With 2023 in the wings, it’s time to delve into the trends that will impact the insurance industry and find out how companies can prepare themselves better in the coming year. One thing we know for certain is that the industry has embraced digital technology to meet growing customer expectations.
Insurance no longer enjoys the same levels of stability and predictability as did a few years ago. Today’s customers expect products that are tailored specifically for them. The looming climate change crisis has further intensified their risk exposure and regulatory demands.
That being said, the insurance industry has stayed resilient over time by overcoming obstacles such as the COVID-19 pandemic and the economic challenges stemming from the Russia-Ukraine war. As the industry braces itself for another challenging year, characterized by rising inflation, climate change, increased competition from tech firms, rising interest rates, and geopolitical turmoil it’s time for it to prove its mettle once again.
After another year has passed, it’s time to look forward to the upcoming year. Our predictions for 2023 in the insurance industry include the following five trends.
1. Environmental, Social, and Governance (ESG) to remain a key focus area for insurers
Considering ESG as part of an insurer’s due diligence process has become standard practice, as it impacts an insurer’s brand reputation and level of risk. Insurers are not only evaluated by their sustainability reports but also by their initiatives on how they are addressing carbon emissions, taking steps to diversify their workforce, and increasing transparency in their governance structures. Given the importance of ESG for the insurance industry, it is time to make it a competitive differentiator. Therefore, insurers should ensure that their ESG processes are at the center of their strategy by 2023.
In 2023, if a lot of emphasis is put on ESG, insurers can be more proactive in ESG initiatives. They will engage with the desired authorities to determine the best ways to meet ESG requirements and understand their implications.
2. AI and automation to remain at the forefront of innovation
Data processing capabilities, new data channels, and improvements in AI algorithms will fuel AI and Robotic Process Automation (RPA) in insurance. As an example, insurance carriers are leveraging the technology transformation driven by insurtechs to build a business model that uses AI at its core. Insurance carriers are positioning themselves to respond to the changing business landscape as AI becomes more integrated into the industry. Leveraging the efficiencies generated by RPA, AI, analytics, and big data, as well as low- and no-code technologies, can help streamline processes, provide exceptional customer experiences, and enhance data security.
In 2023, AI and RPA will have a tremendous impact on all aspects of the insurance industry, from distribution to underwriting and pricing to claims. The massive adoption and integration of automation, deep learning, and AI will drive the industry’s evolution. Players who will use modern technologies, create innovative products, and streamline processes through AI will be able to thrive.
Read more: RPA and automation in financial services
3. Collaborations between insuretechs and traditional insurance firms
Insuretechs are scaling up at a very rapid rate, especially in auto, home, and cyber insurance. This growth led by insuretechs is encouraging traditional insurers to either collaborate with them or acquire their technical capabilities. These collaborations will be a win-win situation for both the insurers and insuretechs, as traditional firms will benefit from the technologies these insuretechs possess. As a result, these insuretechs will have access to a broader client base, funding, and expertise. Profitability will increase due to increasing revenue streams due to reduced operational costs. Lastly, this new model will also provide value-added offerings that will lead to an augmented customer experience.
4. Increased popularity of underwriting workbenches
The most recent generation of insurers has embraced change. They are swift to adopt new technologies and tools that require a completely new class of products just to organize their processes. Underwriting workbenches can be very handy in this situation.
An underwriter’s workbench is a centralized workspace that contains an underwriter’s most valuable digital tools and supports the whole underwriting process. Underwriting workbench companies, according to a 2022 CBI Insights report, raised USD 676 million in equity funding from 2017 through 2021, with more than half of this in 2020 alone.
Workbenches for underwriting are a relatively new concept. Underwriters have just recently begun employing enough digital tools to make workbenches necessary. Underwriting workbenches will undoubtedly become more than just a nice-to-have for individuals transitioning to a digital way of working with the usage of AI and machine learning.
Although many insurers are reluctant to adopt new technology, the surge in popularity of underwriting workbenches demonstrates a willingness to make investments in modern tools when they are presented one step at a time. According to Accenture, 66% of insurance executives say that their organization’s rate of digital transformation is accelerating, and 81% of insurance companies and IT executives globally agree that technology has assimilated into every aspect of the human experience.
Over the coming years, the use of underwriting workbenches is expected to increase, which will be aided by the digital infrastructure.
5. Cross-selling will go hand in hand with a need for personalized insurance packages
The demand for cross-selling and upselling has steadily increased over the past few years across the insurance industry. Although this would initially seem to favor insurers over customers, there is demand for cross-selling on both sides of the aisle. While cross-selling gives a chance for brokers and underwriters to sell more insurance, it provides customers the option to have all their risk management requirements met by a single vendor.
The need for personalized insurance plans and customized premiums will probably go hand-in-hand with the push for cross-selling in 2022–2023. In this digital economy, customers will choose personalized insurance covers instead of off-the-shelf products that are offered currently. Microinsurance, P2P insurance, and flexible coverage options are anticipated to be the most suited options in the long run.
These insurance trends will fundamentally alter the insurance market, paving the way for new opportunities and innovation. Insurers must strategically engage in the following to enable more robust operations, create, or maintain digital momentum, and provide improved customer experiences:
- Harnessing automation
- Connecting people, processes, and technology
- Instituting strong measures for data privacy and cyber security
By improving customer service, saving operating costs, and enhancing the digital experience for customers, these developments are driving the key trends and their implementations onto the business agenda for 2023 and beyond, which is motivating insurance providers to increase their capabilities.
Netscribes offers relevant data and insights based on research and analytics to enable insurance companies to identify emerging trends and navigate uncertainty. Contact us to schedule a consultation.
Based on insights by Sakshi Katoch, Senior Associate, BFSI team