His personal assistant instructs him to take three pictures of the front right bumper area and two of the surroundings. For many insurers, capturing the business value of digital and analytics capabilities will require rapid upgrades to technology platforms. Likewise, vehicles will still break down, natural disasters will continue to devastate coastal regions, and individuals will require effective medical care and support when a loved one passes. Customer relationships will be redefined as more customer interactions happen through digital channels and insurers reap the resulting dynamic customer insights. The resulting avalanche of new data created by these devices will allow carriers to understand their clients more deeply, resulting in new product categories, more personalized pricing, and increasingly real-time service delivery. 3 Scotts personal assistant maps out a potential route and shares it with his mobility insurer, which immediately responds with an alternate route that has a much lower likelihood of accidents and auto damage as well as the calculated adjustment to his monthly premium. How can CFOs rebrand themselves as innovation allies? An in-depth examination at what insurance may look like in 2030 highlights dramatic changes across the insurance value chain.
Some innovative insurers are partnering with external players to offer customers a full suite of services through external application programming interfaces (APIs) and warm handoffs between companies. Indeed, our research shows that across sectors, revenue growth (as measured by the five-year compound annual growth rate) for digital leaders is on average four times that of companies that only dabble in disjointed digital initiatives. 
World Economic Forum, 2015. Human claims management focuses on a few areas: complex and unusual claims, contested claims where human interaction and negotiation are empowered by analytics and data-driven insights, claims linked to systemic issues and risks created by new technology (for example, hackers infiltrate critical IoT systems), and random manual reviews of claims to ensure sufficient oversight of algorithmic decision making. IoT and new data sources are used to monitor risk and trigger interventions when factors exceed AI-defined thresholds. Back to Women in insurance: Leading voices on trends affecting insurers. Never miss an insight. Sophisticated proprietary platforms connect customers and insurers and offer customers differentiated experiences, features, and value. McKinsey_Website_Accessibility@mckinsey.com, match the right talent to high-value processes. The insurance organization of the future will require talent with the right mindsets and skills.
In the case of an auto accident, for example, a policyholder takes streaming video of the damage, which is translated into loss descriptions and estimate amounts. Demand for digital interactions will spike and stay elevated.
While this scenario may seem beyond the horizon, such integrated user stories will emerge across all lines of insurance with increasing frequency over the next decade. 
These roles will include data engineers, data scientists, technologists, cloud computing specialists, and experience designers. But we are seeing technology trends bleeding into insurance. As AI becomes more deeply integrated in the industry, carriers must position themselves to respond to the changing business landscape. artificial intelligence (AI) has the potential to live up to its promise of mimicking the perception, reasoning, learning, and problem solving of the human mind (Exhibit 1). As such, carriers must develop a well-structured and actionable strategy with regard to both internal and external data. Insurers should identify partnership opportunities that align with their business strategies and focus on a few partnerships that can deliver value at scale. Experts estimate there will be up to one trillion connected devices by 2025. With this understanding, they can start to build the skills and talent, embrace the emerging technologies, and create the culture and perspective needed to be successful players in the insurance industry of the future. To remain at the forefront of the industry, insurers will need to have numerous employees with the right technical skills and the commitment to continuously upgrade these skills. During the pandemic-fueled crisis, insurers should therefore find ways to be relevant to their customers and engage them. The authors would like to thank Nick Milinkovich and Karthi Purushothaman for their contributions to this article. When power goes out, insurers can prefile claims by using data aggregators, which consolidate data from satellites, networked drones, weather services, and policyholder data in real time. For example, applied AI is forcing insurers to view customers as distinct individuals with specific customer journeys and demands for products.
AIs underlying technologies are already being deployed in our businesses, homes, and vehicles, as well as on our person. Experts estimate there will be up to one trillion connected devices by 2025. Agents use smart personal assistants to optimize their tasks as well as AI-enabled bots to find potential deals for clients. 
McKinsey: How should insurance players prepare for these digital changes? Others will improve severity prediction and early intervention, including identification of claims likely to jump in severity, such as short-term disability claims that become long-term disability claims, auto bodily injury claims, and workers compensation claims. Human interaction will remain pivotal in the future, but stakeholders will expect all interactions to have digital support.
Carriers will need to understand how the increasing presence of robotics in everyday life and across industries will shift risk pools, change customer expectations, and enable new products and channels. When Scott pulls into his destinations parking lot, his car bumps into one of several parking signs. Finally, insurers will use digital and analytics capabilities to shape remote recruiting for intermediaries and service staff.
One North American financial-services company uses proactive prospecting, which predicts which prospects will have the highest value, to increase their top advisers volume of new business by 10 to 15 percent. With external data, carriers must focus on securing access to data that enriches and complements their internal data sets. Subscribed to {PRACTICE_NAME} email alerts. Some insurtech companies are already designing these types of products; Slice, for example, provides variable commercial insurance specifically tailored for home sharing. McKinsey spoke with Violet Chung, a partner in the Hong Kong office, to learn more about data and analytics in insurance and what insurance carriers should do to succeed.
As these changes take root, profit pools will shift, new types and lines of products will emerge, and how consumers interact with their insurers will change substantially.
