IoT, AI and quantum computing will reshape the insurance industry over the next 20 years.
Bill Pieroni, CEO of ACORD, the global standards body for the insurance industry, painted this vision of the future when he addressed insurance executives at DXC Technology’s Connect Insurance Executive Forum in Charleston, South Carolina, in February 2023. His view of the future is based on an ACORD survey commissioned by DXC examining the long-term outlook for the insurance industry.
“We are defining our direction for the next 20 years and accelerating the future,” said Ray August, president of Insurance Software and Business Process Services at DXC, when introducing Pieroni.
The survey found that the key source of competitive advantage for insurance carriers long-term is “technology dominance,” Pieroni reported, meaning how they leverage technological capabilities. In the survey, 45 percent of respondents rate technology leverage as the primary source of competitive advantage in 20 years, compared to 27 percent who rate it as the primary source today.
That said, to achieve sustainable value creation going forward, carriers need to execute simultaneously on all fronts: technology leverage, customer/channel management, operational efficiency and product development. “If you don’t move forward with technology, you’re stuck with tradeoffs: a good price but a so-so experience, or a great experience but at a high price,” Pieroni explained.
Technology dominance
Pieroni said the top 3 technologies to focus on are IoT, AI and quantum computing:
- IoT — The increasing pervasiveness of IoT devices, some expected to cost less than a penny in 20 years, represents a massive network of data. Imagine wearables impacting workers’ compensation claims, devices for managing energy utilisation, and sensors in automobiles and homes. “This leads to incredible innovation in terms of underwriting and claims,” Pieroni said, because the data collected reports actual activity in near real time. “Insurance is an execution-based business. We price it. We sell it. We manage loss cost. We get a good investment return,” he said. “IoT will transform underwriting and loss cost.”
- AI — The only way to make sense of all the data is AI. AI can be applied to everything from cyber protection to interacting with customers and agents, to generating products, to shaping smart cars. “AI will transform the way we do things. Thank goodness it’ll be just slow enough that we have time to prepare — but that also presents the danger that some carriers may ignore it until it’s too late,” Pieroni said. “Organisations with real stewardship for the future will build the capabilities for AI.”
- Quantum computing — Quantum computing deals in exponentials, which is critical for consuming mass quantities of data. Whereas Moore’s Law in traditional computing is about a doubling of processing power, quantum computing is about going thousands of times faster. Imagine you’re in a car accident; the carrier knows it’s not your fault, and knows the damage done. Before the air bag is deployed a claim is already sent; the money could be deposited in your account before the accident is cleared. “Quantum computing married with IoT and AI will be transformative to the insurance industry,” Pieroni predicted.
Talent imperative
With the emphasis on technology over the next 20 years, the insurance industry needs to do more to bring in tech talent. “We as an industry do not attract our fair share of high-skilled talent,” Pieroni said. Talent is already a key priority and expected to become even more significant. Some 70% of survey respondents said attracting, developing and retaining talent is a top priority today; that figure increased to 80% when looking out 20 years.
Talent should be focused on not just solving problems but innovating around opportunities such as serving customers and agents better, and pricing more accurately. The over-arching goal is to improve productivity and be less labor-intensive.
The need for tech talent goes all the way to the top. Pieroni said that technology expertise will be critical in the C-suite. CEOs who have been CIOs will be in high demand. “We only have a handful of CEOs who were formerly CIOs in the insurance industry,” Pieroni said, adding that they've done pretty well.
Security priority
As expected, security continues to be critical. All those IoT devices and data are a reminder about security risk. Survey respondents identified cybersecurity and risk management as a top technology priority today and in 20 years.
Indeed, many of the critical issues facing insurers in 20 years are issues today. “The future is already here. It’s just not evenly distributed yet,” Pieroni said, quoting science-fiction writer William Gibson. To realise the future and be a leader, “the insurance industry needs to be far better at change,” he said.
Read a summary of the ACORD Insurance 2024 survey commissioned by DXC.
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