Say what you will about the insurance industry being old school— the transformation that has occurred over the past 10 years has been remarkable. With a global pandemic in the rearview mirror and a recession on the horizon, we have five predictions for 2023 that focus on the data, the customer and the bottom line:
Carriers and the industry, in general, will become more comfortable with data-driven risk assessment
The recent viral appeal of OpenAI’s ChatGPT reflects society’s growing acceptance (and appreciation) of artificial intelligence, or AI. AI is replacing tasks that were traditionally performed by humans. Not only can AI write a college essay, but it can also assess risk — fast and accurately.
Because the insurance industry is about managing risk, we’re notoriously risk-averse to adopting technology that we don’t understand. To be clear, AI is not the same as machine learning. But as we become more familiar with AI, our industry will become more comfortable with the practice of using predictive analytics to determine risk.
Of course, regulators will have something to say about AI-driven risk assessment, but we expect to see greater comfort and more experimentation in 2023.
Better access to, and use of, structured data
Imagine working with a single vendor that not only provides the data required to assess risk but also structures that data for your predictive underwriting model. Sounds impressive, doesn’t it
Currently, reinsurers and carriers are forced to manage multiple vendors and everything that goes with that: procurement, contracts, service and support, APIs, etc. But the vendors that provide both the data and the data science capabilities required to structure it for an underwriting platform will become integral to risk assessment and key partners to life insurance carriers.
Take the data in electronic health records (EHR), for example. EHR data may be all you need to assess risk going forward, but combing through that information is still a manual process. With the advancement of natural language processing and other technologies, the provider that can both supply the record and structure the data will have a significant competitive advantage.
Companies are making great strides in structuring data. Those that figure this out will gain dominant market positions and create de facto standards for how data is organized. Don’t be surprised if we see consolidation in this segment.
Carriers return to mortality rates
During the pandemic, the industry had no choice but to focus on fluidless, accelerated underwriting. Reinsurers and carriers took giant steps and made significant progress toward fluidless risk assessment.
While this has been good for industry transformation and growth, in 2023, carriers will analyze whether their pricing and mortality assumptions are on target. This deep dive into accelerated risk assessments will result in a recalibration of the accelerated underwriting process to emphasize mortality rates over volume. We’re hoping that the industry is transparent about those results (but we’re not holding our breath).
Wellness programs will go from differentiator to mainstream
When something goes mainstream, by definition, it’s no longer a trend. But it bears mentioning that wellness and wearable programs have taken hold with a key demographic: Millennials and Gen Zers who are comfortable providing personal information in exchange for financial incentives.
Carriers are increasingly offering early-detection cancer tests and epigenetic testing to better assess biological versus chronological age with a single swab. This is also a huge value-add for individuals who don’t subscribe to either the “ignorance is bliss” or “Big Brother is watching me” mindset.
Carriers that have made progress in post-issue engagement and wellness programs will reap the benefits in terms of customer experience, growth and mortality improvements on their existing book of business.
Embedded life insurance will take hold
This may be the least likely of our predictions to see the light of day, but the concept of embedded insurance has existed in the P&C world for years. While life insurance may be embedded as specialized coverage when you take part in extreme sports like skydiving, it is not as common as we’d like it to be.
Employers are growing wellness programs for their employees, and it seems a logical place to start the embedded life insurance conversation. Workplace benefits already include incentives for wellness initiatives like consulting a nutritionist, joining a gym or getting an annual physical. Is there an opportunity to embed clinical labs into your existing annual physical? We think so.
Do you have any predictions around data-driven risk assessment at your organization? We'd love to help: contact us here.