Insurance Trends to Watch in 2023
Andrew Mazur
Senior Business Development Manager @ DataArt | Driving Technology Transformation
The insurance industry is revolutionized by technological developments and extreme global shifts in behavior. In this article, we delve into the major trends the market will see throughout 2022 and how businesses will be affected by them.
A?Cataclysmic Change
It?would have been hard to?miss the last few years’ effects on?the insurance industry landscape: how the pandemic has paved the way to?en?masse digitization and favored the arrival of?a?new wave of?insurtechs and MGAs. Existing competitors in?this space have not always been nimble enough to?adapt to?the new normal, and those companies that are heavily reliant on?a?human workforce (either internal or?user-facing) have suffered the most. As?a?result, their businesses have become less profitable, and many have vanished.
It?is?crucial to?stay competitive during this time of?uncertainty and volatility, and to?do?this, insurers must adopt new business and technology approaches, such?as:
In this article, we?dive into the biggest trends in?the industry you need to?be?aware of?in?2023. Many of?these had their inception three or?four years ago, and their resolution may take another five or?six years, but 2023 will be?a?critical year in?either adopting or?falling behind these industry shifts.
Insurance Digitalization Trends
Trend?1: Internal Process Digitalization
THE PROBLEM
Conventional insurers have gotten by?with their on-site legacy systems so?far. However, faced with the need to?quickly respond to?unprecedented industry and market changes accelerated by?the pandemic, they now realize that off-the-shelf solutions are simply not flexible enough to?help them meet their clients’ rapidly evolving needs.
Incumbents apply technological systems to?numerous areas, such as?actuarial risk calculations, investment portfolio management, financial planning, claims handling, and so?on. But the major setback is?that the data they use exist in?silos. And without deep integration of?data, companies can neither streamline workflows at?the enterprise level nor improve their customers’ experience.
THE SOLUTION
By?shifting core processes to?the cloud, insurers solve the problem of?dealing with siloed and fragmented data and therefore bridge the gap between the customer and agent in?their interactions. The cloud grants agents quick access to?all relevant information about customers, helping to?streamline interactions for better customer service. Additionally, cloud-based solutions enable companies to?achieve greater agility and launch new products.
THE TREND IN?ACTION
Many companies are already using the cloud as?a?part of?their growing infrastructure, and this will be?even more apparent in?the next decade, according to?a?recent survey by?Sollers Consulting, which shows that?8?out of?10?insurers will rely on?the cloud by?2031. And with the growing popularity of?the cloud, even behemoths like Majesco, Guidewire, and Duck Creek are expected to?change, but not so?quickly as?their ecosystems are rather unwieldy.
In?addition, as?global ecosystems continue to?develop, cloud-native insurers will be?well positioned to?act as?industry ‘orchestrators’ — connecting customers, distributors, insurtechs, healthcare providers, carriers, reinsurers, and others. Considering the current trends and the state of?the insurance industry, we?assume that it?may take another 10?years to?consolidate all this new technology (for example, to?properly unify protocols, API, data models, and so?on).
Trend?2: Data Analysis, AI/ML and RPA
THE PROBLEM
Insurance companies collect, store and transmit vast amounts of?information, which requires organizations to?apply advanced data analytics. In?addition, as?a?Big Data industry, the insurance sector is?vulnerable to?cybercrime. The exponential growth in?ransomware attacks, data breaches, and fraudulent activities we?have witnessed over the last couple of?years has made privacy and data security a?top priority for carriers. And this is?where artificial intelligence (AI) and machine learning (ML) shine.
THE SOLUTION
The virtues of?AI and?ML have proven valuable to?various industries, but the insurance industry can gain more from these technologies because it?heavily depends on?data predictions to?manage its services, honor claims, create personalized products and prevent fraudulent activity.
Many insurers are already using?AI to?improve their service efficiency.
Insurers like AEGON, Sura Colombia, Interamerican and Guidewire are among those who use AI-powered insurance fraud analytics solutions (provided by?software company FRISS) in?their underwriting and/or claim management processes.
