OPINION: Munich Re

DISRUPTIVE TECHNOLOGY

Tech advances in an ever-changing world

Munich Re’s Tech Trend Radar 2021

By Martin Thormählen, lead architect digital business models, Munich Re

The long-term consequences of the current pandemic are still not entirely evident and may not be for years to come. One thing that is sure, however, is that in a global crisis with as many unknowns as COVID-19 has presented, technology often has a way of answering the “what if?” scenarios in real time. This has been the case for many existing technologies that saw their use leap over the last year or so due to the volatility of our social coexistence and cooperation on a global scale. However, these tech trends did not exist in a bubble. Many of them have been available and improving in design for many years. The current crisis has, in many ways, simply opened our eyes to their often overlooked benefits — including those for the insurance industry.

Pandemic as pressure cooker

The speed at which we have had to adapt to such a global crisis has not been easy, even though it has produced incredible shifts in the way we live and work in such a short time. The pressure of the mental challenges of lack of human contact, loss of jobs and the closure of schools and small businesses found scientific know-how producing logical solutions.

Not only were our eyes fully opened to the benefits of technology with the rapid development of corona tests, but a vaccine response on a worldwide scale was also implemented. Our need to socially distance has introduced us to a new hybrid model of working that includes a mix of on-site and home office that is being seen as the new normal, providing a tremendous benefit to commuters and families. A fringe benefit of this is that it will implicitly reduce congestion and relieve public transport, not to mention saving companies money as they need less office space in expensive cities. If it were not for the tech trends that already existed, none of this would have been possible on such a large scale.

Additionally, technology that enables the circular economy is gaining momentum and we have begun to put a new focus on health-related trends like AI-enabled drug discovery, diagnostics and population health. Technology mega-trends like machine learning, cloud computing, robotics and cellular technology (5G/6G) are being implemented more frequently and continue to accelerate with exponential speed.

“Technology that enables the circular economy is gaining momentum and we have begun to put a new focus on health-related trends like AI-enabled drug discovery, diagnostics and population health.”

Potential future of tech-driven insurance

In the first edition of Munich Re’s Tech Trend Radar, we assessed cloud, APIs (application programming interfaces), big data, IoT (the internet of things) and cybersecurity, among others. The trend research from less than a decade ago has developed into wide cloud adoption that is still ongoing, and the implementation of cloud-native, API-driven insurance services so that we are able to connect securely and seamlessly with partners’ customer journeys. “Big data” in 2013 has developed into our Insurance Analytics Marketplace and allows employees and partners to gain insights into insurance portfolios and optimise potential together with our Global Consulting Unit. Today, IoT and Industrial IoT are competently running businesses and cybersecurity has two angles: in IT we protect our own realm and our business units enable cyber-risk coverage for large companies and SMEs.

All of these changes were not clear back in 2013. Initially, almost all insurers were hesitant about adopting cloud computing due to our regulated industry and the increasing mandatory data privacy requirements, which are embraced to protect the rights of our customer. In addition, the insurability of cyber insurance was unclear, since no historical claims database could guide the underwriting and pricing teams and future losses were extremely hard to predict.

In 2021, we have classified the previous years’ trend of “digital ecosystems” as adopted, since it is now a reality. Nevertheless, we would like to emphasise that the implementation of B2B2C and embedded insurance business models are still seen as highly relevant for the insurance industry. The conversion rate is significantly higher if a customer can get directly protected when purchasing a car, expensive mobile phone, e-bike or even tickets for a leisure cruise. On the flip side of the potential partnerships with original equipment manufacturers, e-commerce and travel companies, we clearly see the bargaining power for substantial commissions so that insurers must automate their processes to be able to become cost leaders in their field.

“The general natural language processing domain is also improving at an exponential speed and will be able to compare insurance wordings, analyse claims records and much more.”

Next leaps in robotics

Advances in robotics are one of the focus areas in this year’s edition of the Tech Trend Radar: robotic surgery, as well as care of the elderly and children, are expected to mature in the coming years. Robotics in other industries like car manufacturing, e-commerce fulfillment centres and fruit cultivation are no longer just about automation. Computer vision and 3D perception are now starting to allow soft grasping, so that tasks such as putting goods into parcels in fulfillment centres and the harvesting of apples and oranges is likely to be handled by robots in the future. If insurers are insuring these companies against cyber risk, they need to make sure that the additional technological advancements are priced accordingly.

It is not only machine learning for robotics that is making great progress; simple and often clunky chatbots are becoming obsolete and are being replaced by cleverer versions that sound much more human. Start-ups, as well as the tech giants, are researching and developing new conversational user interfaces, eg, Google Duplex and Google LaMDA, that better understand and leverage language nuances.

The general natural language processing domain is also improving at an exponential speed and will be able to compare insurance wordings, analyse claims records and much more. To our Radar we have added the GPT-3 language generator from AI research laboratory OpenAI, which has a partnership with Microsoft, to emphasise the importance of this new natural language understanding and processing model. After releasing our Radar in June 2021, Google announced its research results on its LaMDA and its Google MUM, which solves search queries, and only a few weeks later the Beijing Academy of Artificial Intelligence published its Wu Dao 2.0 AI model, which uses 1.75 trillion parameters — 10 times as many as Google. Then, by September 2021, we were already reading about GPT-4, which will use about 100 trillion parameters, but will not be ready for several years.

“Simple and often clunky chatbots are becoming obsolete.”

Integrating tech through collaboration

For insurance, technology is not only an enabler; insurers must become tech businesses at heart. Due to the huge number of emerging solutions and available services, insurers cannot hope to adopt everything themselves but need to establish digital ecosystems with partners. To foster an exponential mindset within the insurance industry, organisations need to bring business and technology teams together so that they can learn from each other quickly and implement the most effective business cases.

We clearly see that it is not the technology that drives the success or failure of innovation, it is the people who decide which needs to address. For this reason, we need to see tech trends within the ever-changing societal landscape in which they exist.

“Insurers must become tech businesses at heart.”

For further reading from Munich Re about new trends:

Martin Thormählen

Lead architect digital business models Munich Re