Insurance and Technology: Are You Prepared for the Coming Disruptions?

Insurance and Technology: Are You Prepared for the Coming Disruptions?

Multiple December 08, 2016 Posted in: Blog Posts, Apex Webinar, Insurance / Insurers

Co-authored by Chris Holt and Legaré Gresham.

Last week we presented an APEX webinar on changes in technology that will impact the insurance industry in the coming years. We would like to thank everyone who participated and responded to our polling questions, and we’ll now answer a few participant questions we lacked sufficient time to address during our presentation.

We began by asking our audience, “Which technology do you think will have the greatest impact on insurance in the next 5 years?” We then asked the same question at the end of the webinar. Nearly half of the respondents voted for driverless cars at the beginning of the presentation. That number declined, however, at the end of our session as responses shifted toward artificial intelligence (AI) or financial technology. The graph below illustrates these results.

Our opinion is that AI will have the largest impact on the insurance industry in the next 5 years. Each of the other technologies listed will utilize some form of AI in their implementation. AI will assist all of us to varying degrees in both our personal and work lives. But AI will likely be virtually invisible, behind the scenes much like electricity, unless something goes wrong. Therefore, it is also our opinion that driverless cars will most visibly impact insurance so will likely receive the most public attention. 

We were asked an interesting question as to whether there have been studies of stress induced by loss of control over driverless cars, along with one participant’s comment that he would be terrified to ride in one, perpetually awaiting some sort of malfunction. According to the results of a March 2016 survey conducted by the American Automobile Association (AAA), many U.S. drivers share this  fear. According to  AAA’s survey, three out of four U.S. drivers indicated they would feel afraid to ride in a self-driving car. Other studies have revealed similar initial apprehension, but most respondents grew comfortable with autonomous vehicles within a relatively short timeframe. This particular topic will be explored further in Pinnacle’s December 15th APEX webinar, Autonomous Vehicles and Their Impact on the Insurance Space.”

One webinar participant asked us if the acceptability of these new and continuously-evolving technologies is contingent upon the tech industry's ability to tame cyber risk. Cyber risk is certainly a key issue faced by all new tech developers as well as users. It is our opinion that cyber risk will remain a persistent problem with new technologies since, as with anything of value, there will always be someone trying to steal or compromise them. We sincerely hope tech inventors and developers will succeed in staying ahead of the criminal element.

Regardless of any apprehension we may feel, or the issue of cyber risk, these technological advances will have an ever-increasing impact on the way we live, work, play and interact with each other.

Chris Holt, ACAS, MAAA, is a Consulting Actuary with Pinnacle Actuarial Resources, Inc. in the Atlanta, Georgia office. He holds a Master of Science Degree in Applied Mathematics from Florida State University and Master of Science and Bachelor of Science Degrees in Mathematics from Auburn University. He has over 17 years of actuarial experience in the property/casualty insurance industry. Chris has expertise in assignments involving loss reserving, loss cost projections, risk transfer analyses, and personal and commercial lines ratemaking.

Legaré Gresham, FCAS, MAAA, is a Consulting Actuary with Pinnacle Actuarial Resources, Inc. and has over ten years of experience in the property/casualty industry. She has worked extensively with traditional insurers, captive insurers and self-insureds, including public entities. Her expertise includes loss reserving, pricing and product management, Proforma financial modeling and regulatory support. Legaré is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.

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