Rapid advances in technology are causing both uncertainty and opportunities for organisations across a vast range of industries and for insurers, this is no exception. From the rapid development of AI and machine learning to the widespread adoption of electric vehicles individuals, organisations, and by extension insurers, are open to more risks than ever. Antonio Serrapica writes

On the flip side, developments in quantum computing mean that insurers could be on the cusp of making exceptional efficiency gains, and of making crucial real-time decisions. Either way, the industry is  facing a very different world, even compared to a few years ago, and must be prepared for even more drastic change over the next decade.

Synthetic data and artificial intelligence

Synthetic data, which refers to data that has been created artificially through computer simulation of algorithms, is rapidly advancing. Due to its ability to create realistic data, synthetic data has many beneficial use cases in areas including fraud detection, scientific research, and machine learning.

However, the rapid development of this technology has also opened up the potential for artificial intelligence and deepfakes to fabricate scenarios, events, documents, and even identities. These concerns leave companies particularly exposed to reputational and legal risk, which will take time, resource, and funds to defend against.

One of the key tools that insurers can use to combat these emerging risks is AI itself, which has the potential to revolutionise the way that businesses operate. New breakthroughs include generative models such as ChatGPT which can assist in optimising processes and producing content. Insurers will have to strike the balance between adopting AI tools industry-wide while mitigating their risk, particularly since the ownership and ethical use of customer data are still being contested. They will also need to stay on top of evolving regulation, such as the EU AI act, which was passed by the European Parliament in March this year.

The shift to electrification

The production and widespread adoption of electric vehicles is also on the rise, with Kearney’s report, The State of Global Insurance in 2024, highlighting that 47 percent of vehicles produced globally in 2030 are expected to be fully electric. At the moment, electric vehicles are more expensive to buy and maintain. For insurance companies, this comes with the challenge of providing compensation for damaged vehicles or spare parts, and they will have to refine their focus when it comes to the risks associated with insuring vehicles.

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Beyond their inflated price, electric vehicles also come with the environmental, fire, and health hazards presented by batteries, all of which will have to be considered by insurers across the world.

Digital currencies

For insurers in financial services, one of the greatest uncertainties is digital currencies, which are now becoming mainstream. Kearney’s research shows that 80% of central banks have acknowledged the potential of digital currencies to reduce costs and make payments more transparent. However, central bank digital currencies are notoriously volatile, which alongside a lack of historical data, can make it challenging for insurers to accurately price policies.

Quantum computing

A considerable technological opportunity for insurers comes in the form of quantum computing, which differs from traditional computing in that it uses subatomic particles to perform computations as opposed to binary code. Thanks to its ability to perform complex calculations at speeds far beyond traditional computers, the technology has the potential to produce extraordinary efficiency gains across fraud detection, portfolio optimisation, and underwriting processes.

Quantum computing is expected to become a $6.53bn market by 2030, and major companies are racing to make the technology ready for commercial use. Though with similar risks to digital currencies, widespread adoption of quantum computers can cause uncertainty for insurers as it can be difficult to determine the long-term risks and implication.

Many of these technological advancements reinforce the importance of insurance coverage for both individuals and businesses, but we can’t ignore that this will come with high risk and even higher prices. When it comes to navigating the new landscape of insurance, filled with a range of partners and competitors, leveraging technology will be essential for insurers to not only enhance processes and ways of working, but also establish and defend their place within the industry.

Antonio Serrapica is a partner at Kearney