Insuring tomorrow: Climate change and artificial intelligence redefine the customer experience

Written By Brazen Corporate

How much of an impact will climate change have on your insurance premium in the future? Unfortunately, a lot. In fact, one in twenty-five Australian homes is now expected to be uninsurable by 2030 due to climate change. Whilst it may sound morbid, it was one of many great insights that I picked up after attending the Future of Insurance conference.

I recently attended the Future of Insurance conference, it was a great opportunity to listen to Sean Carmody Executive Director of Insurance, Australian Prudential Regulation Authority (APRA) and executives from Insurance Australia Group, QBE Ventures, Zurich Insurance, Medibank, Honey Insurance and many more. Below are the key themes and questions worth pondering in the future:

Decoding the dialogues
Essential insights from APRA and insurance titans

Customer experience

  • Importance of transparency, accessibility and trust.
    Agile platforms enable personalised experiences and products.

  • Creating products and platforms for future generations e.g. creating tools with a similar look and feel to TikTok and Instagram, one-click buy, buy now – pay later, future-proofing via strategic partnerships.

  • Creating simplified processes for non-tech audiences e.g. customer callbacks focused on those who are more likely to need help.

Claims

  • Streamline processes to enable better employee experiences when responding to customer requests e.g. reducing the number of systems an employee needs to access to help customers.

  • Providing customers with tools such as Internet of Things (IoT) devices, and sensors in the home to detect incidents such as fires and flooding.

Pricing

  • In the future, pricing will be determined via customer behaviour data e.g. data from motor vehicles.

  • Growing concern regarding the protection gap due to policyholders downgrading coverage levels.

Artificial intelligence (AI)

  • Both AI and automation play key roles in simplifying and automating communication processes, enhancing agility and reducing costs.

  • Making processes more efficient using AI, can enable more focus being placed on vulnerable customers.

  • Futurists are predicting that we are ten years away from trusting AI conclusions without human intervention.

  • Power of prevention: Use data insights to focus on mitigation of events.

  • Implementing data literacy programs / classification frameworks prior to making processes automated.

  • Organisations need to develop AI frameworks.

  • Focus on building sustainable technology: Challenging if we are creating legacy systems = tech debt.

  • Using technology to determine the difference between real and fake documents (fraud risk detection). 

Global risks ranked by severity over the next 10 years

The World Economic Forum Global Risks Perception Survey found the number one risk is misinformation and disinformation. This sentiment has been recognised by some of the largest financial institution’s internal audit functions, and senior leaders have expressed an interest in enhancing the reliability of financial and operational information.

Global risk landscape: An interconnections map

Changes in customer concerns

Rising Premiums and Affordability Concerns

Increasing insurance premiums, particularly in sectors like private health insurance and household insurance, can make it more challenging for policyholders to afford coverage.

Underinsurance

Policy holders downgrading their coverage levels or opting for higher excesses to manage costs may result in situations where they are underinsured due to insurance costs. There is a growing concern about the protection gap in insurance, specifically regarding climate-related risks.

Transparency and Trust

Increased transparency in insurance policies, including clarity on coverage, premiums, and factors driving premium increases, can help build trust between insurers and policyholders. This trust is crucial for policyholders to feel confident in filing claims and for insurers to effectively process and manage those claims.

The call to action from APRA - Two key asks:

  1. Encourage insurers to increase transparency, innovate, and address challenges to shape a sustainable future for the industry.              

  2. Harness talent and innovative power across the industry to help shape a future that meets protection needs.             

Conclusion

Overall, the trends and challenges outlined above suggest a complex landscape for insurance claims, with factors such as affordability, coverage adequacy, and trust playing significant roles in the claims process. Insurers may need to adapt their approaches to claims management to address these challenges effectively and maintain trust with policyholders.

What do you think the future of insurance will look like? Do you think similar trends will impact any other industries?

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Brazen Corporate
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