Insurance Practice
How top tech
trends will transform
insurance
Over the next decade, the fully tech-enabled insurer will bear little
resemblance to today’s organization. Five trends, individually and in
combination, will have a seismic impact.
September 2021
© Andriy Onufriyenko/Getty Images
by Krish Krishnakanthan, Doug McElhaney, Nick Milinkovich, and Adi Pradhan
A handful of accelerating technology trends are
poised to transform the very nature of insurance.
In auto insurance, risk will shift from drivers to
the artificial intelligence (AI) and software behind
self-driving cars. Satellites, drones, and real-
time data sets will give insurers unprecedented
visibility into the risk around facilities, leading to
greater accuracy. Claims processing after natural
catastrophes will be automated, infinitely scalable,
and lightning fast. The life insurance industry
will bring to market “wrapped” products that
seamlessly adjust coverage based on the evolving
needs of their customers.
These scenarios aren’t science fiction. The
technologies behind them already exist, and
innovative offerings could become mainstream in
the next decade. Our analysis explored the impact
of ten rapidly accelerating trends most relevant
to competitive advantage.¹ Of these ten, five are
poised to reshape the insurance landscape: applied
AI, distributed infrastructure, future of connectivity,
next-level automation, and trust architecture. The
prevalence of these technologies also means
insurers could face heightened competition from a
new wave of digital attackers, as evidenced by the
large number of greenfield insurers founded in the
past three to five years.
To survive, incumbents will have to adapt their
operating models, products, and core processes
to a new reality. All executives must understand
the impact of these technologies and ensure
their organizations are positioned to unlock their
potential. Leaders will need to let go of entrenched
perceptions and business models and embrace new
ways to manufacture and distribute what will in many
cases be fundamentally different products.
Trends in tech shaping the future
of insurance
The past few years have seen the emergence
of core technology trends that are affecting
nearly every industry. A multitude of technology
advancements and shifts are reshaping products
and services.
McKinsey examined a range of factors to identify
the ten technology trends that matter most to top
executives across industries (Exhibit 1). For every
trend, we calculated a momentum score based on
the growth rate of the technologies underlying the
trends, which we derived from an in-depth analysis
of six proxy metrics: patent filings, publications,
news mentions, online search trends, total private
investment, and the number of companies making
investments.

1 For a detailed discussion of all ten tech trends, see Jacomo Corbo, Nicolaus Henke, and Ivan Ostojic, “The top trends in tech,” June 15, 2021,
McKinsey.com.
All insurance executives must
understand the impact of accelerating
technology trends and ensure their
organizations are positioned to unlock
their potential.
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How top tech trends will transform insurance
In assessing how these trends are affecting
the insurance industry—across lines and core
processes—we pinpointed five that are likely to have
an outsize impact over the next few years (Exhibit 2).
Applied AI
While many carriers are experimenting with AI,
few have truly scaled their capabilities across
the enterprise. As AI becomes more prevalent
and algorithm creation becomes commoditized,
carriers will be able to more fundamentally
reengineer core processes to be more predictive
in nature. AI will disrupt distribution, underwriting,
claims, and service as core processes become
AI-enabled, creating a “human in the loop” model
that increases productivity and allows for higher-
quality touchpoints with customers. Carriers have
yet to fully realize the potential of their data assets—
for example, claims histories and distribution
interactions. In addition to reengineering core
processes, leading carriers and ecosystem players
will use the advent of AI to create products and
services based on data and analytics.
Distributed infrastructure
Insurers around the world have significant
technology debt, with many core processes
weighed down by extensive on-premise legacy
technologies. As cloud matures, a rapid shift to
the cloud for all core systems will help insurers to
be more nimble in launching new products and
creating better customer service. Cloud will also be
critical for enabling the type of compute power that
is needed to fully understand and make use of the
incredibly large data sets (such as tens of millions
of claims data points). As ecosystems continue to
develop globally, cloud-native insurers will be best
positioned to act as ecosystem orchestrators—
Exhibit 1
Ten tech trends will unlock a variety of new opportunities across industries.
McKinsey tech trends index


ill
r
cross industries.
