2020-2030: ten years that will transform insurance forever

The digital revolution is forever changing our world. We live in times when technological advances are causing the different economic sectors to evolve at a dizzying pace. To such an extent that, in a few years, industries like insurance will transform some of the hallmarks of identity that have been in place since the Code of Hammurabi [1]. For example, contingency coverage which, in 2030, could even anticipate them thanks to the use of data.

There are many signs that the insurance industry is preparing for momentous change. Ecosystems will take shape in which suppliers from different industries will interact to create value on the basis of shared data. It will not be a matter of selling isolated products and services but of experiences built by many actors.

In fact, 67% of insurance industry leaders believe that current business models will have changed beyond recognition within the next five years and that these ecosystems will be the primary agent of change, according to data from Accenture Research.

In addition, 58% of insurance companies report that they are already actively seeking ecosystems to integrate, and three out of four expect that at least half of their profits will come from these ecosystems in the next five years.

[1] The Code of Hammurabi is known as the first civil code and penal code because of its age. It dates back to the Babylonian Empire and regulated people’s daily lives in civil and criminal matters.

Today, we find younger generations more interested in using things than owning them, alongside older ones who, largely because of the lockdown of 2020, have overcome their wariness of new technologies. According to INE data, the percentage of people aged 65-74 who reported having shopped online rose to 23% in 2021, up from 13.5% in 2019.

This development is just one example of the multiple current trends in society. Today’s world is dominated by hyper-digitization and hyper-connectivity, empowerment of the individual, personal data protection, genetic medicine, the chronification of deadly diseases, the aging of the population, low interest rates, environmental awareness, the sustainability of the welfare state, omnipresent artificial intelligence, hyper-globalization or the concentration of inhabitants in and around megacities, among other areas.

As a result, the insurance industry also presents its own trends linked to its different business lines. In this regard, gaining importance are concepts such as mobility, which is increasingly connected, autonomous, shared, and conceived of as a service. For its part, in health special attention is paid, among others, to concepts such as precision and preventive medicine, automatic triage, pharmacogenomics, connected health and mental health. All these factors mix with other more cross-cutting factors such as the emergence of risk marketplaces or the availability of value-added services, social protection, and debt dilution systems.

End of ownership

The new generations will own fewer things and consume more shared products and services. The insurance industry must face this scenario by creating new business models and new B2B relationships.

New mobility

By 2030, people will be getting around in various semi-autonomous and connected modes of transportation. Insurance would likely cover the entire trip and not just a single vehicle in this setting. In addition, users will pay for the service on a pay-as-you-go basis.

Data everywhere

In the future, users will be surrounded by smart, connected devices that will collect, understand and send their data. This will have a decisive influence on how the insurance industry will operate. In fact, it will not so much secure specific products as real-time data events.

Climate change

Climate disasters will increase over the years and affect our way of life. The role of insurance companies in this scenario will have to do with guiding their users on how to live sustainably and avoid risks.

Preventive health

In a few years, people will be monitoring their bodies and analyzing their health. Insurance companies will be able to help people avoid illness by providing us with suggestions to improve our lifestyle.

Longevity

With an increasingly long-lived society, it will not be enough to digitize everything. The insurance industry should maintain a holistic view of a person’s life and offer care services appropriate to their circumstances.

Together with those identified above, these macro trends paint a picture of a world in which longer-lived consumers will have a changing lifestyle with high expectations. They will be so focused on navigating within an overly complex world that they will have neither the interest nor the time to deal with or pay for things they are not interested in.

Moreover, the democratization of data and artificial intelligence will transform the very essence of insurance. The insurance experience, as we know it today, will lose value, and insurance will become just another feature of a product or service provided by a player trusted by the consumer. This means that insurance will become part of new ecosystems in which players from different industries will interact to offer value to consumers.

Consumers are increasingly accustomed to a new consumer paradigm that is fully integrated, digital, and based on pay-per-use. In addition, people are increasingly looking for experiences rather than products. This can be easily seen in the declining tendency to physically own objects such as vehicles, real estate, and offices.

These trends are part of a collaborative economy context, in which there is an increasing willingness to share assets, thus generating value and reducing costs. For this reason, companies must look for innovative and agile business models that allow them to remain competitive and grow outside their traditional business focus.

In this business setting, digital ecosystems will be a decisive force for change. These are complex networks of players interacting to create value for all using digital technology. Data and services will flow freely, providing the end-user with a holistic and seamless experience.

What role will insurance companies play in these ecosystems? In reality, they can play all kinds of roles: from lead facilitators to initiators, participants or providers of security and trust in ecosystems dominated by others.

More specifically, seven major ecosystems have been identified in which insurance providers can find major opportunities for development in both direct and indirect generation of value. These ecosystems are related to life, mobility, health, marketplaces, business, equity, and travel. They include opportunities such as risk engineering, inheritance planning, vehicle condition monitoring and reward setting, data data security and connected homes and cars.

The value chain in the new digital ecosystems is rooted in the collection, aggregation, and analysis of data from different sources. These processes will make it possible to build hyper-personalized value propositions for new consumers.

All of this will be combined with the use of insurance companies’ proprietary software, which will be coupled with external artificial intelligence solutions to provide deep insight into risks.

This cross-cutting vision will enable insurers to improve the selection and monitoring of these risks and the prevention of fraud. With this unique knowledge, companies will be able to develop special value propositions that will combine insurance coverage with a wide range of additional services within the ecosystem.

Insurance companies must adopt the technologies that will integrate the various players in the ecosystems for all this to happen. For example, the use of APIs that will facilitate data exchange. They will also need to open up their infrastructure to allow for the free flow of information between the companies themselves and the ecosystem. In this regard, concepts such as open insurance present themselves as a great opportunity.

Transparent insurance

By the end of this decade, insurance will be transparent to the user. Insurance will be deployed as an additional layer within the ecosystem: it will be encompassed within the value proposition of different products and services. As a result, most experiences will be insured through a B2B offering. The insurers of the future are destined to become giant B2B brains with hardly any operational arms, and they will rely on predictive models more than on historical data.

This means that insurance will not be sold directly to the user but will instead become one of the features of an experience. In fact, there are already some startups with solutions that are integrated into the offerings of other providers, such as hourly insurance in mobility or real-time cargo insurance for logistics operators.

Personalized insurance

In 2030, consumers will purchase customized insurance policies that cover risk in real time. This will involve a shift from insuring specific products and assets to offering coverage for individual behaviors and events.

In fact, the combination of past behavior and real-time data will enable a unique mix of coverage and pricing for each user at each point in time. This model will be able to collect and process data to assess risk in real-time and also auction the risk to the highest bidder.

Anticipating risk

Another of the scenarios in which the future insurance companies will operate has to do with a fundamental change in their business model: in many cases, they will move away from covering risks toward preventing them. In fact, their work will largely consist of advising their customers on how to anticipate risks.

We will see life insurance policies that promise customers they will reach a certain age or even that they will avoid developing the most typical ailments of a given genetic profile. Even car insurance will prevent a user from suffering the most common accidents. In reality, insurance will become a combination of preventive services.

Signs abound that the insurance industry will experience unprecedented disruption in the coming years. In this context, companies must be capable of adapting to capitalize on the significant new opportunities for them to create value.