SVP and General Manager, Insurance Suite, Guidewire Software
In 2023, the number one priority for insurers will be operational efficiency and profitability. With inflation driving the rising cost of claims with the inability for immediate rate increases, insurers will focus on improving efficiency, pricing accuracy, and reducing leakage and waste.
The rise of insurtechs and COVID had insurers focused on growth and unusual “new normal” types of investments. Operational efficiency and proper risk pricing/profitability are the “old normal” – and critical to long term financial sustainability.
2023 will see P&C insurance get back to basics.
6. P&C Will Lead with Climate Resiliency and Sustainability
Christina Colby, Chief Customer Officer, Guidewire Software
Climate resiliency and sustainability will have a meaningful impact on the P&C industry in 2023 and for the foreseeable future, particularly with the industry’s growing focus on ESG efforts and with the changing shape of the risk that they write. There’s no industry better positioned to create global influence with risk mitigation and adaptive behaviors around climate change – and that kind of change starts within our own companies. Technology will have a huge impact on carriers’ abilities to shift their scope 1, 2, and 3 carbon emissions, from their own green IT to thoughtful digital solutions to offer for their customers.
7. Get Ready for Transformational AI Gains This Year and Beyond
Anoop Gopalakrishnan, VP, Engineering, Guidewire Cloud Infrastructure, Guidewire Software
As our offerings in insurance and other industries have evolved to adapt and be flexible to the point of tailoring to the needs of each industry, so has the complexity of the rulesets and the cognitive overhead for the people managing and building this software. The demand for further flexibility still outpaces the speed at which companies can build software which by itself is built on a foundation of finite rulesets.
We are entering an era of transformational artificial intelligence (AI) and could be rightly said to be at the cusp of building applications that are more than just simple rules of execution in code. With the advent of GPT-3 (Generative Pre-trained Transformer 3), we are beginning to see some real applications that could be leveraged in the natural language processing world.
Think about training a chatbot on private data, which along with the breadth of the English language it already has from the world wide web. With this knowledge, the chatbot could start responding to customers politely and contextually to their specific cases or generically to the offerings of the company. Now while with this we can generally improve customer interaction, the bot could be inverted handsomely inward to managing myriad set of applications that the DevOps teams manage themselves in troubleshooting or generating fixes with code. How about a bot that can generate entire Java service applications based on the needs of the developer which adheres to the standards set by the company? Applications to these AI models could extend to being able to predict failure of equipment in and industrial or transportation industry and thereby allowing insurers or partners the ability to offer proactive maintenance services to the policy holders.
The sky is the limit as to what can be cooked up in the interaction space for the insurers to the policyholders, giving a better personalized experience while maintaining the ability to cross sell or improve the value proposition.
Bonus: Continuing Technology Trends
There are numerous continuing technology trends that Guidewire has reviewed in previous years which are expected to see further achievements in 2023.
1. Insurers Will Improve the Use of Predictive Analytics
With the ongoing advancement of machine learning and AI within predictive analytics, insurers will continue to have more effective data to make informed decisions in underwriting, claims, core processes, and elsewhere. A common challenge is deciphering the quality of that data from the source, reducing or removing data bias, and turning the opportunity for error into accuracy when forecasting the future.
2. Cyber Security and Fraud Detection Will Gain Strength
The role of cyber security is always adapting and is doing so in multiple facets. From evolving legislation and regulations that heighten compliance requirements for disclosures, to better preparing insurance companies, financial services, and credit rating agencies for cyber attacks, the need remains in 2023 to instill greater cyber risk support and cyber security expertise at a leadership level. Cyber security experts can assist with this risk management, providing a high level of security and trust with a strategic approach.
Additionally, insurance fraud accounts for billions of dollars every year in the industry and strides will continuously be made for better fraud protection solutions, such as in claims processing where there are measures to proactively detect fraud and avoid costs that are often passed on to policyholders.
3. The Role of Drones Capturing Big Data Still Needs Definition
For several years, drone service has been used where ease of access is needed for property or casualty situations that may be difficult to reach or need to be captured from an aerial view. Drones are also pivotal for capturing large and complex data sets or “big data.” However, the future of what widespread drone use will look like within P&C is a year-over-year trend that is left with questions as regulations and costs are often prohibitive.
Additionally, tools must continue to evolve to process big data when it is captured. In 2020, Guidewire Data Platform (GWDP) was announced. The cloud-native big data platform uses modern tech stacks on Amazon Web Services (AWS) with an architecture that is grounded and guided in metadata. Insurers will continue to need tools like GWDP for data ingestion, enterprise-grade security, automation, and more.
4. An Increase in Telematics Usage is Expected
Automotive (vehicle) insurance is still seeing a rise in the usage of telematics, especially as driving habits have changed in recent years. Real-time insights instead of manual readings will only improve the relationship between vehicle operators and insurance products – primarily through better pricing that reward positive driving habits. In fact, the horizon looks bright for expanding the use of telematics within usage-based insurance (UBI) for auto insurance into new areas of the world.
5. More Internet of Things (IoT) Innovations Will Be Created
Devices like smart sensors, smart homes, and wearable sensor technologies continue to expand the possibilities for P&C insurance among the internet of things (IoT). These encompass risk assessment, fraud detection, and numerous other areas around telematics and UBI. Insurers are using these technologies to assess risk for almost anything insurable. IoT devices also better support claims and often help to prevent issues before a claim and/or underwriting is needed.
6. Collaborators Will Continue to Provide New Blockchain Technologies
The exciting revolution of safe, secure, and efficient blockchain technologies continues to trend into 2023. Blockchain in insurance is used for the quick exchange and verification of finances, information, and much more without the fear of what was sent being compromised. In previous years, the P&C industry slowly introduced blockchain technologies with the rise of insurtechs. Through partnerships and digital transformation, the use of blockchains has grown and is increasing in use. For example, the collaboration between Guidewire and The Institutes RiskStream Collaborative™ introduced an integration in Guidewire Marketplace which provides users with RiskStream’s RAPID X blockchain application to exchange loss information with other insurers more quickly and accurately.
7. Low Code/No-Code Remains as an Established Requirement for Insurance Software
Modern P&C insurance software platforms need to allow both developers and those without development experience the ability to make easy operational updates. That’s why low-code and no-code solutions are becoming more influential within insurance technology. It is especially helpful for insurers who need to bring new products to market quickly on an accelerated timeline. InsuranceNow Go, which was introduced in 2019 as an out-of-the-box, low-code cloud deployment for InsuranceNow, is an example that supports this trend.
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