Next-generation
computing
Cross-cutting
technologies
Distributed
infrastructure
Future of programming
Bio revolution
Nanomaterials
Future of clean
technologies
Industry adoption
Market-entry
stage
Technical
maturity
Low
Low
High
High
Industry
applicability
Fundamental
research
Multiple
industries or
horizontals
Niche
Next-level process
automation and
virtualization
Future of connectivity
Trust
architecture
Circle size: momentum
2018–20
Circle color: momentum
compared with 2015–18
Applied AI
Higher
No change
Lower
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How top tech trends will transform insurance
acting as a connecting hub among customers,
distributors, insurtech, healthcare providers,
carriers, and reinsurers, among others.
Future of connectivity
In many markets, insurers have begun using
telematics to evolve the core auto product. The
wider adoption of IoT could usher in a similar
reshaping of product in life, health, property, and
commercial lines. Increasing the frequency and
specificity of data being shared through IoT devices
helps customers provide a more accurate view of
their needs and insurers better understand risk,
both at time of purchase and an ongoing basis. The
increased prevalence of 5G allows this data to be
shared at lower latencies and helps insurers provide
real-time services to clients.
Next-level process automation and virtualization
Insurers have for many years invested in robotic
process automation to help automate processes,
especially in back-office operations, but emerging
technologies will enable carriers to fundamentally
rethink product and service. For example, industrial
IoT can enable real-time monitoring of equipment
to allow for predictive maintenance before claims
happen. Similarly, digital twins and 3D and 4D
printing have the potential to transform the claims
experience for all physical damage areas.
Trust architecture
Across lines, insurers handle sensitive customer
information, and the ongoing evolution of products
and services will require customers to share
even more of this information with carriers. New
Exhibit 2
Five trends will have a pronounced impact on insurance.
Personal P&C
Home
Auto
Standard¹
Specialty²
Individual
Group
Tech trend
Commercial P&C
Life and annuities
1 Main lines include other liability (claims), marine, nancial lines, and specialized property.
2 Main lines include workers’ compensation, general liability, commercial auto, commercial multiple peril, and property.
Source: McKinsey analysis
iv tr

ill
v r
d ipact on insurance.
Next-level
automation
Future of
connectivity
Distributed
infrastructure
Next-generation
computing
Applied AI
Future of
programming
Trust architecture
Bio revolution
Nanomaterials
Future of clean
technologies
Major impact
Moderate impact
Limited impact
4
How top tech trends will transform insurance
technologies will allow carriers to more effectively
manage risk and make use of complex customer
data—a critical step in evolving to a “predict and
prevent” model of insurance where data is shared
more frequently between parties with insurers
playing a more active role in claims prevention. As
blockchain becomes more widely adopted, it will
help carriers more effectively manage customer
data in a safe and consistent manner and simplify
current issues such as identity management
and verification. Zero-trust security and similar
approaches will help carriers create resilient
networks that protect against cyber intrusions.
Why tech trends matter—and why now
These technology trends have the potential
to materially change some of the underlying
inputs of insurance products and core functions.
In underwriting, for example, automated
warehouses (enabled via applied AI and distributed
infrastructure) may fundamentally alter the nature
and focus of workers’ compensation coverage by
removing the majority of human workers from most
warehouse operations. The higher-order impact of
these trends on insurance will likely be experienced
when technological forces interact and build upon
one another. As an example of this multiplicative
effect, we see distributed infrastructure (such as
wearables), trust architecture (enabling privacy-
protected sharing of real-time health data), and
applied AI (enabling real-time feedback on the
impact of physical activity on personal wellness)
combining to transform how insurers use data to
develop predictive insights and inform a variety of
interactions with policyholders. Similar innovations
could take place across the insurance value chain.
According to Amara’s Law, we often overestimate
the short-term impact of new technology and
underestimate its long-term effect. With respect
to the tech trends affecting insurance, it is unclear
where the industry is in the impact continuum.
Given the pace at which these trends have
emerged and become disruptive (consider the
rapid, in some cases exponential, increase in AI
capabilities such as deep learning in the past three
to five years), we may have passed the inflection
point and begun to underestimate their long-term
impact. These specific trends have significant
momentum (as measured by the tech trends index),
and innovative insurance incumbents and new
entrants have started using them to offer new
products and services. However, many insurers
are still modernizing their technology stacks and
are at an early stage of the digitalization journey,
leaving them susceptible to being overtaken by
more nimble players. All of these factors should be
a wake-up call for insurance executives to develop
an understanding of where and how these
trends may affect their core products and the
competitive landscape.
