After the tectonic changes that have been brought on by the coronavirus outbreak, a sudden halt in the global economy and almost all existing industries occurred, as well as in everyday life as we once knew it. Consequently this had an impact on the insurance industry in numerous ways. Emerging trends have taken over the market therefore changing the game once more. Business models are now more digitally oriented, thus unlocking new opportunities and potential value worth billions of dollars, making it an industry that’s ready to adapt and boom in the near future. Personalization and digitalization are keywords for 2020, adding artificial intelligence and advanced analytics to the equation of the insurance industry. These and other changes made 2020 an interesting year to analyze when it comes to this industry, so what were the top trends this year?
Customers nowadays appreciate the personalized approach, which suggests that the one-size-fits-all types of products are a thing of the past. The digital economy is driving its customers towards on-demand, usage-based and all-inclusive insurance lifestyle products. Human effort will become obsolete in the future since new, digital models are bound to take over and cut the dependency tied to intermediators. In the long run, flexibility, micro insurance and peer-to-peer insurance will most definitely pay off and become common options. Keeping the trust of your customer base is now challenging more than ever, so being “customer centric” is a necessity. Loyalty is also achieved through Lifestyle apps that strengthen the bond between the insurer and the insured. Application Programming Interfaces (APIs) can also give an accurate representation of patterns in customer behavior which can in turn give better risk assessment and reduce false claims.
Artificial Intelligence and Robotic Process Automation will take over the insurance industry because of its promise of greater data processing capabilities, newer data channels and evolution of AI algorithms. Many aspects of the insurance industry will be forever changed and improved by automation and AI such as customer experience, market competition, cost optimization and new business models. AI is on a good path to eliminate brokers and excessive paperwork; its algorithms can predict behavioral patterns therefore minimizing the risk of potential fraud, reducing time, costs and effort altogether.
The Internet of Things, mobile versions of InsurTech apps and wearable devices with their new sources of data are making premiums more personalized. With the continued progress of the connected devices market, property and casualty insurers will have access to real-time data on the loss exposure of individuals. This will reduce the time needed to react and also improve the quality of the intervention. These helpful insights will be constructed around the data based relationships, which will in turn give deeper granular insights in customer profiles and protect them from potential risk exposure. All of this data can predict complex customer behavior, reduce decision time and attain advanced pricing accuracy. If this trend continues, AI and machine learning will slowly take over in full and make insurers active risk managers.
One of the 2020 trends that also swept the market are InsurTech partnerships. These InsurTech companies are showing tremendous growth in the field of auto, cyber insurance and home ownership. This imposes a problem for traditional insurers who will subsequently have to either acquire the technology or partner up with InsurTech firms. Research has shown an increased demand for innovative technologies and products in millennials, so collaborations like these will become an imperative in the years to come. It’s an all around win-win situation, for both traditional insurers and InsurTech companies.
Last but not least, all of these trends subsequently led to this final one – the need for blockchain technology. Huge volumes of customer data have to be processed in real time in an easy and secure way. Blockchain technology promises data secure management covering multiple organizations and diverse stakeholders with integrity. Reduced operational costs are also one of the advantages of blockchain, with added identity management, fraud management and reliable data availability. The number of companies exploring blockchain technology and implementing it into their businesses nowadays is on the rise.
To conclude, all of these trends made way to a new and bright future in the insurance industry. Statistics have shown that a change is on the way; 95% of insurers expect an increased use of advanced analytics over the course of the next 3 years, and 62% of insurers believe that the industry is keeping up with the technological advancements, which will possibly change to a higher percentage in the coming years. A new value worth billions of dollars can be built for the insurance industry, but the key is to recognize the chance and assess when and how to tap into this lucrative potential, leveraging existing and brand new technologies and thus paving the way for a more digitized and technologically advanced future.