Where is the future of Insurance going?

Change and disruption are constants in today’s environment, but their severity and breadth are increasing across the sector. Insurers will continue to confront bottom-line issues as a result of growing inflation, low interest rates, greater regulation, and higher risks from pandemics, cyber attacks, and climate change, all of which are already having an impact. These numerous concerns, along with the tectonic forces of customers, technology, and altering market borders, are pushing basic transformation in the insurance sector. The year 2022 has already provided us with game-changing scenarios that will accelerate change and generate huge possibilities for those who are prepared to satisfy the expectations of a new generation of dominating buyers, altering risks, and quick customer adoption of technology.

The insurance industry’s viability is inextricably linked to these clients. We lose business if we lose contact with them, both present and future. To fulfill the expectations of a rapidly changing client and marketplace, you must be prepared to adapt to the following significant developments in 2022.

As the main buyer (individuals and company owners), Millennials and Gen Z will alter insurer loyalties.

Millennials and Generation Z are currently the primary insurance purchasers. They do not adhere to the customary lifestyle and purchasing habits established by previous generations. They are breaking new ground. They have distinct insurance requirements and higher expectations. According to our most recent study, they have altered the types of insurance products required, increasing need for value-added services, and greater expectations for tailored underwriting, utilizing new data sources such as IoT devices. These changes will increase demand for new and innovative goods and services. Some highlights include:

Trend: Millennials and Generation Z outnumber Gen X and Boomers in the usage of connected/smart home devices such as thermostats, smoke/CO detectors, video doorbells, and home security devices/services by up to 63 percent.

Implication: There will be an increase in demand for IoT-based insurance that offers value-added services to assist minimize or eliminate risk.

Trend: Millennials and Gen Z anticipate to be in different occupations (45 percent) and working remotely (40 percent) during the next three years, and 25 percent will start a new business, highlighting the generation’s nomadic nature.

Implication: This generates a new need for flexible and portable employee benefits, as well as the necessity for insurers to cultivate direct ties with employees in order to retain them as clients when their lifestyles change.

Trend: The younger generation (80%) is very interested in pricing depending on driving behavior and kilometers traveled. They are also interested in services that give real-time information on driving safety and performance, car safety and maintenance, license and registration renewals, and determining the market worth of their vehicle.

The need for UBI auto insurance, as well as new value-added services, will reshape competition, consumer loyalty, and market leaders.

Trend: Millennials and Gen Z used Apple Pay/Samsung Pay at 53 percent, corporate applications (Amazon, Starbucks) at 73 percent, digital wallets like Zelle and Venmo at 68 percent, and Bitcoin at 25 percent.

Implication: In order to match with this new generation’s usage of money, insurers must provide a diverse range of digital payment choices – both for paying premiums and for settling claims.

Customer engagement will be quicker, better, and smarter as a result of digital transformation.

The growing use of digital technologies for shopping, payments, and banking by home-bound clients has shifted the balance of power in InsurTech and FinTech between established incumbents and emerging entrants. The extent of the adjustments in market power witnessed during the epidemic are accelerating, much like the compressed and expedited changes in customer behavior.

Customers are driving the digital revolution, requiring insurers to adopt a “outside-in” perspective in order to offer complete, appealing experiences. To fulfill changing client expectations and keep up with emerging digital leaders, insurance businesses must reinvent themselves and create tailored products and highly personalized services.

More crucially, the need for a holistic customer experience – in which digital solutions integrate with other goods and services to assist customers in managing their lives – has grown. Using data and AI/ML to understand, appraise, and engage consumers is critical for “smart customer interaction.” Similarly, “improved engagement” that provides clients with a comprehensive perspective of their insurance products, value-added services, and non-insurance items is increasingly demanded – but seldom delivered. This creates a chasm between what customers anticipate and what insurers provide, moving allegiance and loyalty to insurers who can match these expectations.