Scenarios enabled by the combination
and interaction of tech trends
Several scenarios could play out, depending
on technology adoption, government legislation,
consumer preferences, and tech-enabled
product innovation.
Property and casualty
While these trends could affect property and
casualty (P&C) in a range of ways, two scenarios
illustrate the extent to which they could transform
the landscape.
Seamless, automated underwriting of
commercial insurance
Key trends: applied AI, distributed data collection,
future of connectivity, and next-level automation
Scenario: The combination of applied AI, distributed
data collection, future of connectivity, and next-level
automation will allow insurers to underwrite a much
wider range of risks more or less automatically using
real-world, real-time data from a variety of sources.
Insurers can increasingly use drones, satellite-
generated radar imagery, computer vision, applied
AI, and smarter edge devices to collect a variety of
data on facilities and assets. In just a few days, a
carrier could compile a data set of radar-based and
drone-generated images and image attributes of an
oil rig to inform underwriting in a fraction of the time
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How top tech trends will transform insurance
currently required. Trust architectures embedded
via IoT and high-speed mobile networks allow a wide
range of participants in the insurance value chain to
share data in a secure and public manner.
Potential P&L impact: There could be significant
improvement in combined ratio as a result of more
accurate underwriting and more efficient processes
for initial quote and bind as well as renewal.
Emerging examples:
— Predictive intelligence company Windward
provides watch-list monitoring for maritime
assets, enabling risks to be assessed based on
near-real-time conditions and recent activity.
— The integrated logistics company Maersk has
built a maritime blockchain with a vision for
using IoT and smart contracts to update policies
in an automated fashion.
Drastic shift in risk profile and how insurers partner
with their customers to manage it
Key trends: next-level automation, applied AI, trust
architecture, and distributed infrastructure
Scenarios: As the degree of automation increases
in traditionally labor-intensive industries, the
nature of insured risk will change. Consider a fully
automated dark warehouse run by robotic pickers
using applied AI and next-level automation. Risks
from cyberthreats and malfunctioning AI become
more acute compared with accidents caused by
human error. The nature of risk will change, while
some new risks may emerge and require new types
of coverage and underwriting.
Managing risks from autonomous and
semiautonomous vehicles will force carriers to
reassess how auto insurance products function.
The role of insurers may shift from claims to
prevention, whereby they are best placed to
identify and reduce risk by partnering with clients
and using technology. In many cases, insurers will
need to form ecosystems and integrate a multitude
of data sources.
Potential P&L impact: Industry revenue and profit
pools could shift significantly.
Emerging examples:
— Munich Re’s aiSure is an insurance product
for AI providers that wish to offer insurance-
backed performance guarantees. For example,
Deep Instinct (a cybersecurity firm using AI and
deep learning in its products) offers customers
a ransomware warranty backed by an insurance
policy purchased from Munich Re.
— AXA’s Construction Ecosystem integrates data
from a range of technologies, including imagery,
wearables, and sensors, to provide contractors
with unique insights and benchmarks to help
manage risks on their jobsites.
Life and annuities
Through technology, insurance underwriting
becomes continual rather than at a point in time,
with innovative products emerging to reflect shifting
customer behaviors. Models such as ecosystem-
enabled data sharing will give insurers greater
access to granular information to support more
specific pricing and risk tiering. The combination of
tech trends will enable insurers to cover individuals
in more dynamic and responsive ways.
Insure the individual: ‘Pay as you live’
Key trends: future of connectivity, distributed
infrastructure, applied AI, bio revolution, and
trust architecture
Scenario: The ability to engage individuals
continually will lead to products that dynamically
adjust premiums, benefits, or both on a regular basis.
Mortality and morbidity insurance will be a more
fluid product, essentially enabling individuals to pay
as they live. For example, many individuals today
need to buy life insurance, critical-illness protection,
disability coverage, and long-term-care coverage
to fully protect their families from the financial
disruption of high-cost medical events. In the future,
the lines between these product categories will blur
substantially, as carriers are able to offer “umbrella”
coverage across risk categories tailored to each
individual. In addition, with the bio revolution and
the advent of precision medicine, carriers will be
expected to have a significantly more nuanced
perspective on a customer’s risk. The ability
to “unbundle” traditional protection products to
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How top tech trends will transform insurance
create custom packages will be guided by broader
regulation and actuarial standards, which will need
to adapt.
