5 Strategies to Grow Your Insurance Business in 2022
- By shifting into digital transformation and embracing a more modern approach to conduct business, insurers can streamline and reduce operating and maintenance costs.
- Spearheading green initiatives that proactively tackle climate charge within the insurance market can be a key factor of success for insurers.
- The industry has seen a rise of customer-centric services that have transformed how consumers relate to their insurers.
- With increasing costs and risks to organisations, any insurance business that has adopted or is planning to adopt digital transformation cannot afford to ignore cybersecurity
- Cloud computing in the insurance industry is the glue that brings together all the other strategies covered so far.
The past two years have been a tumultuous time for insurers as the world grappled with the many challenges that COVID-19 has brought. Due to travel cancellations and other economic losses incited by the pandemic, the global insurance market witnessed a general trend of decreasing profit and increasing claims amidst an economic recession.
This trend was reported in the study, “The Impact of COVID-19 on the Insurance Industry” published by the International Journal of Environmental Research and Public Health. However, now that the global economies are picking up in this recovery phase of the pandemic, what can we expect for the insurance market in 2022?
According to the latest forecast from Swiss Re Institute in their report, “Turbulence after lift-off: global economic and insurance market outlook 2022/23”, the global insurance market is expected to exceed USD 7 trillion in premium terms by mid-2022. This goes hand-in-hand with the rising risk-awareness among consumers and businesses for both life and non-life insurance.
How can insurers get a big slice of this pie? We’ve collected 5 strategies driving the insurance industry’s recovery and growth that insurers can’t afford to miss out on when creating their 2022 business plan.
#1 Optimising costs
With many insurance businesses having undergone restructuring or a shift into hybrid or remote working as a result of the pandemic, it has become more important than ever to optimise costs in order to meet the needs of the business.
One of the ways insurers are doing this is by moving away from legacy systems laden with a lot of manual work and physical storage that create higher labour, storage, and maintenance costs.
By shifting into digital transformation and embracing a more modern approach to conduct business, insurers can streamline and reduce operating and maintenance costs. Furthermore, they will enhance the client experience and create more business opportunities for growth.
Another way digital transformation helps insurers optimise their costs is by opening the immense potential for insurance underwriting to become more efficient. Automating the workflow, implementing straight-through processing, and using artificial intelligence to collect more relevant information at a faster rate all combine to equal cost savings.
Insurers can then pass on these cost savings to their clients by charging lower premiums. Providing more affordable insurance coverage can be appealing to potential policyholders and thus can help drive business growth for insurers.
Finally, an indirect but critical way digital transformation can help insurers save money is in claims handling and fraud mitigation. With algorithms crunching digital data to provide insightful analytics, insurers can reduce back-office expenses and prevent future losses caused by fraudulent claims.
Keeping the cost of insurance down will remain critically important as insurance businesses recover from the increased claims over the past two years that have eaten into their profits.
#2 Climate change & sustainability
Many insurers are realising the necessity to adapt their business model to the realities of climate change. Prof. Dr Peter Hoppe, a board member of the Global Climate Forum, asserts:
“Climate change is a fact. Countering it is a must. We are convinced that climate protection makes economic sense, as it would be more expensive in the long term to pay for the damage it causes.”
According to the study, “A Global Review of Insurance Industry Responses to Climate Change” that was published in The Geneva Papers on Risk and Insurance, many industries such as construction, manufacturing, and transport have created innovations to reduce their carbon footprint. Yet, the insurance industry lags behind in these innovations.
Thus, spearheading green initiatives that proactively tackle climate charge within the insurance market can be a key factor of success for insurers in 2022. An article published in the journal Insurance in a Climate of Change stated:
“The industry should not be afraid to be bold on this issue. In fact, this might just be the perfect opportunity for the insurance industry to demonstrate how it really does advance the interests of all of us ahead of its own, narrower commercial interests.”
Consumers are primed to prefer companies that respond to the “greening” of the global economy. Insurers that factor in climate change and sustainability will not just play a role in helping the planet, but will also gain favourable sentiment while contributing to long-term economic strength.
