New technologies will introduce major opportunities to the insurtech sector in 2022 but may also bring some challenges. As legacy companies continue to adapt their systems for the 21st century—incorporating AI, cloud computing, and machine learning technologies—they’ll face competition from smaller, more nimble startups that offer instant app-based payouts and niche coverage types.
Some of the trends we’re seeing solve long-running insurance industry challenges, while others offer new ways of thinking about the customer relationship altogether. Here’s what you need to know about the top five insurtech trends of 2022—and what you can do to ensure that your company isn’t left behind.
1. AI and Machine Learning
Artificial intelligence (AI) is an umbrella term that includes subcategories like machine learning and natural language processing (NLP). Insurance companies will increasingly use Applied AI to automate the underwriting and claims process, as well as “human-in-the-loop” systems that use a combination of AI and human operators to perform tasks more efficiently than either could on its own. For example, ProNavigator’s AI-powered search technology can recognize key insurance terms and acronyms—allowing agents and insurer call centers to quickly find the information they’re looking for across thousands of documents held in various portals and file servers. Insurers can also use optical character recognition (OCR) to extract information from scanned documents and reduce the need for entering data by hand.
2. Drones and IoT Devices
According to a recent report by McKinsey, satellites, drones, and Internet of Things (IoT) devices will transform the insurance industry by improving the accuracy of data used in underwriting and claims processing. For example, “a carrier could compile a data set of radar-based and drone-generated images … of an oil rig to inform underwriting in a fraction of the time currently required.” The Instanda blog echoes this prediction, noting that future auto insurance premiums may be based less on a policyholder’s driving history than on the capabilities of their vehicle’s autonomous driving software and onboard sensors.
3. Return of Health Insurtech
The past few years saw some insurtech stocks take a nosedive, as up-and-coming health insurtech companies were hit by rising medical costs. For example, the Bright Health Group ended 2021 Q3 with a medical cost ratio (MCR) of 103%—paying out more in expenses than it took in in premiums. However, Nasdaq argues that this may have more to do with external circumstances than with any shortcomings in the underlying technology. As a result of the pandemic, “the companies haven't had enough time to employ their care-coordinating technology which is supposed to reduce expenses over time.” While this may or may not turn out to be the case, 2022 is likely to see a resurgence of interest in health insurtech companies that prioritize full-stack tech solutions. Wearable IoT devices will also play a role here, although privacy concerns may limit the use of such data when offering health insurance products.
4. Shift toward ESG Initiatives
In 2021, London-based insurance group Aviva became one of the largest insurers to announce a goal of net zero emissions by 2040. According to Bloomberg Green, Aviva “will stop underwriting companies that make more than 5% of their revenue from coal unless they have signed up to the Science Based Targets initiative.” Other insurers are likely to follow suit, introducing new ESG (Environmental, Social, and Governance) initiatives to mitigate financial risks and meet consumer demand for more sustainable insurance and investment products. As Artificial.io explains, “A growing number of providers will consider ESG risk factors when undertaking risk assessments and underwriting … [as well as] supporting clients in managing ESG issues within the framework of commercial insurance.”
5. 3D and 4D Printing
Finally, there’s 3D and 4D printing, both of which are likely to have an outsized impact on the insurance industry due to their role in construction and manufacturing. While 3D printers are already widespread, 4D printing (which produces objects that change in shape or quality over time) is still in its infancy. As Independent Agent magazine suggests, this technology could “lead to more efficient claims processes as policyholders become capable of repairing and replacing their own broken or failed auto or home equipment.” At the same time, 3D printing raises new questions around product risk and liability, and insurers will have to develop policies that take these technologies into account.
6. Remote or Hybrid Work Environments
As a result of the worldwide COVID pandemic, remote or hybrid work arrangements are here to stay. That challenges insurance in particular in two fundamental ways. First, it accelerates the pressure on insurance companies to bridge the technology gap between legacy systems and the new digital world, in which old technology increasingly falls short of facilitating onboarding and training a virtual workforce. Second, it forces insurances companies to rethink the way they hire and manage people, and overcome more traditional employment patterns which are known to be especially predominant in this industry.
How Insurers Can Get Ready for 2022
Some of these trends are well on their way, while others may take some time to be fully realized. Insurers can prepare by familiarizing themselves with new technology, hiring the right talent, and being willing to experiment with new products and ideas. While learning about concepts like AI can be daunting, having a working knowledge of each trend can ensure you don’t get caught off guard by new developments.
The best way forward is for insurance companies to embrace technology and remote work. ProNavigator's knowledge management platform can help by simplifying information discovery and access, making it easier to onboard and train staff in the new normal of virtual teams.
Mitja Alexander Linss is the Sr. Director of Marketing at ProNavigator. He frequently writes about knowledge management, information discovery, artificial intelligence, and InsurTech.