Will 2024 be the year of data for insurers?

While there’s no denying technology has had an incredible impact on the business of insurance over the past few decades, the industry is still very much in its infancy of technological transformation. Workflows are slowly starting to digitize, but it’s important that they do so in a cohesive way that allows for the flow of data between platforms. Creating this type of connectivity allows insurance industry stakeholders to leverage data to mine insights into their own business, customers and the industry at large.

Many exciting opportunities lie ahead for the insurance industry in 2024. More insurance companies than ever are harnessing the power of connectivity and data to further accelerate the digital roundtrip of insurance, and I expect we’ll see that continue in 2024.

Embracing data and predictive analytics
Data was a major buzzword in 2023 and its hype has continued into this year. There is a lot of opportunity for carriers, MGAs, wholesalers and agencies to utilize their own data, as well as third-party data, to drive better decisions. I expect we will see more industry players aggregating their data into centralized locations, such as data lakes or the cloud. This will give insurance organizations the opportunity to develop customizable reporting that provides visibility into their business and the larger industry.

An example use case would be a carrier wanting to see pricing averages for a certain state during a time period that experienced a significant weather event, such as a tornado or hurricane. With the right tech tools and an accurate, aggregated data set, that information could be pulled into one report, rather than having to manually compile information from multiple places. The carrier can then use the report to determine which verticals they may not be competitive in and how to rectify that, such as adjusting pricing mechanisms to be in line with their competitors.

Insurance companies with accessible and actionable data can enter the predictive space, which is where the really exciting opportunities lie. There is a lot of room for growth in predictive analytics. We’ll start to see insurance companies leveraging big data to gain insights into customer behavior and market trends for better forecasting. This can be especially helpful for underwriters when determining whether to assume a risk. Using predictive analytics, an underwriter can get to a risk management decision much more quickly and in a much more accurate way since the decision is backed by historical data.

Widespread adoption of AI and machine learning
Another 2023 buzzword that will carry over into the new year is AI. I expect we will see the industry leveraging AI and machine learning much more aggressively in order to solve long-standing problems.

There are two types of AI. The first is large language models, or LLMs, which are programs like ChatGPT or Google’s BERT. LLMs can play an important role in the insurance industry, especially for things like technical support, customer support and content generation for marketing campaigns and customer communications. With that being said, we need to be cautious about implementing LLMs in the insurance industry because they run a risk of errors. Take underwriting, for example, which requires a certain level of accuracy. If an LLM generates inaccurate information that is presented to a client, the client could potentially make a bad call.

Machine learning, on the other hand, will be easier to implement in underwriting processes. This algorithmically based form of AI learns from existing data, gradually improving its accuracy over time. Essentially, historical data can be used to predict the future, potentially even assigning an accuracy score that would identify the likelihood of something happening.

The potential for digital claims processing
Claims processing is an example of a long-standing problem in our industry that can potentially be solved with machine learning. Our industry has been stuck in a legacy world of processing paper faxes, PDFs and handwritten notes, which is too time-consuming and costly for carriers, agencies and their clients. Digitizing this process would make resolving claims much quicker and easier for all parties involved and bring us one step closer to completing the full digital roundtrip of insurance. There are tools out there that help with pieces of the process, but we haven’t seen a solution that really solves the problem in its entirety. I expect we’ll see the industry really working to bring in AI to help digitize claims processing from beginning to end, making the process move faster by taking human interactions out of simple transmission and communication tasks.

Once claims processing has been digitized, agencies can capitalize on the new data flowing through their systems to develop new business and provide more value for their clients. We are seeing more agencies looking to build out this data set to get a better picture of who their clients are and then use that information to generate new leads. This data will also allow agents to provide more consultative services to their clients, particularly during renewal time when they can recommend different types of coverage based on claims the client has filed.

Looking ahead
Overall, I think 2024 will be an exciting time for insurance companies and insurtechs looking to innovate and solve industry inefficiencies. Embracing data will be key in advancing the insurance industry’s technological transformation. Centralizing data for holistic views of processes, policies, and products, as well as allowing it to flow through systems, creates the connectivity needed to ensure the best experiences for carriers, agencies, and their clients.