Can Insurers Overcome Current Challenges with These Industry Trends?

A Shifting Industry Landscape

The rate of change for those in the insurance industry has only accelerated over the past few years. Economic disruption, the COVID-19 pandemic, and even global supply chain issues that have increased issues like rising loss costs, have all contributed to major shifts in foundational ways of doing business.

Insurers hoping to stay profitable and relevant in our digital age are faced with numerous challenges. Alongside these challenges, however, there are opportunities for innovation through the latest trends.

Current Challenges

Is your insurance company facing any of the following challenges?

1. Loss of confidence. Your insured customers are skeptical about the services and products you offer, in part because many customers lack knowledge about their own coverage.
2. New regulations that upend business models. Standard industry practices and procedures have not caught up with the latest government regulations.
3. Difficulty retaining and attracting talent. Over the next 50 years, more than 50% of the current workforce will retire, and your company is struggling to replace those leaving with younger generations.
4. Rising costs. Despite price increases, not all your products and services are profitable because of changing economic conditions like higher interest rates.
5. Increasing customer expectations. In part because of superior experiences elsewhere, customer needs and preferences are evolving.

“Most insurers are realizing that reacting to risks may not be good enough and are undertaking transformation efforts aimed at preventing losses from happening in the first place,” highlights a recent Deloitte report.

Are industry trends—both general and technology-specific—able to help you overcome these challenges? Let’s take a look at a few trends from both categories.

General Trends

1. Embedded insurance. Embedded insurance, or bundling insurance with a product that a customer buys (e.g., giving the option to purchase travel insurance at the same time as a flight) is not new but has seen significant traction recently. This trend disrupts the current model of buying from insurance agents, sometimes “even excluding legacy carriers altogether.”
2. Integration between the insurance and healthcare industries. As both industries try to take a more proactive, preventative approach, insurers are changing their messaging from more business-oriented to customer-care-centered. 
3. A focus on sustainability. Insurers play a pivotal role in sustainability, helping companies “navigate and manage new and emerging physical, transition, and liability risks, such as supply chain interruptions, risks related to new technologies, and delays to projects,” notes PA Consulting.
4. Mergers and acquisitions that target InsurTech companies. Although general merger and acquisition activity has decreased recently, Deloitte predicts a revitalization, especially for InsurTech companies.

 

Technology Trends

The insurance industry has been characterized, sometimes unfairly, as rife with digital dinosaurs. Still, many insurance companies rely on outdated technology for a less-than-ideal user experience. 

These technology trends, however, can help propel you into the modern era:

1. Data redundancy avoidance. Many insurance companies are starting to integrate unwieldy legacy technology and disparate systems in order to minimize data redundancy, streamline the user experience, and reduce unnecessary technology investments.
2. Personalization. Knowing a customer’s needs and desires has become non-negotiable, and the industry is pushing this standard further through offerings that prioritize risk prediction, prevention, and intervention. Personalization also improves a customer’s overall experience and increases loyalty and engagement.
3. Connections between internal systems and external services. Using APIs (or Application Program Interfaces) enables insurers to bridge the internal/external gap, making it easier to expand service offerings rapidly and decrease time to market.
4. Omnichannel experiences. Increasingly, customers want the same level of experience and cohesion across every touchpoint, from telephone calls to a mobile app to your website.
5. AI. AI is here to stay, and figuring out how to use it for your business is crucial. For instance, by 2025, it’s predicted that 95% of customer interactions will be chatbot-powered.

 

Protecting Your Future and Embracing Change

How will you leverage both general and technology-specific trends to your advantage in order to address the challenges you face—now and in the future?

As PWC notes, “Unfortunately, most carriers are opting for incremental change. This may keep the lights on for the time being, but future success depends on radical reinvention.”

Truly preparing for the future will involve not only harnessing the trends that make sense for your business but also implementing them in a thoughtful, sustainable way, using technology that can grow with you.

For more about how to become an insurance innovator with Liferay DXP, read our whitepaper.