The connected world and digital transformation is impacting every industry. The insurance industry is no exception and encounters its own revolution now. From peer-to-peer platforms, on-demand contracts, and wearable devices, the focus has shifted significantly to the user and the user experience. For hundreds of years the industry was somewhat provider-centric – the concerns centred around loss ratio and profitability. And for hundreds of years the relationship was analogue, bureaucratic, and unfriendly. From the customer’s perspective the system is entirely broken: policies are expensive, claims processes are long and complex, and it takes too long for the customer to get paid. There is no trust between incumbents and their customers. In the case of commercial customers, a significant share of the claims regulation ends up being discussed in arbitration boards.

InsurTechs are starting to change this scenario, providing new products, digital channels, and an approach overtly centred around the user experience. Customers are becoming “users” and benefiting from the digital transformation with blockchain, machine learning, chatbots, and cloud-based solutions such as Lemonade, Trov, and Oscar. What comes next? Seamless Insurance. Deriving from the term “Seamless Banking” first coined in 2015 by futurist Anders Sorman-Nilsson,¹ we envision a “Seamless Insurance” concept, where one should be able to sign for on-demand policies on the go, with dynamic pricing and through fully digital channels. Since every possible appliance with which you interact is connected, you will buy your car insurance in your car just before you set off on the drive; get travel insurance at the terminal before you travel; and home insurance through your connected refrigerator when you learn about a possible thunderstorm. Seamless Insurance does not require the customer to visit or engage with a branch office, agent, bank, or retail store.

It is easy to foresee how seamless the experience would be for banking or insurance in a hyper-connected world with virtual reality, beacons, drones, and augmented reality. Imagining your brain being integrated with an AI platform, which will enable you not only to order an insurance product, but also to calculate relevant risks, values, and options, is perhaps harder – but will be a reality by the mid-2020s.² That AI-driven seamless insurance journey has already started with automated bots replacing error-prone and process-driven tasks, in many cases very repetitive ones such as claims and servicing tasks, initially on the consumer side and then in more complex commercial lines, where humans interact with machines. Indeed, the claims process is a clear candidate for full automation with no human intervention required long term, using chatbots and bots in general as enabling technology in addition to robotic process automation. Lemonade in the US; Trov in Australia, the US, and the UK; and Zhong An Insurance in China are good examples of where advanced technologies are used to transform processing experiences. Various startups are integrating the bots with machine learning platforms and anti-fraud solutions creating a much faster and better user experience and achieving even greater results for the insurers in terms of rates of fraud. Lemonade combines these capabilities to settle customer claims in three seconds. The claims bot is not only replacing entire teams through advanced predictions and analytics, but also providing a digitally enabled experience from one single place of interactions. Most large insurance incumbents do not have anti-fraud solutions of this sophistication, exclusively dedicated to the digital channel. This makes such bot-led solutions an obvious choice for differentiation in the world of digital.

AI as Insurance PA

As chatbot solutions evolve with the enhancements of machine learning-led platforms, they start to move up the value chain to deliver enhanced customer engagements while relying less on humans. By initially automating necessary but tedious process tasks, bots are gradually becoming assistants for every necessary task. Information, policy changes, and cancellations along with the claims process will become natural tasks to be executed with the help of “chatbot solutions”. However, in this evolving scenario, since every piece of interaction now is being performed via a digital medium, and the data are constantly being stored and analysed, the bot will then give advice around products, dates, risks, and opportunities, like mega digital comparison helpers or robo-advisors within the parameters of regulatory frameworks. We can imagine that just as you hire an Uber car to go to the airport, the insurance PA is going to propose that you get coverage for your trip to the airport, even if the car is using its autonomous driving option. As you approach boarding, the PA will offer travel insurance for you, and any family members travelling with you. Because all relevant big data and the digital footprint are simultaneously and instantaneously analysed, the PA will curate the product with very specific coverage for malaria since your vacations include a stop in areas of risk in South America. It is even more powerful to have the PA integrated with your past interactions with other providers (including former insurer incumbents’ legacy systems).

PA as Tailor

That is where analogue meets digital: where your current digital behaviour and past interactions intersect. Integrating the current digital data with the historical, your PA will be able to offer a specific dynamic price based on your profile, and yours alone. Group risks will be long gone; products will be tailor-made, informed by huge quantities of relevant data, to meet the very specific needs of that unique individual. This means that users should benefit from a great reduction in premium cost, since individuals subsidizing a specific age or risk group will no longer exist. Dynamic pricing with the use of online telemetry and big data is a game changer for both the user and the insurer. This augmented insurance experience will mean nothing less than the process of retiring actuarial science as we know it. Let us all call this new actuarial science Actuarial Science 2.0 – where pricing make sense!

AI as the New UI

From interacting with your vehicle, to ordering insurance products for potential future default to your microwave, there is no real limitation to the augmented insurance experience. AI in insurance becomes the new user interface. Customers will rely on their PA – most likely giving it a charming name – for all customer experiences and tasks to be accomplished. In fact, it becomes a much better experience, since the PA knows everything about you, whether historical or online contextual data. It is thus able to provide the best recommendations for you and you alone. This is what we call true personalization. On the flip side, traditional insurers and InsurTechs will attract your PA’s attention by focusing on the exact criteria of the segment to which you belong with solutions or products that are presented exactly when needed and supported with the most precise pricing. Consumers will benefit from a fluid offer-response process to acquire new relevant products coming to market; providers will acquire customers faster and retain customers better through the increased precision of their interactions.

What about Seamless Insurance for Commercial Insurance?

AI for Precision Agricultural Insurance is a great example of the possibilities. We have already seen early entrants such as The Climate Corporation. More recent innovations have emerged with the likes of Farm Dog, Farmers Edge, and Aerobotics.³ In the race to chase greater agricultural production, variety of technologies are becoming key drivers to improve production volume and quality, support more precise underwriting, or eliminate irrelevant activities in the claims environment. Think of IoT devices, intelligent apps, drones monitoring, and satellite imagery helping producers make real-time decisions regarding every aspect of their land and cropping. Precision Agriculture will help the world produce better quality crops in larger volumes. However, as farmers know, there are no guarantees of success in the farming business: every year, extreme weather and disease have a significant impact on crops. Agriculture is in fact a multi-year business. So insurance is paramount for producers to keep their business healthy when outside factors such as tornados can destroy their production in an instant. AI integrating with existing Precision Agricultural technologies, and an insurer’s operational systems, could not only disseminate fairer prices based on location, geography, and production patterns, but also provide valuable recommendations to predict future requirements around crops and pest control. Precision Agricultural needs a range of Precision Insurance offerings that captures the history of production but also incorporates real-time telemetry to better service the industry.

The Time is Now

While they may sometimes look as if they come from sci-fi books, technologies that allow seamless and frictionless interactions are already available and used in many adjacent sectors. The only challenge is that they are actually used in silos. Our experience of using Facebook M’s chatbot, Echo’s Alexa, and Jawbone’s wearables is becoming gradually ubiquitous. So the challenge for insurers and innovators is how properly to curate these different pieces and, more importantly, work out how you design the architecture to deliver Seamless Insurance. There is no one correct answer. Companies are likely to be going through a process of trial and error, resulting in some inevitable mistakes. When you have the user at the centre of your process and product design, it may take longer to achieve the right outcomes, but better products and solutions will be built as a result. Insurers and innovators should take advantage of emerging technologies and fluid on-demand workforces, and be the catalyst of a profound economic transformation. The time is now.