The primary factors influencing these changes—the growing amount of data being collected and used, as well as technology developments that make it possible to link this data to insurance products—will continue to influence how customers look for insurance. These developments are becoming essential to the future of insurance, regardless of whether people decide to work with an agent or deal directly with an insurer, OEM, or other service provider. We specifically see a time when customers will be able to compile and manage their data in a private “risk wallet.” As a result, customers will be able to better match risk to money by utilizing tools such as generative AI. Additionally, by matching such risks to alternative capital, new entrants will make insurance available to niche or high-risk pools.
We look at three different consumer lenses—the Mirrored Consumer, Curators, and Collectives—to demonstrate these shifts.
The Mirrored Shopper
A mirrored customer is a comprehensive, data-driven profile that is constructed from first-, second-, and third-party data, much like a digital twin. This data creates intelligent networks of digital twins and comes from a variety of sources, including wearables, sensors, and haptic devices. It contains information on the assets that customers own or utilize in addition to their personal habits. This method provides a comprehensive understanding of a person’s everyday life and the dynamics inside their home.
The reflected consumer presents interesting opportunities for insurance companies. In order to underwrite risk, insurers typically concentrate on a small amount of data, depending on what the customer or agent supplies in addition to what they are legally able to gather from second and third-party sources. But in the future, customers might be in charge of their risk “wallet” and have authority over the information that underpins insurance. Customers could move their risk wallet between carriers, evaluating coverage and costs according to the information they are ready to divulge.
With the consent of the insured, real-time exposure changes may also result in more accurate pricing and the ability to activate or deactivate coverage instantly. For instance, removing a car from a policy may occur when it is sold, and re-rating home insurance may occur when a roof is replaced. Engaging in healthy activities may potentially lower life insurance rates.
We have seen a few instances of the reflected consumer in action. A trial project in California stored vehicle titles on a private blockchain, allowing customers to directly control their auto insurance policy using digital wallets. Similarly, by utilizing data from ADT’s smart technologies, State Farm’s $1.2 billion investment in ADT seeks to enhance loss prevention.
In order to respond to the reflected customer, carriers must:
Target Market: Concentrating on the information required to underwrite risks. More data enables insurers to more accurately segment their customer base, enabling more customization.
Claims Experience: Using real-time claims data and eschewing outdated techniques.
Distribution & Purchase: Collaborating with outside data sources to enhance the precision and convenience of the insurance buying process.
Product & Pricing: Using both structured and unstructured data, generative AI and large language models are used to dynamically refine pricing.
Curators are artificial intelligence (AI)-driven middlemen who serve as online personal shoppers for insurance customers. These curators do not need much human involvement because they are highly automated. By assisting customers in locating the best coverage and price based on their data, property, and behaviors (such as telematics), curators could complement the conventional function of agents and brokers in the insurance industry.
Curators might use the most recent information on a customer’s transactions and risk profile to continuously look for the best offers rather than only when it was time for renewals. Both the customer and the agent gain from this since the consumer spends less time looking for insurance and the agent can concentrate on developing relationships and increasing productivity.
Depending on the risk profile of a customer, curators may eventually even bargain with insurers to obtain cheaper rates. 60% of participants in a survey of insurance consumers stated that they would be open to sharing more information in exchange for quicker, simpler services.
Carriers should get ready for the emergence of curators by:
Target Market: Determine which customers are most likely to appreciate a carefully considered insurance experience.
Distribution & Purchase: Create a smooth user experience where coverage triggers are identified and automatically handled, with consent from the customer as needed.
Product & Pricing: As curators search for better offers, make sure technical systems can manage the ongoing alterations required.
Collectives
Digital technologies have made it possible for worldwide virtual communities to emerge around common interests and purchasing power in today’s interconnected globe. Collectives in the insurance industry are groups of customers who are bound together by certain traits, including the goods they buy or the kinds of risks they share.
In the past, the foundation of insurance has been pooled risk, in which the cost of insuring high-risk individuals is shared by all. More precise, individualized pricing is becoming more and more in demand as customers’ risk profiles become more detailed. Smaller, more focused consumer groups looking for coverage catered to their unique risk profiles may be the future of insurance collectives.
With embedded insurance in industries like travel and automobiles, carriers are already observing this trend. While ride-sharing firms offer customized insurance coverage for hybrid personal/commercial drivers, several OEMs now supply auto insurance at the point of sale.
In order to accommodate this expanding trend, insurers ought to:
What Comes Next?
As previously mentioned, carriers will be updating and improving their underwriting and product models in the future of insurance. This will call for adaptability in managing new data sources, interacting with digital curators, staying competitive in a market that is changing quickly, and coming up with fresh, innovative methods to stand out from the competition. Carriers will be better positioned to prosper in the changing insurance market if they welcome these changes and take aggressive measures to adjust.
