The insurance industry isn't just changing - it's being fundamentally rewritten. The rise of artificial intelligence (AI) and the Internet of Things (IoT) isn't simply adjusting traditional risk models; it's significantly altering them.
"We're sitting on the shore, watching a large wave approach," said Ali Tahmoorespour (pictured), a broker at InsureBC. "Instead of preparing to surf and utilize the approaching wave, we risk being overwhelmed. If we, as insurers, don't leverage AI and the technologies we now face, the technology sector will overtake us. Therefore, instead of wasting time, we should act quickly to leverage this new technology."
For decades, insurance pricing relied on broad demographic factors—age, gender, location—because there was no way to track individual risk in real-time. Now, insurers can utilize telematics in cars, wearable health monitors, and digital footprints—every detail can be collected and analyzed.
This data allows insurers to offer usage-based insurance (UBI) policies, tailoring premiums more closely to individual driving habits. Studies indicate that the UBI market has experienced significant growth, with approximately 20 million policies in effect and projections estimating the market's value to reach over $190 billion by 2026.
"Previously, risk modeling was demographic," Tahmoorespour said. "We grouped customers into pools based on demographic proxies, such as age, gender, height and weight. While this was not ideal, we did it because we lacked the current processing capabilities and access to individual data.
"With IoT, we can access granular data for each individual through various devices, such as those attached to cars or homes, and digital footprints. This allows us to assess individual risk in real-time, not just at renewal."
The ability to track individual risk means not just more accurate pricing but constant adjustments.
"For instance, imagine a device in a car, similar to a gyroscope in a smartwatch or phone, that records driving patterns. If I brake or accelerate excessively, or change lanes abruptly, the device can detect and transmit the data, allowing us to adjust rates in real-time, not just at the next renewal," he said.
Safe drivers will benefit, while reckless ones will pay more.
"We can adjust risk assessments and premiums in real time. This brings us closer to fairness, as individuals will pay premiums that accurately reflect their risk, rather than subsidizing those with higher risk,” Tahmoorespour said. "It can incentivize clients to adopt safer behaviors. Essentially, insurance companies will not only provide post-incident support but also help clients mitigate risk."
For brokers, this technology isn’t an opportunity—it’s a threat. The reasons are clear. Brokers rely on experience and intuition. AI doesn’t.
"Clients will have access to better data and more accurate assessments, and they will likely prefer AI-driven services over traditional brokers," Tahmoorespour said. "Brokers consult clients based on their individual knowledge and experience. Consequently, advice can vary, and not all consultations are equally effective."
There’s also the issue of financial incentives.
"Brokers' commissions are often based on a percentage of the premium, which incentivizes higher premiums," he said. "For example, if I re-market your home policy and find a lower rate from Company A due to a strategy change, I may not disclose it because it reduces my commission. AI, however, will always prioritize the lowest premium for the client."
For a new generation of consumers, the appeal of AI-driven insurance is obvious.
"The new generation prefers immediate results. Due to their fast-paced lifestyles, they desire quick solutions. AI provides this by enabling them to instantly compare rates, make changes, and purchase policies,” he said.
For all the advantages of AI and IoT-driven insurance, there’s a major hurdle: regulation. The industry is moving faster than governments can react. But time is running out, and subsidies could accelerate the transition.
"I don't think it's a critical challenge yet, as this is a gradual transition, not an immediate switch," Tahmoorespour said. "Currently, some individuals have access to these devices, while others do not. As those without see the benefits, they will begin to adopt them.
"First, we need government support to provide subsidies for these devices, benefiting both the public and the industry. For example, wearable devices that monitor steps and blood pressure benefit not only the insurance industry but also doctors and the medical system, enabling them to track health and potentially prevent diseases."
But, while other countries race ahead in AI-driven insurance, Canada is lagging.
"Because we are so slow in Canada, and despite being an immigrant, I’m more patriotic than many Canadians, we have to move faster," he said. "We are behind. Other countries are moving forward very quickly."
Even basic digital tools are missing.
"Even in BC, we don’t have a website where buyers can compare insurance rates and purchase online," he said. "This shows how slow we are. We're closing our eyes. As I said, the wave is coming, and we're watching it approach. We can’t do anything. It will direct us."
The waves aren’t going to stop. The only question is who will ride it—and who will be left behind.
"True progress comes when we choose the hard path and embrace change. Sticking to old ways is easier, but it leads to falling behind—or failing altogether," Tahmoorespour said.
