IBM Looks At A Virtual Insurance World In 2020

The global insurance industry in 15 years will see virtual service providers, increased standardization, products quickly tailored 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 risk management–reducing claims management and costs by placing emphasis on preventive actions, IBM predicted.

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

IBM said it reached its conclusions after a year-long global study 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 discussions withmore than three dozen global insurance industry executives, as well as otherinfluential stakeholders from around the world.

The research also examines disruptive forces that will influence theindustry over the coming years, including technology, complex regulation, and competition from an increasing number of sources.

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 number of niche service providers from inside and outside of the traditional value chain.Within 15-years, a number of partial and even totally virtualcompanies will surface to meet the needs of consumers and businesses.

o Modern information networks and the ongoing transfer of financial responsibility to end-customers will drive attitudes regarding increased services and convenience. Applicants and policyholders from a range of demographic groups will shift loyalties to carriers that consistently meet their expectations.

o A global population that consumes and thrives on communication and personalization will drive carriers to develop products that are flexible and adaptable. Technology will empower insurers to bring their products closer to real-time interaction via sensor networks and enlightened privacy regulations.

o Globalization of all industries and the need for efficiency will drive the coordination of consumer and businessprotection across geographies, increasing automation and underscoring the demand for industry standardization.

Survey participants predicted that over the next decade there will be a significantincrease in the flexibility of insurance products, and that increaseduse of pervasive computing technology will make this a reality.

Calculating the cost of a specific risk, according to respondents, will make use of inexpensive sensors tied into the next-generation Internet. Data provided by these sensors will support real-time calculation of risk, and keep a running tally of premium costs based on the actual risk presented–serving both life and property policies.

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

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

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

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