They can approach the current moment as a chance to reimagine and rapidly prioritize upgrades in their technology platforms. By going digital, intake functions will support rapid information gathering and become consistent for all customers and intermediaries. The role of insurance agents has changed dramatically by 2030. Carriers should start making targeted investments to enable the migration to a more future-forward technology stack that can support a two-speed IT architecture. Individuals receive real-time alerts that may be linked with automatic interventions for inspection, maintenance, and repair. Please try again later. Insurers should prioritize seven crucial digital and analytics imperatives. 3. Convolutional neural networks and other deep learning technologies currently used primarily for image, voice, and unstructured text processing will evolve to be applied in a wide variety of applications. The time to actand to tap into the resulting business valueis now. As soon as the car stops moving, its internal diagnostics determine the extent of the damage. Violet Chung: Adopting technology could have both immediate and long-lasting impacts on the following three areas: First, customer relationships. Customers will also be more acutely aware of their personal and health risks and will demand solutions to help them better manage these risks. Advanced technologies and data are already affecting distribution and underwriting, with policies being priced, purchased, and bound in near real time. Insurers should not postpone their digital and analytics agendas. Virtually overnight, organizations had to adjust to accommodate remote workforces, expand their digital capabilities to support distribution, and upgrade their online channels. In response, leading insurers are investing in long-term reskilling and upskilling to harness the capabilities of their existing workforce through personalized digital learning. 1 They can conduct more effective return-to-work monitoring, for example, and create better guidelines for workers compensation and disability. We'll email you when new articles are published on this topic. Deploy AI-powered capabilities at scale, such as machine learning models and tools, digital marketing, and end-to-end digitalization capabilities to drive automated decision making across the life cycle. UBI becomes the norm as physical assets are shared across multiple parties, with a pay-by-mile or pay-by-ride model for car sharing and pay-by-stay insurance for home-sharing services, such as Airbnb. The plan should outline a road map of AI-based pilots and POCs and detail which parts of the organization will require investments in skill building or focused change management. Most AI technologies will perform best when they have a high volume of data from a variety of sources. This system is pretested by the largest carriers across multiple catastrophe types, so highly accurate loss estimations are reliably filed in a real emergency. Pricing is available in real time based on usage and a dynamic, data-rich assessment of risk, empowering consumers to make decisions about how their actions influence coverage, insurability, and pricing. How can CFOs rebrand themselves as innovation allies? The future of US healthcare: Whats next for the industry post-COVID-19, Getting personal: How banks can win with consumers. The COVID-19 crisis will cause structural shifts that will have significant implications for the insurance industry. Insurers should invest in digital capabilities for straight-through and low-touch claims processingstarting with digital-first notice of loss. Strengthen their core technology backbone to enable speed, flexibility, and scalability across the enterprise stack. The agent of the future can sell nearly all types of coverage and adds value by helping clients manage their portfolios of coverage across experiences, health, life, mobility, personal property, and residential. These models are powered by internal data as well as a broad set of external data accessed through application programming interfaces and outside data and analytics providers. In 2030, underwriting as we know it today ceases to exist for most personal and small-business products across life and property and casualty insurance. Information collected from devices provided by mainline carriers, reinsurers, product manufacturers, and product distributors is aggregated in a variety of data repositories and data streams. By the time Scott gets back to the drivers seat, the screen on the dash informs him of the damage, confirms the claim has been approved, and reports that a mobile response drone has been dispatched to the lot for inspection.
Traditional roles throughout the value chain may shift, and some players may become more specialized. Insurers should aspire to become more relevant to their customersto position themselves not just as claims payers but as partners that help prevent losses and support customers through challenges. Some carriers are already beginning to take innovative approaches such as starting their own venture-capital arms, acquiring promising insurtech companies, and forging partnerships with leading academic institutions. Claims triage and repair services are often triggered automatically upon loss. In such an environment, digitally enabled intermediaries and digital-only sales models are proving to be effective and may be accelerating the winner-take-all trend. While no one can predict exactly what insurance might look like in 2030, carriers can take several steps now to prepare for change. For example, insurers are unlikely to gain much insights from limited-scale IoT pilot projects in discrete parts of the business. When the world paused (and reorganized) its usual activities to contain the spread of COVID-19, many insurers demonstrated great resolve. Violet Chung: Given the nature of insurancethe large capital reserve to offset pooled risks, stringent regulation, proprietary claims data, and underwriting know-howdigital disruptors have largely been kept at bay historically. By 2025, 3-D-printed buildings will be common, and carriers will need to assess how this development changes risk assessments. Please try again later. Enough information is known about individual behavior, with AI algorithms creating risk profiles, so that cycle times for completing the purchase of an auto, commercial, or life policy will be reduced to minutes or even seconds.
Highly dynamic, usage-based insurance (UBI) products proliferate and are tailored to the behavior of individual consumers. Customer engagement in this context requires an insurer to understand the customers lifetime value through the lenses of acquisition costs, insurance risks, cost to service, cross-sell potential, and retention. Generating value from the AI use cases of the future will require carriers to integrate skills, technology, and insights from around the organization to deliver unique, holistic customer experiences.