The Top 5 Global Trends Creating Competitive Advantage for Insurers in 2021/2022
- Many insurers stay with legacy systems that slow down processes and hamper innovation.
- As insurance businesses rush to create new products that meet new consumer expectations, speed is the differentiating factor for success.
- Consumer experience is evolving in the insurance market, and any company that doesn’t keep up with it will soon become endangered.
- Cybersecurity is an insurance trend that cannot be ignored, especially as insurers’ systems and processes become increasingly digitized and vulnerable to cyberattacks.
While many industries have been transformed by digital transformation, the insurance market has struggled. As a consequence, many insurers have preferred to stay with legacy systems, often laden with manual work that slows down processes and hampers fast innovation.
Enter insurtech at the turn of 2010—technology specifically catered to the needs of the insurance industry—skyrocketing innovation in the insurance market. Now, more than ever, we believe insurtech will play a pivotal role for the survival and growth of insurance businesses.
In the past year, particularly as the insurance market is recovering and adapting to a new post-pandemic world, insurtech has emerged as the go-to solution for the insurance market. We believe it’s the key for insurers to gain a competitive advantage, keep up with global insurance trends, and deliver what their consumers really want—and need. Let’s now dive into the top 5 global trends we’ve spotted that are shaping how the insurance market is moving forward in 2021/2022.
“The pandemic has provoked a need for digitization and new distribution models in the insurance industry. In the next 10 years, I believe we will see a lot of business development and innovation in the distribution space, and Insurance-as-a-Service or embedded insurance services will be more dominating.”
-Axel, Co-founder & CEO of Cloud Insurance
#1 The global insurance market is expanding its services to meet growth levels that are higher than pre-crisis 2019 levels
Projections by the Swiss Re Institute predict the insurance market will experience an above-trend recovery growth of 3.3% in 2021 and 3.9% in 2022. They’ve also seen the total global direct premiums written in 2021 rise 10% higher than their pre-crisis 2019 levels.
Unsurprisingly, the key driver in non-commercial lines of insurance growth has been the COVID-19 pandemic. Global cases of COVID-19 and economic lockdowns triggered consumers to become more concerned over their health and financial stability.
As a result, consumers—now more than ever—seek solutions from their insurance to cover their needs in the case of illness, impaired ability to work, or sudden unemployment due to COVID-19.
It is not surprising then to see that more people have purchased new insurance policies since the outbreak of COVID-19, as reported by the Swiss Re Institute. They also report that consumers are more engaged with insurers, with 30-40% of respondents in an Asia-Pacific survey purchasing additional life and health insurance during the crisis and another additional 25-50% intending to do so.
This is a huge growing market. If you want to grab a slice of this pie, you certainly want to make sure your products and services address consumers’ new health and financial stability concerns.
As insurance businesses rush to create new products that meet new consumer expectations, we predict speed to be the differentiating factor for success. Those who bring to the market new offers faster will gain a competitive edge in the recovering insurance market.
Many insurtech platforms now provide insurers with product-builder functionalities so insurers can build products faster and decrease time to market. This allows insurers to meet the growing demand for new products such as:
- “Cancel for any reason” travel insurance: The number of international tourists has declined by 65% (United Nations World Tourism Organization), severely impacting demand for traditional travel insurance offers. Insurance providers that are quick to update their travel insurance policies with “cancel for any reason” offers will grab the market that is hungry to travel but want the assurance that they can cancel due to market uncertainties. SquareMouth, an insurance company, increased its policy sales by 400% by adding on a “cancel for any reason” upgrade.
- Work-from-home personal accident insurance: The working environment has experienced a major shift from office buildings to remote working from home. While largely triggered by COVID-19 lockdowns, this trend was already building pre-pandemic and is likely to stay post-pandemic.
- Increasing living costs and a wide range of remote working collaboration tools are the two key catalysts in the rising trend of working from home or remote working. With that, insurance coverage for personal accidents while working remotely will also likely increase and become a competitive advantage for insurers who offer it.
The value of being able to quickly create new products and offers is, of course, valuable beyond pandemic times. It’s undeniably an advantage that makes insurance businesses flexible and adaptable to keep up and thrive with any changing circumstances.
#2 How wearable healthcare devices and telemedicine are creating a paradigm shift for insurers
Another global insurance trend causing disruption in the insurance market is digital wellness. In particular, wearable technology for wellness.
A market research report published on MarketsandMarkets has estimated the value of the global wearable healthcare devices market to reach USD 46.6 billion by 2025. They project this market to expand at a compound annual growth rate (CAGR) of 20.5% from 2020 to 2027.
