5G technologies and insurers

Indeed, even Capgemini’s own recent report on 5G doesn’t contain a single mention of insurance, insurers, or any related word. And yet, as I dig into the detail, I see both opportunities and threats for insurers from 5G.

This blog covers:

• What 5G is
• 5G use cases relevant to insurers
• Opportunities and threats arising for insurers.

What is 5G?

5G is the latest standard for cellular networks and addresses many of the challenges of previous technologies. In summary, it is:

• Faster (see graphic below)
• More secure
• More reliable
• More energy efficient
• Able to cope with far more simultaneous connections.

Table comparing 5G with other wireless communication technologies

5G use cases relevant to insurers

1. IoT devices

The first clues as to the relevance of 5G to insurers are contained in the table above. The combination of connected device density and ultra-reliability will support the massive growth of IoT (internet of things) sensors.

And, as many commentators (including me) have pointed out, IoT devices mean that:

• It’s easier to anticipate and thereby mitigate or even avoid, the crystallization of insured risk
• It’s possible to develop entirely new customer propositions incorporating this capability.

2. Autonomous/self-driving vehicles

As Capgemini’s report says, 5G’s fast and reliable data transmission capabilities can better deliver the sensing and remote-control abilities required by both self-driven vehicles and drones.

These more powerful communication capabilities also increase the ability of different autonomous systems to collaborate with each other – a key benefit when operating multiple systems in close proximity, such as vehicles on a road.

Opportunities and threat arising

The opportunities and threat arising for Insurers include the following:

1. Leveraging IoT. As stated above, IoT can be used to manage insurance risk and to support entirely new risk management products and propositions. And 5G increases the size of this opportunity.
2. The accelerated roll-out of autonomous vehicles. Insurance premiums from covering personal and commercial motor vehicles comprise almost one-third of total global P&C/GI GWP. As I’ve pointed out before (first in 2016 and expanded on in 2017) that’s a lot of premium that’s going to disappear as self-driving technologies reduce the incidence of accidents, and vehicle manufacturers increasingly self-insure. The threat to insurers is clear.
3. Use of drones. With drones becoming more reliable through the use of 5G, we can expect their greater use by insurers in both the underwriting and claims segments of the insurance value chain. And increasing use across multiple industries provides new opportunities for Insurers to provide insurance.

Conclusion

I’ll be the first to admit that 5G doesn’t represent an existential threat to insurers. But I hope you’ll see, as I now do, that it’s not irrelevant. As with many of the new digital technologies, 5G offers both opportunities and threats to insurers.

Which are threats, and which are opportunities, depends entirely on how the individual insurer chooses to respond.

If you’d like to discuss your own approach to 5G, please do get in touch.