Potential P&L impact: Industry revenues and profit
pools for personal life and health insurance could
change substantially.
Emerging example: Vitality, a South African
wellness solution, provides incentives for better
health behavior, collects data using fitness devices,
and dynamically prices risk over time based on
customers’ engagement with their health.
Reimagining strategy in an
evolving landscape
As these trends unfold and begin to steadily alter
the nature of insurance operations and products,
incumbent carriers will need to carefully consider a
number of critical questions to inform decisions and
actions in the near future:
— How will these trends affect the nature and
structure of our organization? In what
ways will we need to adapt our functions and
core processes?
— Do we have the right talent and mix of skills that
will be required to both understand and harness
these new technologies? Where are our gaps—
and how wide are they?
—
If we were to incorporate these new
technologies, should we pursue a build, buy, or
partner strategy?
— What is the role of data and technology
ecosystems as we consider our future
technology, product, and operating strategies?
If we participate, what should our role be—
for example, ecosystem owner, facilitator,
or participant?
— How are consumer attitudes toward privacy
and data sharing evolving? Which technology
ecosystems are well positioned to capture data
that could be transformative for insurers?
— Where are traditional insurers being
disintermediated by new entrants, and where
do new entrants have an unfair advantage in
how they deliver products and services built on
tech trends?
The tech trends highlighted in this article will
dramatically reshape the industry from top to
bottom, creating significant opportunities and,
in some cases, existential threats to traditional
players. These shifts are already happening,
meaning insurers should act now to develop a more
ambitious vision for how technology can elevate
their organizations. To embrace the potential of tech
trends, winning insurers will build their tech talent,
put tech trends and their business implications on
the leadership agenda, and be willing to disrupt their
own products and services.
In future articles, we will continue to offer deep dives
on the impact of selected tech trends, focusing on
the specific opportunities and threats to various
insurance lines of business.
Copyright © 2021 McKinsey & Company. All rights reserved.
Krish Krishnakanthan is a senior partner in McKinsey’s Stamford office; Doug McElhaney is a partner in the Washington, DC,
office; Nick Milinkovich is an associate partner in the Toronto office; and Adi Pradhan is a consultant in the Montreal office.
The authors wish to thank Ramnath Balasubramanian, Alex D’Amico, Bamlak Gessessew, Arun Gundurao, James Hills, Douglas
Merrill, Björn Münstermann, and Peter Braad Olesen for their contributions to this article.
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How top tech trends will transform insurance
Contact
For more information on this topic, please contact:
North America
Ramnath Balasubramanian
Senior partner, New York
Ramnath_Balasubramanian@McKinsey.com
Sanjay Kaniyar
Partner, New York
Sanjay_Kaniyar@McKinsey.com
Krish Krishnakanthan
Senior partner, Stamford
Krish_Krishnakanthan@McKinsey.com
Doug McElhaney
Partner, Washington, DC
Doug_McElhaney@McKinsey.com
Nick Milinkovich
Associate partner, Toronto
Nick_Milinkovich@McKinsey.com
Europe
Jens Lansing
Partner, Düsseldorf
Jens_Lansing@McKinsey.com
Nadine Methner
Partner, Frankfurt
Nadine_Methner@McKinsey.com
Björn Münstermann
Senior partner, Munich
Bjoern_Muenstermann@McKinsey.com
Ulrike Vogelgesang
Senior knowledge expert, Hamburg
Ulrike_Vogelgesang@McKinsey.com
Asia
Dino Ho
Senior expert, Seoul
Dino_Ho@McKinsey.com
Joe Zachariah
Associate partner, Melbourne
Joe_Zachariah@McKinsey.com
Further insights
McKinsey publishes on issues of interest to industry executives. Our recent articles include:
Insurance 2030—The impact of AI on the future
of insurance
Reaching the next normal of insurance core
technology
The top trends in tech
Tech-driven insurers: How to thrive in 2030
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How top tech trends will transform insurance