Telemedicine, on the other hand, has been evaluated to be worth USD 50 billion as of 2019 and is forecast to grow to a value of almost USD 460 billion by 2030 according to a report published on Statista.
The growing trend of wearable healthcare devices is empowering consumers to take charge of their wellness by giving them the means to non-invasively monitor vitals such as activity, heart rate variability, blood pressure, SPO2 levels, sleep quality, glucose measures, and more. Meanwhile, telemedicine leverages the remote working trend and allows consumers to access online medical consultations.
What does this mean for the insurance market? On the whole, it means joining the trending paradigm shift from “sickness care” to “wellness care”.
Rather than offering products that consumers can use only when they are sick, insurers can now be present in the consumer’s daily wellness journey by aligning themselves with wearable healthcare devices and telemedicine trends.
You can see this happening with product offers by insurance businesses such as US-based insurer Aetna’s partnership with Apple in 2019 to introduce a health-tracking app for iPhone and Apple watch users. Consumers can use the app to reach their health goals and earn rewards such as discount vouchers, while the encrypted data collected by the device can help Aetna provide custom recommendations.
This opens an entirely new line of possible product offerings that add diversity to the consumer value chain while changing the relationship and engagement consumers have with their insurers.
Speaking of engagement, how insurers engage with their customers on the consumer experience journey is another must-watch trend in the insurance market.
#3 How AI and cloud computing is leveling up the consumer experience journey in the insurance market
Thanks to digitization, consumer experience is evolving in the insurance market, and any company that doesn’t keep up with it will soon become endangered!
According to research by IBM Institute for Business Value, over the past decade, 85% of insurers are deploying consumer experience initiatives throughout the customer journey while 90% have appointed a Chief Consumer Experience or Chief Customer Officer.
How exactly is digitization evolving the consumer experience in the insurance market? Largely through artificial intelligence (AI) and cloud computing; 2 new megatrends that are fast becoming fundamental building blocks within companies.
According to Deloitte Insights, 68% of insurers are either in the process of testing or adopting AI or machine learning. AI has huge potential to take the consumer experience journey beyond chatbots and begin automating time-consuming manual processes such as claim processing, underwriting, customer service, fraud detection, policy administration, and even policy personalization.
ISG Survey also reports that 51.3% of insurance businesses see the potential of cloud transformation and plan to invest in it. Cloud computing can aid insurers to collaborate easier, improve efficiency, have reliable backup and disaster recovery systems, and allow for greater scalability and flexibility.
Blockchain is a disruptive technology that can create a more secure and transparent way of storing data, as well as enabling transactions without the need of a central authority or third party.
The way blockchain technology can transform the insurance market is not only revolutionary, but with huge cost-saving implications. For example, blockchain can be applied for fraud prevention and detection.
The Coalition Against Insurance Fraud estimates that in the United States alone, insurers are losing over $80 billion a year to fraudulent insurance claims. Just from this, you can see how much value blockchain technology can bring to insurers.
Other ways blockchain can bring value to insurers is through anti-money laundering, smart contract, and data decentralization.
The prospective advantages of using blockchain to simultaneously improve services and protect insurance businesses is making blockchain an exciting investment opportunity. Accenture has forecasted that the global use of blockchain in the insurance industry could reach up to USD 1.38 billion by 2023.
The effects of a cyberattack on a business can be devastating, no matter what the industry. Fintech is a popular cyberattack target, and we deduce it will be the same for insurtech.
In 2020, Fintech News reports that an average of 80% of firms across all industries have seen an increase in cyberattacks. However, banks in particular experienced a 238% rise in cyberattacks, largely believed to be triggered by the coronavirus.
Research by Accenture also revealed a spike of cyberattacks on insurance providers, with the number of attacks almost doubling from 2018 to 2020.
Thus, cybersecurity is an insurance trend that cannot be ignored, especially as insurers’ systems and processes become increasingly digitized and vulnerable to cyberattacks.
Digitization is the only way forward for the insurance market
The writing is on the wall: digitization of the insurance market is here to stay. It is increasing the efficiency of virtually every point on the customer value chain, from increasing the speed of offering relevant and customized offers to automating claims management operations and more.
About Cloud Insurance
Cloud Insurance is a seamless SaaS solution made by insurance experts for insurers since 2016. Our all-in-one solution helps insurers reduce time on managing policies, claims, financials, and reports through APIs, AI, and rule-based technology. Learn more about our solutions here>>.