Insurance Industry Trends for 2021 and Beyond
February 23, 2021
Like most industries, the insurance sector faced significant disruption in 2020 due to COVID-19, prompting unprecedented digital transformation to enable business continuity. Since the economic crisis of 2007, insurance companies had been trying to cut costs and improve business efficiency to counteract the low returns from investments, however, compared to other sectors, insurance remained behind the curve in process digitization.
The pandemic served as a catalyst for change, and the emerging trends for 2021 are aimed at embracing new technology, reducing expenses, and enhancing customer experience. Automation of customer-facing processes, such as application and claims experience, was necessitated when businesses went virtual. In the back end, the digitization of application reviews is reducing reliance on costly manpower and will speed up customer onboarding. Solutions like Adastra’s Formato digital application forms have gained popularity in the industry and will continue to improve the insurance application process. Claims experiences are steadily improving, and for the Auto insurance sector, apps/digital solutions are available for customers to upload pictures of the vehicular damage, accident location, and other documentation, for online validation and claims processing. In addition to enhancing customer experience, automation of claims processing is also instrumental in reducing fraudulent claims. We expect adoption of similar processes by the Property & Casualty insurance segments, such as home and marine insurance.
Most insurance companies have been around for a long time, and their ageing technology systems have become difficult and costly to maintain. Moreover, with the ongoing consolidation trend in the insurance space (especially in the P&C segment), there is a need to consolidate data and phase out old technology systems. Already, insurance companies have started investing in newer, faster solutions, and we anticipate that the modernization of data estates and technology architecture will continue for some time to come.
With changing customer demographics, there is an expectation for new, customized products and services. The usage-based approach has gained popularity in the Auto insurance segment, and new insurance types will arise to cover emerging business models and risks. Customers are expecting to purchase products differently, and insurance companies will have to continue working to deliver convenience, speed, and ease of purchase. The industry is also attempting to build meaningful customer relationships, and we expect to see more companies adopting an advisory role to help customers reduce risk of (relevant) adverse events. This could take the shape of discounts, tips, bundled packages, and will likely require insurance companies to strengthen their data analytics capabilities to gather more insights about customer behavior and preferences.
Finally, it is time for the insurance industry to put their collective knowledge on customers and claims to improve decision-making on insurance products, pricing, and underwriting. Data sharing is an ongoing trend in the sector, and with the use of AI and Analytics, companies can leverage the enormous volumes of data they have to develop more customized, competitive products, mitigate risk, and improve profitability. We anticipate increasing focus on data privacy, security, and data governance to enhance both customer and organizational trust on their data assets. With Open Banking on the horizon, we expect data sharing to also play a key role in adjudication and credit worthiness evaluation.
This article delves into the expected trends for the insurance industry for 2021 and beyond, and sheds more light on what insurance players can do to better serve their customers, increase profitability, and gain a competitive edge.