Top Insurance Industry Trends to Follow

February 28, 2023

Despite the current economic and geopolitical uncertainties, the insurance industry is constantly evolving to meet the changing needs of policyholders. As the year progresses, we expect to see further disruption from insurtechs, leveraging of data and artificial intelligence (AI) to streamline the claims process and an emphasis on cloud migration.

In this blog, we will take a closer look at five top insurance industry trends to help you stay ahead of the curve.

1. Insurtechs

Insurtechs have been a driving force behind the technology-motivated evolution in the global insurance space in the last few years. From digitalizing legacy platforms to leveraging machine learning and automated processes, insurtechs have paved the way for creating a stickier consumer base. Addressing policyholders’ demands for transparency and choice, these companies have shifted the insurance industry focus to what really matters: faster claims processing, preferred payment methods at checkouts and embedded insurance products – trends that will continue to develop in 2023.

Last year, some insurtechs saw their valuations plummet compared to the all-time highs spurred on by pressure from inflation, high interest rates and rising global economic uncertainty1. However, it’s not all bad news as this situation may present an opportunity for the growth-minded incumbent insurers to get back in the game.

Working strategically to buy, build or partner might be a good way to capitalize on this insurance industry opportunity. Leveraging the lessons learned from insurtechs might help you optimize your business operating models and align your priorities with policyholder expectations. This could ultimately enhance the customer journey and drive profitability for your business.

For example, private equity firms previously limited by COVID-19 restrictions now have the capital to support more active M&A options. The beginning of 2023 has already seen some major deals go public in the insurance industry, and it is estimated that PE firms have up to $2.5 trillion available for continued investment2.

2. Revamped insurance claims

The claims industry is racing to meet the needs and preferences of every policyholder, whether they are the more tech-savvy Millennial or GenZ or the Baby Boomer or GenXer who prefers more human interaction. With technology advancements accelerating at a rapid pace, insurers should consider four factors that may shape the future of claims:

  • More technology, fewer claims
  • Introducing technology such as Internet of Things (IoT), telematics and wearables in the insurance industry value chain could help insurers make their policyholders more aware of risks and reduce the number of claims. For example, while using real-time telematics data, an AI-capable bot could be able to track drivers’ behaviors alongside road conditions, flag potential hazards and possibly even take control of the brakes to prevent a collision. Another example could be seen with home insurance when IoT devices might be installed to prevent thefts.

  • Digitally enabled human interaction
  • Simple claims can already be completely resolved by today’s technology. In fact, analysts predict that the next three years will see 70% of auto property damage claims and 50% of property claims able to be resolved with only a light human touch3. This could allow insurers to curate the policyholder's experience more carefully as well as devote attention to complex claims.

  • A transition from risk transfer to risk mitigation
  • Although claim prevention technologies already exist in the insurance industry, policyholders are still reluctant to adopt them fully. There might be a reduction of costs for insurers by promoting the use of prevention technologies, however, building more awareness and providing education around the benefits to both policyholders and commercial teams is needed.

  • A more proactive approach to customer service
  • Consumers operate within a highly personalized, connected world in which they choose how to interact with different companies. However, despite 75% of claims organizations believing they are successfully customizing the policyholder experience by offering choice and ease of access, most claims are still resolved via a phone call4. The ability to meet consumers in their connected spaces might be key for insurers.

3. Data and AI

Data and AI capabilities have already been applied in the Life and Property and Casualty (P&C) insurance journeys through property-intelligence solutions. In 2023, we might see their use expand even further and integrate into other lines of the insurance industry.

With consumers increasingly adapting to the current digital reality, many carriers have shifted to offer digital services and accept online payments. Whether you’re just starting or well on your way to digital transformation, this transition may seem daunting. We’re here with the expertise you need to help build the online journeys your policyholders expect.

The adoption of AI within the insurance industry has been more irregular. However, as technology advances, AI could become more widespread, giving insurers the potential to provide a better claims experience for their policyholders. Using data to assess risk levels and make recommendations could help drive down loss ratio. AI could also be applied in a cybersecurity setting as further insulation against risk. Insurers who encourage AI applications in the workplace could see increased productivity and experience quality touchpoints with their consumers5.

4. Cloud migration

Cloud services are expected to grow in the next few years with a projected 32% increase by 20256. This could present an area of unexplored potential for the insurance industry. Migrating to the cloud could bring a myriad of improvements like frictionless omnichannel experiences, integrated services and quicker solutions delivery.

How could using cloud technologies provide further value for insurers? Integrations could not only lower costs across IT operations but also ensure access to faster, more advanced and more reliable technology to create tailored policyholder solutions. Additionally, introducing automation across the cloud may allow insurers to cut costs and increase revenue by utilizing existing services such as chatbots or automated workflows7. Encouraging this migration across your company could significantly help with differentiation.

5. Inflation as an incentive for innovation

As inflation continues to shape the global insurance industry, 36.4% of carriers identify it as their greatest challenge8. Increasing prices of supplies, procurement services and energy are affecting operating costs and the bottom line. Policyholders struggling with the cost-of-living crisis are continuously prioritizing value through lower-priced policies and avoiding those with high premiums. These behaviors could translate into less customer loyalty, more competition and a negative revenue impact.

Insurance companies could weather the storm by staying abreast of the top trends we’ve highlighted in this article. Keeping your ear to the ground for more developments could help your business be more prepared.

Having a payments partner that understands the ebbs and flows of the insurance industry, works with the top global players and has 30 years of experience in financial services could help with driving strategic goals such as increasing profitability and customer retention. Our dedicated payment solutions are designed to help protect you and your consumers from fraud and risk.

Let’s work together to make 2023 a year of strategic growth.

References:

1 Opportunities for insurers in a rapidly shifting insurtech market | McKinsey & Company
2 2022 insurance M&A outlook | Deloitte
3 Claims 2030: Embracing the future | McKinsey & Company
4 Claims 2030: Embracing the future | McKinsey & Company
5 How top tech trends will transform insurance | McKinsey & Company
6 What every insurance leader should know about cloud | McKinsey & Company
7 What every insurance leader should know about cloud | McKinsey & Company
8 Insurance Predictions 2023 – Thematic Intelligence | GlobalData

About the Author
Bhuvan Maingi, Senior Strategy Manager, Financial Services & Healthcare, Worldpay from FIS
Bhuvan MaingiSenior Strategy Manager, Financial Services & Healthcare, Worldpay from FIS

Simona Dobreva, Go-to-Market Manager, Financial Services & Healthcare, Worldpay from FIS
Simona DobrevaGo-to-Market Manager, Financial Services & Healthcare, Worldpay from FIS

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