The insurance industry is changing, and it’s not all because of the pandemic. We take a look at three prominent trends of 2021, so you can make sure your insurance practice is ahead of the game.
The COVID-19 pandemic caused many industries to pivot in 2020, and the insurance industry was no exception. The resulting fallout changed not only the definition of risk in insurance but also shifted customer needs and expectations while speeding up the virtualization of insurers overnight.
Historically, insurers tend to be risk-averse and usually hold back on being at the forefront of new technology. But, new sources of innovation, such as InsurTech, are driving change in the industry. This new mindset, combined with changing customer and agent expectations and the desire to cover unknown risks with specialized products, will drive industry trends in 2021. These trends are paving the way for the future of insurance by allowing insurers to utilize new technologies that tailor products to their customers and their needs.
Let’s take a look at what three main trends are changing the insurance industry this year
1. Changing Demographics Require a Different Approach
In 2019, millennials overtook baby boomers as the largest generation of adults in the United States. The rapidly changing demographics of both customers and agents create increased expectations on your ability to provide a digital experience and a need to provide more tailored products to your customers.
Older millennials are heading into their peak earning years, starting families, purchasing homes and making complex buying decisions. In 2020, millennials and Gen-Xers owned over 60 percent of small businesses in the U.S. As these generations become your primary focus for new customers, you’ll have to pivot your types of product offerings and processes to reflect this new generation.
Millennials and Gen-Xers are driving a huge digital shift in the business insurance industry as these consumers often trust and expect to use technology for complex buying decisions. They prefer mobile apps and online portals over speaking to a representative. As a result, your insurance company must continue to create tools where your customers can access all the content and services they need in one click. Insurance companies and agents who continue to innovate and adapt to an increasingly tech-filled world will be the ones who thrive in the industry in 2021.
2. InsurTech Capital Is on the Rise
Despite the turmoil the insurance industry faced last year, global investment in the InsurTech sector reached an annual high of $7.1 billion. Investors have recognized how invaluable InsurTechs are for their targeted solutions and how they can help companies prevail during times of instability.
The pandemic is only one of the powerful drivers pushing the insurance industry towards accelerated innovation and transformation. Other notable automation drivers include:
- The changing demographics of both insurance professionals and customers
- Shifting consumer expectations
- The evolution of risk
- The continued fragmentation of the industry
- Legacy systems that don’t integrate.
Insurance companies are seeking out new technologies and innovative methods such as customer journey mapping, design thinking, lean process mapping and intelligent automation to make processes more efficient, reduce expenses and evolve with consumer expectations.
While much of the investment InsurTech drives has resulted in targeted and innovative solutions, it presents carriers and brokers with the challenge of integrating these solutions into both your business and technology architectures. As a result, this year, we will see the adoption of more sophisticated event-driven architectures that continue a shift toward business-driven events as a way to integrate smaller, targeted systems and services vs. traditional request-response patterns. This will drive flexibility for the overall processes and enable faster response, intelligent automation and improved decision-making.
Similarly, not all of your integrations and innovations will be through traditional architectures. Practices will adopt Robotic Process Automation aided by more sophisticated automation, like AI, faster. Innovative ideas that originate within your carriers should leverage no code or low code frameworks to enable fast prototyping and business ownership of certain solutions.
As we mentioned above, the more digitally connected and tech-savvy generations may be your primary targets, but they do not have the same purchasing behaviors as previous generations. Insurers want to adapt to these customers with rapid digitalization that you can only achieve with the involvement of InsurTechs — and investors are taking notice. As the insurance industry continues working remotely, InsurTechs focusing on streamlining and virtualizing customer engagement in sales and claims will continue to be successful.
3. Product Specialization Becomes a Priority
In today’s extremely competitive landscape, forward-thinking insurance companies will avoid taking a one-size-fits-all approach for customers. The market continues to trend towards product specialization as clients now expect tailored services across the insurance industry.
As you continue to focus on what offerings, content and tools interest your target customers, you now have a collection of data that InsurTech makes more accessible, which in turn makes personalizing products and services for each customer (commercial and personal) more possible than ever. For example, some companies are using telematics devices to record driving behavior or miles driven in order to tailor auto insurance policies to each customer while effectively handling risk. Younger policyholders and agents see this customization as a competitive advantage.
Don’t Forget About Security Concerns
Data collection and product personalization bring new customers but also concerns about privacy and security. Millennial and Gen X consumers are highly conscious about data security and cyber risk, including in insurance. As cybersecurity, along with other emerging or new risks, continue to evolve, you must find new ways to offer products and services to customers while properly protecting information obtained from data collection to minimize the risk of fraud. To stay competitive with the millennial generation, you must continue to transform the sector to focus on client experience.
Navigating What’s Next
As we settle into 2021, the increasingly competitive insurance industry will continue to experience the influence of changing demographics, the influx of InsurTech capital, and the expectation of product specialization. Remember that customer service and satisfaction will be key to appeal to your millennial and Gen X consumers.
Help from InsurTechs will be essential to achieving the rapid and successful digital transformation needed to focus on the upcoming tech-savvy consumers’ wants and needs. Remember, both tech-based and human-centric solutions will be important to address challenges and opportunities throughout the year.