Machines Will Save the Insurance Industry
Bloomberg reports today that “Insurance companies are running out of ideas” and that the big rewards “will come from machines.” I could not agree more, and that is exactly why I seek to take a run at the very heart of the business; as this is where the biggest rewards reside.
Insurance companies stand to generate huge savings and product improvement by deploying number crunching databases, online selling, auto-form filling application systems, wearable devices, automobile tracking, and home monitoring. According to Bloomberg, Allianz alone reports:
Allianz SE expects digitization will help it generate 1 billion euro of yearly productivity gains in its current three-year plan. Even though its earnings per share growth will be helped by a $3.2 billion share buyback, it knows it has to dig out more savings over the long term. The industry as a whole would do better by automating back-office functions, says McKinsey.
But machine learning in the underwriting and product innovation is where the proverbial rubber will hit the road.
The insurance industry is about to see a step function increase occur in the underwriting as a result technology and machine learning.
Very soon, machines will be able to complete underwriting much faster with more accuracy due to the continued exponential growth rate of (i) the science of biology around aging and mortality, (ii) the increase in computing power, (iii) the increase database connectivity, and (iv) the decrease in cost of molecular testing. These trends continue to accelerate at a rate that traditional industry participants will be challenged to get in front of, let alone completely overhaul their business infrastructure to take advantage of. It has been known that machine learning in property and casualty insurance underwriting has been proven to be better for years, yet the adoption rate and utilization of theses technologies by traditional carriers lags. After all, why would General Motors develop an electric car?
With the development of M-panel technology, improved products will become available for consumers:
The ability to provide consumers life insurance and related products that better serve their needs is upon us. Technology is about to eliminate the need to be subjected to invasive underwriting protocols like having blood drawn or a urine specimen (basically required for life insurance over $250,000 at a cost of several hundred dollars).
Rather than avoid technology, embrace it, and allow it to provide benefits to consumers in the form of new products and services that meet today’s needs.