It’s important for insurance organizations to know and understand industry trends if they want to continue growing their business and to succeed in the digital age. With this information, your own insurance company can easily identify which aspects of your business you need to improve on. More importantly, you’ll be able to pinpoint where you’re performing well and can thus work toward duplicating the results in the other areas of your business.
Do note that not all trends end up exerting a significant influence on the insurance industry. In addition, some trends can arise unexpectedly due to unforeseen events, like an economic recession or a global crisis like the COVID-19 pandemic. Nevertheless, with careful analysis of previous and current trends, and by gaining insights from both, you can make safe assumptions as to the future movements in the industry.
That said, here are some key trends that every insurance organization and professional should take note of. These are the trends that are having an impact on the industry and will continue to affect it in the coming years.
Artificial Intelligence and Machine Learning
It’s safe to say that modern computing technologies like artificial intelligence (AI) and machine learning have made their way into practically every important industry these days, and the insurance sector is no exception. Fortunately, the effects have been highly positive. Thanks to insurance software, for example, practitioners can now create more transparent, personalized insurance journeys for their clients. It has also become easier to detect insurance fraud and other types of financial crimes that have been a bane to the insurance system for years.
Using novel insurance solutions can also help simplify processes such as enrollments, billing, and claims adjudication. You can also consolidate several different processes into one system, which can help streamline operations and lower costs. Most importantly, tech can help your organization become more flexible in providing the needs of your customers.
AI has also become more prevalent in the form of modern algorithms, which can help in creating predictive core insurance processes. This will not only increase productivity, but will also improve consumer experience at different touch points. The bottom-line? Modern tech-based solutions have been and will continue to be a driving force in the insurance industry across various facets of business.
One of the most popular non-traditional insurance products is parametric insurance. Also called index-based insurance, parametric insurance offers the insured a fixed amount when an event “triggers” or exceeds a threshold.
What makes it favorable for a big part of the market is that unlike traditional policies, parametric insurance doesn’t need for a loss to be incurred by the insured. As soon as certain parameters are met, the insured will receive a payout. For example, if a building is located in an earthquake-prone area, the owners can insure the structure so that when an earthquake of at least magnitude 5.0 occurs, the policy will pay $100,000.
This type of insurance has seen a recent resurgence due to the COVID-19 pandemic, as the disease has presented new health risks. Of course, parametric insurance can be expected to continue to be relevant in property insurance in case of calamities like earthquakes, floods, and hurricanes.
ESG or environmental, social, and governance factors have also become increasingly important in insurance due to climate change. In fact, many insurance companies already consider ESG-related risks in the underwriting process; the higher the risk, the higher the premium. This can result in commercial customers adopting new business practices that are more sustainable for the environment.
Adopting ESG practices within the insurance industry and individual companies can also result in improved results in employee recruitment and retention. These changes can also spill over to customer loyalty. Why? Because being environmentally and socially conscious is a big convincing factor for people to patronize any business.
Unlike other industries that suffered massive job losses because of the 2020 recession, the insurance industry experienced very little change in their staffing ranks. The industry itself is highly mobile, which means it was one of the first to adapt to a work-from-home or, indeed, work-from-anywhere setup. The COVID-19 pandemic also highlighted the importance of insurance, particularly products for life and
Many insurance companies worldwide are expected to hire more people in the next few years as the increase in demand continues. In addition, tech-savvy candidates will be more in-demand as the industry becomes more rooted in the digital space. Meanwhile, job seekers will favor more flexible companies with top-notch digital capabilities.
Last but certainly not least, blockchain is rapidly becoming mainstream in insurance. The technology helps facilitate not only greater transparency, but also greater efficiency when it comes to placements,
settlements, and compliance. The decentralized nature of blockchain also makes it more secure, even as it creates an ecosystem for multiple stakeholders.
Automation and data integration are also big parts of blockchain in insurance. This allows claims to be paid almost instantaneously, with real-time risk tracking. Moreover, blockchain is also used as a form of contactless payment solution. With more consumers expecting some form of digital payment from their chosen providers, it’s wise to consider this facet of blockchain as well.
Ultimately, no one can truly predict what the “next big thing” will be in insurance. That’s why it’s prudent for every organization to keep track of trends to help make reasonable forecasts and ensure seamless transition when needed.