Three Futures for Technology and Insurance

San Francisco, CA, USA November 28, 2005

Celent looks ahead and sees three alternative technology-driven futures for the insurance industry.

In a new report, " ," Celent predicts how new technologies are impacting the future of the insurance industry. According to the report, there are three scenarios: Utopian Vision, Nightmare Scenario, and Probable Future. In the "Probable Future," there are significant improvements in information technology (better, faster, cheaper) and in other technologies (smarter, stronger, more useful). Insurers that recognize these changes in their business model will succeed; others will struggle.

Table 1: Three Technology-Driven Insurance Futures
The Future	Information Technology	Other Technology	Insurance Model	Industry Response
Utopian Vision	10X better, faster, cheaper	Smarter, stronger, more useful	Micro-pricing, ultrasmart underwriting, effective loss control	Profits up, sustained by knowledge-based barriers to entry
Nightmare Scenario	Progress slows, Moore's Law repealed	New technology disappoints or runs amok	New risks create large new losses	Stagnant industry, capital departs slowly
Probable Future	Steady and predictable progress in all areas	Smart monitoring and safer products	Better understanding of old and new risks, pricing improves	Performance gap between good and bad insurers widens
Source: Celent analysis

To construct each of these futures, the report identifies the building blocks of information and other technology and the insurance model. Celent also makes projections about how these components could change and how insurers would react to those changes.

According to Donald Light, senior analyst and author of the report, "Insurers should prepare for the probable future, while seeking out the opportunities implied in the utopian vision and mitigating the risks implied in the nightmare scenario." He added, "Having a single corporate point of view about technology and the future of insurance will establish a common set of assumptions and context for an insurer痴 operational and strategic plans. Refreshing this point of view every few years will allow senior managers to think creatively about how to win in a world that is certain to change."

The 22-page report contains one figure and two tables.

of Celent's Property/Casualty Insurance and Life/Health Insurance research services can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.

Author

Donald Light

Research & Advisory