Will the insurance industry be able to handle new tech risks?

Technology is ‘creating new risks that the industry is currently unprepared for’ says Gari Gono, INSTANDA's Head of Solutions. Insurers have been warned they face a silent revolution and must prepare for technology to deliver new risks and opportunities.

Risk, the bedrock of the insurance industry, is undergoing a silent revolution. Whilst digital transformation has been the bastion of change for insurers over the last year, there has been far less said about how technology is changing insurance, from the outside in.

Technologies are creating new risks that the industry is currently unprepared for. Over the next five to ten years, insurers will have to create entirely new product lines as technological advances pave the way for new dangers. Difficult conversations will need to be had over liability – if a driverless car is to blame for a road incident, who is responsible? Only those insurers that adapt to these risks will survive and thrive.

At the same time, with the developments of data and AI, incumbents will soon know more about risk than ever before. This is creating an opportunity for insurers to embed themselves deeper into consumers daily lives, in the same way we have seen with online banking apps. If technological expansion continues at its current pace, insurers will be able to use their knowledge of risk to offer recommendations on how consumers can better protect themselves. This is long overdue.

Last month’s annual CES technology event provides a good starting point for exploring these issues. The event saw bigger, better, and thinner TVs and laptops. It also presented ground-breaking solutions designed to improve life and reduce the risk of accidents, or death. But we should question if it is that straightforward when it comes to insurance.

I crashed my car into a bridge, because… my windscreen glitched

Panasonic's new HUD was one exciting innovation, a piece of tech that turns your car windshield into a video game – with navigation routes and alerts for cyclists. Another was Nobi’s smart ceiling lamp. The light features motion sensors and infrared detection. It is designed to detect irregular motions and falls, a welcome technology for those at risk. A fall detection will activate an Alexa sounding voice in the lamp which will ask ‘did you fall’? If the response is yes it will send a notification to a caregiver.

Both technologies hope to be released within the next two years. But as an industry we are totally unprepared for them. How will the Panasonic's new HUD impact car insurance? How will insurance policies incorporate augmented reality? How will it impact risk? What if the Nobi smart lamp doesn’t alert a family member to a serious fall. Are they liable?

These are all risks we need to be thinking about, as soon as possible. New technologies will require completely new policies, as the need to protect consumers from emerging risks increases. Insurers will also need to have flexibility in their policies, so they can adjust and update policy details quickly, to accommodate new gadgets and dangers.

Currently, insurers’ existing technology systems make it very difficult to do that. It can take years to create a new insurance product and months to update the details of an existing policy. The only way insurers will be able to adapt to these new risks is if they themselves embrace digital.

Why this insurance is automatic, systematic, hydromantic

Another major theme presented at CES was home automation and improvement. You saw Samsung’s HandyBot, which uses advanced AI to stack dishwashers, a Wi-Fi-enabled pet flap with a built-in camera that lets you control when your pet leaves the home, and touchless doorbells and bathrooms.

What does this mean for insurance? Currently, insurers are reliant on consumers manually providing details about their habits and home, where they store their cars, how they look after their pet. After buying a policy from an insurer, you then only hear from them once something goes wrong.

Technology promises to change that completely. More advanced home automation and AI tools can monitor conditions in the house and feed that back to incumbents. This will allow insurers to more accurately price risk, provide more personalised policies, and give recommendations of actions to take to reduce risks.

How close are we to this type of insurance?

The technologies presented at CES may seem a farfetched reality to insurers, but they pose some serious questions to the industry. Technology is creating opportunities, opening new markets, and allowing insurers to better price risk and do more to help reduce claims. But it is also creating new risks, which will demand a new type of insurance.

If we want to get this new type of insurance right - create better, more personalised, and affordable insurance products that consumers need – insurers need to get ahead. To do that, they need to reflect on if their own technology is up to scratch. Can they bring new products to market quickly to react to new technologies and dangers? Can they make changes to policies quickly? Can they make use of data to better price risk? These are serious questions to be asking.