The expansion of the insurance value chain to include risk mitigation has been underway for decades. But in recent years, it’s been rapidly progressing toward a tipping point where the “insurance” sector brand will be reinvented as “risk management and insurance.”

Historically, insurance providers have organized their businesses around balancing premiums and claims. But going forward, the insurance business must center on predicting and preventing losses for organizations and consumers.

With this shift, the opportunity for insurance professionals to make a difference is huge. We can help people and businesses minimize risk, prevent losses and avoid huge costs (financial and otherwise). Using a predict-and-prevent approach also provides customers a way to sidestep the tasks of filing claims and the demands of recovering from catastrophe.

Development of the predict-and-prevent model

Here’s why it’s urgent for providers to make the fundamental shift from a detect-and-repair model to a predict-and-prevent strategy: Traditional risk-transfer tools such as insurance policies are no longer fully sufficient to cover many risks. Without predict-and-prevent tactics, there might not be enough premium to cover known and emerging losses.

To be sure, loss mitigation and control have long been mainstays of the insurance value chain. In the late 1800s, The Hartford Steam Boiler Inspection and Insurance Co. began physical plant inspections to identify and prevent boiler malfunctions that could lead to insurance claims. Today, numerous insurers provide similar services in both personal and commercial lines.

But technology—such as sensors, artificial intelligence and analytics—has created a bigger, broader opportunity for real-time prediction and prevention of insurance claims. The growing capabilities of technology and its shrinking costs make this approach viable in a wide range of applications.

It’s a must for the insurance sector to pursue the predict-and-prevent strategy because consumers and businesses are demanding it. They have warmed up to embedded risk management, which is creating new ways to implement protective strategies. With embedded risk management, a customer can buy the product, choose insurance as part of the transaction, and gain built-in loss-avoidance and detection capabilities. The insurance provider not only underwrites the insurance coverage but plays a central role in facilitating this value-added approach.

Some personal auto insurance carriers now offer crash detection as a safety feature. The motion sensors on a driver’s mobile phone or in a vehicle detect sudden deceleration or other anomalies. An insurance or GPS app on the phone or in the car contacts emergency services and notifies the insurance company. This process not only speeds up emergency response but gets a claim started in real time to shortcut the process.

Tech-based embedded risk management can help detect and monitor changing conditions. One common example is when pipes freeze and burst in an unattended building. Embedded detection coupled with real-time risk mitigation (using sensors and artificial intelligence) provides an automated response to shut off valves and minimize water damage.

Insurers are finding creative ways to use the predict-and-prevent approach to get ahead of the competition. At least one insurer, for instance, invests in devices that alert homeowners when irregularities in electrical voltages are detected. These devices can prevent house fires and are especially useful in older homes.

Preparing agents and brokers for a new role

As risk management evolves, insurance agents and brokers will assume an increasingly critical role: explaining and delivering this value-added approach to consumers and businesses.

Today’s agents and brokers are uniquely positioned to help customers manage risk more effectively through predict and prevent because they already are conversant with an individual’s or organization’s risks of cyber, identity theft, flood, fire and many other perils.

To do this well, though, insurance agents and brokers must educate themselves on the latest tech-based opportunities, elevate their knowledge and skills, and connect with the right resources to make them successful.

But the ability of the industry to deliver results using a predict-and-prevent strategy must involve a wide range of insurers, agents and brokers, technology and other service firms, nonprofit organizations and member organizations.

While evolving a multibillion-dollar business built around insurance coverage could take decades, in my view it’s critical that all facets of the risk management and insurance sector move toward a predict-and-prevent model as quickly as possible.

Those who continue to focus primarily on indemnity and reparation will face significant financial risk as losses become unsupportable. Ultimately, proactive risk mitigation is the right thing for insurers to do, but not just from a financial perspective. Ethically, we can and should help society avoid loss and needless suffering. Predict and prevent should be our guideline for the future.