Tech is revolutionizing the insurance industry by automating and enhancing efficiency, from customer onboarding to policy placement to claims handling. In fact, the global insurtech market was valued at $5.45 billion in 2022 and is poised for remarkable growth, as it's expected to expand at a CAGR of more than 50% from 2023 to 2030.
But what are the forces driving this?
There’s a vanguard of technological advancements, aka insurtech, driving unprecedented change in how insurance is conceived, developed and experienced: embedded insurance, customer-facing digital tools, telematics and the Internet of Things (IoT), reliance on rich data sets and AI and machine learning (ML).
With these five insurtech trends in mind, let's discover what they are and how they'll redefine the insurance landscape in 2024.
See also: Biggest Business Trends for 2024
Continued Emphasis on Rich Data Sets
As more of the insurance industry relies on technology for greater efficiency and lower costs, there's a greater need for cleanly structured data for analytics and insights.
As the promise of insurance data lakes escalates, the sourcing and completeness of data to fill the lakes is paramount to getting real ROI from the investment. Common data challenges, like missing, outdated or incorrect information, can result in an incomplete picture of a risk and flawed underwriting and pricing decisions. The data must be complete, validated and sometimes cleaned to support accurate analysis.
In the insurance industry, issues arise when agents lack complete client data, hindering their ability to advise clients on pricing and coverage. For instance, correctly determining the industry classification, such as distinguishing between a barber shop and a beauty salon, is crucial, as it significantly affects insurance policies and premiums.
To effectively support decision-making for agents in underwriting and application processes, as well as to fuel AI models, rich data sets demand accurately sourced and structured information.
There are several ways for insurance companies to ensure their data is clean. One way uses third-party data validation and verification tools supplied from businesses such as Verisk, Fenris and HazardHub. A more accurate option is getting customers to validate data themselves by presenting them with information you’ve already collected and giving them an intuitive interface to review it.
Leveraging data cleaning tools offers many benefits, such as data validation, reduced manual effort, removal of duplicates, precise risk assessment and improved customer service. Simply put, clean data enables better decision-making and fosters customer trust by ensuring accuracy and reliability in information handling.
AI and ML-Driven Insights
Once insurance companies have their rich data lakes full of accurate information, they can let AI and ML do all the hard lifting. AI and ML can analyze vast amounts of data from multiple sources, including historical claims data, customer information and external data from IoT devices, to enhance the accuracy of risk assessment.
For example, predictive modeling, which uses an ML algorithm to process historical data, can help insurers better understand and predict risks, resulting in more precise pricing of policies.
Moreover, automation and AI-driven chatbots can streamline the claims process, reducing the time and cost of claims handling, while image and text analysis can expedite claims assessment by quickly identifying relevant information and fraud detection.
Large language models (LLMs) can also be leveraged for data extraction. Eric Sibony, co-founder and chief scientific officer at Shift Technology, told the Insurance Times that a significant use case for LLMs is "data extraction from unstructured data, [such as] free text and documents." While LLMs can be leveraged as chatbots and can generate emails and other generic documents, their data extraction tools can also be used to detect fraud and make personalized customer recommendations.
Analyzing a broad scope of customer data through AI programs and tools allows insurance companies to gain deeper insights into their clients' preferences and behaviors, enabling insurers to offer more personalized services and policies. Furthermore, this information can drive personalized marketing and communication to improve customer engagement and retention.
See also: Investment Outlook for 2024
Embedded Insurance
As people’s time is precious, customers want ease and speed when buying insurance. But the current process is complex and time-consuming.
To solve this pain point, insurance companies can now embed their offerings at the point of sale (POS) through application programming interfaces (APIs), allowing them to market their products exactly when customers need them. As we head into 2024, embedded insurance is expanding beyond travel insurance that you can purchase while buying flights or an all-inclusive package deal.
Tesla was the first company to offer POS car insurance—made possible with the help of telematics. GM Motors also now offers its customers something similar. With these embedded solutions, GM and Tesla can also monitor customer driving patterns and behaviors, allowing them to alter monthly premiums and rewards for better driving.
This trend not only enhances the customer experience but broadens the reach of insurance to new consumer segments, widening the market.
Customer-Facing Digital Tools
The popularity of embedded insurance highlights that, in 2024, businesses need to focus on a customer-centric approach to sell a product or service.
This means building products and services with customer wants and needs at the forefront and making the buying, renewal and management process as simple and personalized as possible. In addition, because of industry regulation, many insurance products have become commoditized, which means the best way for agencies to differentiate is through a placement process enabled by advanced technology.
By investing in easy-to-use mobile apps and online portals, online claims submission tools, smart form documents with e-signatures and telematic apps, insurance brokers and carriers can differentiate themselves from their competition by providing an exceptional customer experience.
In fact, McKinsey reported that companies that use technology to enhance the customer experience can increase customer satisfaction by 15% to 20%.
See also: 2024 Outlook for AI in Insurance
Use of Telematics and IoT
The insurance telematics market is expected to grow from nearly $5 billion in 2023 to $11 billion by 2028. And the increasing adoption of telematics has been particularly fueled by the growing popularity of electric vehicles.
Telematic devices can be used to monitor driving and collect data for the vehicle owner, facilitating personalized safety tips and delivering driver habit information. These days, companies like Allstate, GM and Tesla are also using this data to dynamically adjust insurance premiums. Furthermore, advanced telematics can also be used for real-time accident data and fraud prevention by analyzing factors such as hard braking, cornering or speeding during a specific period.
The development of the IoT has advanced the use of telematics, particularly for fleet management. IoT sensors can seamlessly integrate within a fleet management platform to quickly and efficiently mine and sort relevant data. This provides near-real-time visibility into key metrics, including fuel usage, engine status, vehicle location, driver behaviors and vehicle maintenance history.
With this new in-depth data collection, carriers can make advanced underwriting decisions and design insurance products that better align with their policyholders’ needs.
Wrapping Up
As the countdown to 2024 picks up pace, these five key trends are poised to shape the insurance industry's trajectory. They mark a paradigm shift in how insurance is conceptualized, developed and experienced.
These trends collectively underscore the industry's commitment to meeting the evolving needs of a tech-savvy clientele.
