ACORD, the global standards-setting body for the insurance industry, has released the results of a survey on the future of insurance.
ACORD CEO Bill Pieroni presented the findings of the Insurance 2040: Prospects and Predicaments for Innovation & Value Creation survey at the DXC Connect Insurance Executive Forum in Charleston, S.C.
The survey polled insurance professionals about their perspectives on the outlook for the insurance industry over the next 20 years. Respondents identified the technologies, practices and strategies they believed would have the greatest impact on the global insurance sector in both the short and long term.
Nearly 50% of respondents anticipated that their greatest source of long-term competitive advantage would be the way in which they used technological capabilities, ACORD said. They said that operational efficiency and excelling in core functions like underwriting and claims may not be enough to drive superior performance. Instead, they felt technology-enabled optimization of these functions will become a baseline, necessary but not sufficient to maintain an advantage over the long term.
“Technological capabilities will be of critical importance to delivering a superior underwriting and claims experience, creating operational efficiencies, enhancing customer experiences, and leading in product development,” Pieroni said. “While executing on core insurance functions will remain of paramount importance, this will rely more and more on thoughtfully leveraging the right technologies. Moreover, our analysis indicates that insurers will need to employ a composite strategy, executing across all areas in order to effectively compete in the future. Embracing technological capabilities and prioritizing digitalization will be essential in doing so.”
Increased sophistication in technologies like artificial intelligence, machine learning, and the Internet of Things is projected to have a large impact on the industry, ACORD said. Survey respondents said that familiarity and proficiency with technology, from the C-suite down, will be increasingly important. Respondents anticipated a rise in the technology vs. people skew in their organizations’ capability mix over the next 10 to 20 years, and 52% said technology would be the most critical competency for the C-suite by 2040.
Technology will also impact the channels by which customers purchase insurance. Respondents expected that direct channels will rise in significance across business lines, while the expertise of agents and brokers will continue to be important, ACORD said.
“The need for human talent and expertise in our industry cannot be overstated,” Pieroni said. “However, we will see the focus shift toward familiarity and proficiency with emerging tech capabilities. Industry professionals with this skill set will continue to drive innovation and advancement across the ecosystem.”
Survey respondents also noted the changing role of non-traditional competitors in the market. Nearly 25% of respondents believed these competitors will capture a significant share of premium and profit by 2040.
Respondents also ranked their top technology priorities over the next two decades. APIs were widely considered the most important priority for the near to medium term, with 24% naming it among their top three areas of focus. However, respondents seemed confident in addressing the need for API development over the next decade, with priorities shifting for the longer term. Respondents said AI and machine learning will be even higher priorities in 20 years than in 10 years, with quantum computing doubling in importance over the same period.
“These results are right on the mark,” Pieroni said. “Standardized data exchange via APIs is a critical enabler of transformation, while AI and quantum computing have the potential to prove truly transformative across the enterprise in the long run. These capabilities will have a material impact across stakeholders and the insurance value chain. Real-time data leverage and risk assessment will have dramatic impact on stakeholders’ ability to create value for shareholders and customers alike.”
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