The insurance industry transforms quickly. There are several trends companies evaluate to modernize their business. Per definition a trend indicates a general direction of change or development (Cambridge Dictionary, 2020). Amongst all initiatives in my opinion the following shape the future of insurance the most.
Trend No. 1: Sustainability in insurance
Climate change is top of mind for a lot of firms. Insurers have a certain interest in sustainability as well. In the long run they are important capital investor and risk carrier for upcoming natural disasters. Preventive measures help to reduce future risks. Furthermore, customers request “green” insurance products. Over the last years insurance companies invested massively in renewable energy. (Oak & Schoeffler, 2020)
Trend No. 2: Importance of partnerships
In the past insurer relied on partnerships in sales or at the point of sale. Due to globalization and the introduction of emerging technologies new competitors are entering the market. If insurance companies want to retain a unique position in the market and realize growth, they need to take partnerships to the next level. Ideally insurer and industrial businesses bring their key capabilities together and create solutions hand in hand.
Trend No. 3: Customer centricity
Demographical change influences customer behaviour. Insurers tend to have very complex and untransparent processes. For laymen it is nearly impossible to understand an entire insurance police. Technology savvy generations demand customer-driven solutions and services. Putting the client at the center of the insurance business model marks new challenge for the whole industry. Insurers need to focus on increasing customer interaction and loyalty. With the offering of customized insurances and mutli-channel experiences they need to raise the voice of the consumers. (Deloitte, 2020)
Trend No. 4: The data-driven enterprise
As learned in the previous chapter data is of significant relevance in the future. Usually, insurer process huge amounts of data - varying from customer data, market data or risk evaluations. Nevertheless, the majority of insurer struggle having the same data across all organizational units. Therefore, most often gaining insights from data is difficult. Silos and isolated applications reduce data quality. In order to leverage big data and analytics these businesses need to improve their data handling and governance. A structured data approach enables insurance companies to decide fast and based on facts.
Trend No. 5: Introduction of new insurance models
Technology disrupts traditional insurance products. Through the use of data, new models of insurance are evaluated and introduced. The personalization of insurance products relates to a customized offering depending on someone’s situation. A general product does not satisfy today’s standards anymore. Instead insurance products should address individual circumstances and needs of a consumer. The modularization of insurance products describes the coverage of single items or category groups. As opposed to all-inclusive protection customers tend to insure possessions of high value (e.g smartphones). The on-demand insurance products request a high flexibility of insurers. Consumers activate their coverage in specific situations. One example is the travel insurance. Alternatively, with usage-based approaches customers are paying their premiums based on how often they for example drive their car. Vehicle insurance uses telematic data to analyse the driver’s behavior. Lastly, peer to peer insurances gain traction in the market. In this scenario individuals bundle their premiums within a group to insure against certain risks. (GVD, 2018)
Trend No. 6: Rise of InsurTechs
Globally InsurTechs influence the insurance industry. Over the past years these start-ups are addressing the changing consumer needs in the market. With the help of technology, they aim to offer flexible and customer-centric solutions. Some of them act as full risk carrier with their own insurance licence others focus on digitizing the value chain of traditional insurance companies. If anyone is interested in details, I can recommend reading the following article on "The Four Waves of InsurTech":
Trend No. 7: Cybersecurity
As technology evolves the number of cyber-attacks is rising as well. More and more individuals or firms fall victim to cybercrime activities. Hence, they want to insure against the risk of being hacked. German insurance companies offer protection to secure cybercrime. Since this risk complex to measure, cyber-insurances mostly address large institutions instead of private households. In the future this kind of insurance will get attraction for private clients as well.
If insurance companies can leverage technology to follow these trends, they will be well-positioned for the upcoming years. Hand in hand with the adaption of trends, insurer need to fulfill developing regulatory and compliance requirements.