Consider the following two intriguing approaches:

• Google’s “Plex” bank and savings accounts connect seamlessly into the Google Pay app; Google cloud services include cyber insurance from Munich Re and Allianz.
• Sofi, an online lender and bank, now provides insurance from Ladder Life, Lemonade, and Gabi, as well as other financial services in the areas of life, health, wealth, and wellness.
• Customer-centricity is the first step in implementing digital transformation. A real customer-centric mindset will encourage insurers to provide capabilities that produce outstanding customer experiences and inspire brand enthusiasm. To do this, next-generation core insurance systems, digital experience platforms, and an ecosystem of additional digital capabilities, such as chat bots, artificial intelligence, and new data sources, must be brought together. To channel these capabilities, a contemporary architecture that offers easy, quick integration via microservices or APIs operating in the cloud is required to promote speed to implementation, speed to market, and speed to value at scale.

The market and technical changes, according to Next Gen executives, represent a multifaceted opportunity for insurance. They now have the proof they need to combine new data sources, reach new market groups, and provide innovative new products that customers need and want —- producing quicker, better, and smarter customer experiences.

Embedded Insurance is the new battleground for consumer acquisition and retention.

In this digital era of insurance, practically every insurance procedure, including purchasing, is increasingly becoming digital and seamless. The upside of responding to this dynamic is that we no longer need to “sell” people on acquiring insurance and can instead provide insurance that is ready to be “purchased” effortlessly at the time of need, resulting in a scalable, sustainable business model.

Embedded insurance thrives in this environment. It’s an exceptionally successful method to solve the industry’s decades-long burden: insurance is offered, not acquired. This worldview is dramatically altered by embedded insurance. Embedded insurance is insurance that is included in the purchase of a product, service, or platform. That is, the insurance product is not offered to the buyer on the spot, but is instead made available as a standard feature. Insurance is no longer offered since it is purchased as part of something else.

Embedded insurance has an increasing market presence due to new players and collaborations between insurers and other businesses, such as GM, Ford, Tesla, SoFi, Petco, Outdoorsy, Airbnb, Uber, Intuit, and Zipcar, and its acceptance is accelerating. It is anticipated that embedded insurance

might account for more than $700 billion in premiums for P&C by 2030, or 25% of the overall global market. If we include components of life and health insurance, embedded insurance might provide more than $3 trillion in market value for those that permit it. 

According to one venture capitalist, “Google, Microsoft, Amazon, Wal-Mart, and Tesla are all involved in insurance.” Toothbrushes that assist in the financing of dental items. Individual and family health care programmes sponsored and supported by insurance companies. Hearing about and purchasing policies via the applications and people we interact with the most. All of these aspects of integrated insurance, as well as others, indicate an ocean of fresh innovation and enthusiasm in the sector. Finally, if we believe that having more alternatives is preferable, resulting in superior plans at cheaper rates rather than coverage we don’t need, embedded insurance will be the most significant shift in how we feel about and interact with insurance.” [ii]

The true value of integrated insurance… is a long-term business strategy in which, rather than always competing for prospects and leads, we are constantly making insurance easier and more desirable to acquire. Consider the market reach and optimized business strategy that may put the status quo to the test.

Leaders are being redefined by technology and innovation.

Everyone would agree that innovation and disruption are intertwined concepts. The process of developing an altogether new technique that adds value to anything is referred to as innovation. Accepting the realization that anything new will most likely modify our existing strategy is what disruption is all about.

Leaders distinguish themselves by putting a greater emphasis on initiatives that contribute to the creation of new business models, the expansion of distribution channels, the entry of new markets, the addition of value-added services, and the development of new products by leveraging technology as a foundation and catalyst for innovation. Technology is beginning to transform the industry, from next-generation SaaS core to AI/ML, digital ecosystems, low code/no code platforms, and new digital solutions.

AM Best’s Executive Vice President and COO, Jim Gillard, puts it plainly. “Demographic, technical, economic, and environmental trends are changing the insurance sector.” Innovation can help an insurer overcome these issues… As innovation becomes more prevalent, insurers that do not innovate may find themselves at a competitive disadvantage due to adverse selection and declining operating efficiencies.”

Leaders distinguish themselves by using technology to significantly alter the business operating model and innovate – two important criteria assessed by AM Best in their innovation ratings.