Examples of green insurance policies that have surfaced in the market include incentives for low-emission vehicles, offering carbon risk management and carbon reduction services, and policies with improved resilience to disasters caused by the compounding effects of climate change.
#3 Shift to customer-centricity
There is a famous adage attributed to Ralph Waldo Emerson, “Build a better mousetrap and the world will beat a path to your door.”
While it’s true that having a good product is an important foundation for business success, any marketer or company owner will tell you that people are inherently lazy and will not want to “beat a path to your door.” At the end of the day, consumers will gravitate towards whomever makes it easier for them to get the product they need.
This is essentially what customer-centricity is all about. Being customer-centric in the insurance industry means making the entire customer journey experience as simple and as easy as possible, from decision-making through to purchasing, consumption, and after-sales support.
The importance of customer-centricity is reflected in this statement published in the research, “Acquiring Insurance Customer: The CHAID Way”:
“...It is essential for an insurer to have knowledge about customers, plan customer-centric offerings, attract more profitable customers and increase the bottom line. In the changing market and economic conditions, the insurance industry has started considering customer-centric rather than a product-centric view to well serve the customers.”
In recent years, the industry has seen a rise of customer-centric services that have transformed how consumers relate to their insurers. Examples of this include customised packages to meet their client needs, microinsurance, and discounts, incentives, or rewards for customers that achieve certain milestones.
Digital transformation is a key enabler of customer-centric products and services. Along with optimising costs for insurers, digital transformation opens the path to utilise artificial intelligence (AI) that can deliver customer insights that support customer-centricity.
Pivoting into customer-centricity will give insurers a competitive advantage by improving overall customer satisfaction, which naturally leads to loyal customers and referrals
#4 Enhance cybersecurity
Going hand-in-hand with digital transformation to achieve cost optimisation and customer-centricity is the need for enhanced cybersecurity.
Cyber-attacks have escalated over the past few years. The average cost of a data breach is now USD 4.24 million as per IBM's Cost of a Data Breach Report 2021 report. This figure is the highest it has ever been in the 17-year history of IBM’s report. The report also states the rising trend of remote working due to COVID-19 has increased the average cost of breaches by USD 1.07 million compared to organisations where remote working was not a factor.
Cybersecurity breaches can have far-reaching consequences for a company, not just affecting the business financially, but also compromising its reputation.
One example of this was seen when the British Airways website was hacked in 2018 and compromised the data of more than 380,000 people, including credit card details and other banking information. Consumers lost trust in British Airways which impacted their revenue. It took British Airways months to properly recover from the incident.
With increasing costs and risks to organisations, any insurance business that has adopted or is planning to adopt digital transformation cannot afford to ignore cybersecurity in order to protect their assets and reputation.
#5 Cloud computing
Cloud computing in the insurance industry is the glue that brings together all the other strategies covered so far.
The cloud can store more data than physical records at a significantly cheaper cost. Having data in the cloud also allows for integration with other cloud-based industries to fuel massive innovation.
For example, connecting to data a car’s GPS data through the cloud can give insurers real-time data and insights to create customer-centric, personalised plans based on how people travel. On the other hand, integration with climate modelling, catastrophe modelling, and risk profiles of “low-carbon” technologies can help insurers make data-driven decisions for green insurance initiatives.
Since cloud computing can reduce a lot of costs for insurance businesses, it also makes it easier for insurers to offer affordable microinsurance for those who are excluded from traditional supply. When combined with digital transformation, insurers can also offer microinsurance add-ons that can be purchased through a mobile app as and when a customer needs it. These innovations that result from cloud computing opens up exciting avenues of innovation and growth to continually elevate the customer experience with insurance.
Buckle up for fast growth
With forecasted growth and recovery for the insurance market predicted in 2022, there is no better time than now for insurers to invest in initiating or improving these 5 strategies in their organisations. If you’re an insurer, start buckling up for growth. The ride can be bumpy, but you can make it as smooth as possible by leveraging insurtech to smoothly shift into digital transformation and cloud computing without having to invest the resources and time to build systems from scratch.