2024: Time to Open Up on APIs, AI, Data and More

Customer expectations will continue to be a driver for change in insurance and across all industry sectors throughout 2024. The insurance industry is currently lacking in fast and efficient processes and customers will simply not tolerate poor customer experience and will switch to disruptors if service isn’t good enough.

Customers want their experience to be easy and transparent. From purchasing policies to reporting claims, there should be seamless communication and information at every step in the process, at any time and from everywhere.

In 2024, CIOs and technology executives will need to keep customer experience and operational excellence front of mind. It’s more important than ever that insurers know their customers well. Customer data, including behavioural and preferential data will be insurer’s crown jewels. This will enable the effective execution of digital business strategies aimed at cross-selling and upselling, personalisation, dynamic customer engagement and revenue growth through new products and services.

Automation will play a significant role in differentiation and insurers will need to know where automation can best support the customer experience. If insurers design the customer journey carefully, they will have an advantage in renewal and retention. And although automation is a focus, right now it’s focused on speed and cost – but automation also has a role to play in customer experience.

In recent years, organisations across ever sector have been looking to understand the ways in which AI can enable more efficient, intelligent and engaging business models. In 2023, Generative AI was a hot topic, but most of the work has been on understanding the capabilities as they rapidly evolve, with discussions around concerns such as result accuracy and IP.

However, the increasing pace of development of novel AI methods will put pressure on all organisation, including insurers, to transform their businesses. Insurers will need to balance the need for transformation with ensuring stability and trust with customers and maintaining human touchpoints where they add the best value. The rewards for those who get it right will be significant, allowing insurers to respond to the digital economy whilst also reducing their costs.

We expect to see more disruptors with new business models, increasingly personalised products being developed and the big digital players becoming more active. These big players, such as Amazon and original equipment manufacturers (OEMs), have the sophisticated platforms and customer relationships to offer insurance at scale but in a far more personalised way.

In particular, for 2024, we see less focus on understanding Generative AI and more on identifying specific use cases and carrying out early protypes/POCs (Proof Of Concepts).

The demand for innovative services and products has continued to increase especially in auto, homeowner, and healthcare. In 2024, insurtechs will continue to grow their market rapidly. A collaboration between traditional insurance companies and insurtechs will be of mutual importance. Insurers will benefit from taking an iterative and agile approach, enabling them to offer new solutions quickly. Experimenting with innovative products or services then becomes more accessible and less risky. At the same time, insurtechs will gain access to larger customer bases, funding and domain expertise. So less about competition and more about collaboration.

Insurtechs will continue to evolve in the healthcare sector, where the use of wearables and other data sources such as health tracking apps to collect customer information means that  health insurance premiums and models can be adjusted in a customer-centric manner. Many insurtechs collaborate with doctors, trainers and other participants in the healthcare sector to guide and motivate their customers to a healthier lifestyle, which decreases claims and provides added value for the user.

Digitisation will make the industry fast and flexible, so there will be tailored insurance offers for nearly every situation, usage and risk group. From a cost and effort point of view it wouldn’t make any sense for a traditional insurer to provide all these types of insurances and services on its own and so we see more collaboration over 2024.

On a number of levels, climate change will continue to have significant impact. Firstly, with the environmental impact of climate change, catastrophes are on the increase. Insurers need to improve their risk modelling in an environment that is getting more hostile. This will require access to wider sets of data, through the use of IoT and advanced analytics to extract meaningful data.

Secondly, insurers will need to become more ESG friendly, not just to meet the demands of legislation but reacting to pressure from customers and employees as well. As more of Gen Z enter the market, as customers, and the workplace, as employees, there will be less tolerance for corporate greed at the expense of the environment and more drive for doing what’s right.

In insurance, there are still a number of hurdles to overcome with open insurance to achieve the level of sophistication experienced with open banking: being able to move insurers more simply and quickly, and third parties to offer additional features based on insurance data.

Proprietary systems, lack of industry standards and legacy technologies hinder the data exchange which is necessary for open insurance. However, we may see some changes here if regulation in insurance edges closer towards an industry standard. Even if we don’t see early open insurance adopters, we are seeing clients adapting their technologies according to its principles and starting to take an API-led (Application Programming Interface) approach to data exchange with plug and play style architecture and centralised hubs and portals.

Increasingly, third parties are becoming technologically capable. According to Statista, in 2021, there were just over 15 million open insurance users worldwide. It is forecasted that by 2024, this number will be more than five times higher and in 2032 there will be more than 812 million open insurance users globally.

In 2024, those insurers taking an API-led approach will be able to connect unconventional partners, such as start-ups, and thus gain access to new types of issues and business models. Internal software interfaces (like APIs) already exist in the industry, and open insurance approaches are now about opening these APIs to external partners as well. The necessary infrastructures are therefore already largely in place but what is needed for a uniform towards open insurance ecosystem is a standardisation. Aiming for higher revenues, more efficiency and new business areas as well as new customer groups, will bring about a need for the insurance industry to develop common standards for working together and with parties from outside the industry. Making the exchange with cooperation partners easy – both within the industry and in other markets – will be an enabler for starting new initiatives and bringing new products to market.

Whilst some insurers are well advanced in their cloud adoption, others are still dealing with on-premise data centres. These require refreshes of hardware necessitating large capital outlays. They also don’t give insurers the flexibility to size for peak traffic nor to capitalise on cost-saving periods where there is little activity. Data centres also usually come with long lead times on service level agreements, increasing the difficulty of working with any sort of business agility. To add to the complexity, many data centre providers are finding them unprofitable to run and are exiting.