The global insurance industry in 15 years will see virtualservice providers, increased standardization, products quicklytailored to individual consumers, and shifting consumer loyalties,according to an IBM study.

Old insurance models will be replaced by “pay-as-you-live”insurance–which deals with life “as it happens,” and active riskmanagement–reducing claims management and costs by placing emphasison preventive actions, IBM predicted.

The study also forecast that new business processes will becreatedthat lower costs and broaden product appeal.

IBM said it reached its conclusions after a year-long globalstudy conducted by the IBM Institute for Business Value(IBV)–”Insurance 2020: Innovating Beyond Old Models.”

Findings in the report, IBM said, are the result of discussionswithmore than three dozen global insurance industry executives, aswell as otherinfluential stakeholders from around the world.

The research also examines disruptive forces that will influencetheindustry over the coming years, including technology, complexregulation, and competition from an increasing number ofsources.

Survey respondents and data analysis revealed four mega-trends,IBM said, that underscore the need for innovation:

o The rising tide of technology will enable an increasing numberof niche service providers from inside and outside of thetraditional value chain.Within 15-years, a number of partial andeven totally virtualcompanies will surface to meet the needs ofconsumers and businesses.

o Modern information networks and the ongoing transfer offinancial responsibility to end-customers will drive attitudesregarding increased services and convenience. Applicants andpolicyholders from a range of demographic groups will shiftloyalties to carriers that consistently meet theirexpectations.

o A global population that consumes and thrives on communicationand personalization will drive carriers to develop products thatare flexible and adaptable. Technology will empower insurers tobring their products closer to real-time interaction via sensornetworks and enlightened privacy regulations.

o Globalization of all industries and the need for efficiencywill drive the coordination of consumer and businessprotectionacross geographies, increasing automation and underscoring thedemand for industry standardization.

Survey participants predicted that over the next decade therewill be a significantincrease in the flexibility of insuranceproducts, and that increaseduse of pervasive computing technologywill make this a reality.

Calculating the cost of a specific risk, according torespondents, will make use of inexpensive sensors tied into thenext-generation Internet. Data provided by these sensors willsupport real-time calculation of risk, and keep a running tally ofpremium costs based on the actual risk presented–serving both lifeand property policies.

Similar technology will also support a broad range of policyduration products such as “just-in-time insurance,” where each stepof a journey would represent a different risk, such ascar-to-train-station, train-to-city, station-to-office, etc.

A “pay-as-you-live” scenario would trade some location andtime-of-day privacy data for lower insurance bills overall.

In the spirit of active risk management, the same network ofsensors could also provide convenient information–such as avoidingan overloaded expressway–relayed on the appropriate device (such asthe car audio system, a phone, and then in e-mail or as a phonecall in the office.)

The full research results and white paper are available at:ibm.com/bcs/insurance2020.