Robotic process automation (RPA) is?another distinct area that will become more commonplace in?the future.?54% of?insurance executives expect their organizations will use robotics in?uncontrolled environments within the next two years, according to?research by?Accenture.
THE TREND IN?ACTION
Although some of?the practices mentioned above are already popular, throughout 2023?we will see a?proliferation of?automation and?AI throughout the industry?— and not just within the already-tested processes named above. When paired with alternative data and advanced analytics, AI?can significantly impact the entire insurance value chain, providing it?is?deployed correctly and those using it?are properly trained.
AI?could be?instrumental in?enabling insurers to?adopt new business models and take advantage of?market opportunities, as?brokers gain confidence with this new technology and enhance the accuracy and fairness of?their AI-driven systems.
领英推荐
Trend?3: Customer Experience Improvements
THE PROBLEM
Customer experience (CX) is?now one of?the crucial success metrics of?an?insurance company. However, despite industry-wide improvements in?this area, a?recent?J.D. Power?Insurance Digital Experience Study reveals that overall customer satisfaction with insurers’ digital offerings is?not satisfactory.
To?understand this disparity, we?must first understand insurance customers’ expectations. These fall into three broad categories: value, choice, and security:
THE SOLUTION
Technology can provide the interfaces and automation for all of?the needs outlined above, but it?can also help insurance professionals deliver a?more personal and empathetic customer experience on?a?one-on-one basis.
THE TREND IN?ACTION
To?create a?superior?CX and satisfy clients’ needs, traditional insurers are starting to?collaborate with insurtechs and technology startups that redefine customer experience through innovations in?all insurance-related activities from distribution to?underwriting and pricing to?claims. And as?CX becomes friendlier, there will be?more ?digital? users than ever, as?mobile apps will be?more widely adopted by?the general population, including older people and minorities.
Trend?4: Maturing Insurtech Startups
THE PROBLEM
Global investment in?insurance technology start-ups hit a?record?$10.5 billion?in?the first nine?months of?2021. Initially, insurtechs were relatively small start-ups, typically steered by?ambitious tech-savvy innovators who provided a?point solution in?terms of?insurance distribution or?claims management solutions.
THE SOLUTION
However, this situation is?changing as?we?see a?growing number of?successful insurtechs that aim to?be?an?entire system that supports the industry instead of?a?single-point solution. Given massive valuations and increasing investment, these start-ups are growing into trustworthy companies, providing a?full range of?solutions to?remove customer pain points.
THE TREND IN?ACTION
In?2023, we?expect a?further surge in?new insurtech entrants, offering SaaS-based solutions based on?APIs put in?place to?deliver personalization on?a?grand scale. These tech-driven insurance companies pose a?potential threat to?incumbents, but they are also creating new opportunities for everyone through partnerships. Traditional insurers, anxious to?go?digital and spurred in?part by?the pandemic, are investing and partnering with some of?these insurtechs as?a?novel and more efficient way to?achieve their digitalization. This is?a?trend expected to?ramp up?in?2023, and the impact of?these start-ups will be?far-reaching and long-lasting.
Trend?5: New Players
THE PROBLEM
MGAs are no?longer a?rarity. Global investment firm Conning?reports?that MGAs are one of?the fastest-growing segments of?the insurance industry, with 21?out of?the top 25?property-casualty insurers now working with MGAs. Technological advancements, digitalization, and new business models all result in?a?burgeoning MGA market, and failure to?appreciate this can leave incumbents falling behind their competitors who are exploiting this trend.
THE SOLUTION
The MGA model is?versatile and capable of?embracing multiple links in?the insurance value chain. Acting on?behalf of?large insurers, these agencies tend to?respond to?market changes faster than conventional insurance companies. Some of?them act like (and turn into) carriers. Fronting arrangements even use MGAs to?pass the risk to?third-party capital providers.
THE TREND IN?ACTION
MGAs are expected to?expand their presence in?the ongoing hard market in?2023. A?recent?research?suggests that two-thirds of?businesses are expecting to?expand their carrier partnerships in?2023, and almost half of?the market believes that current conditions are ideal for growing an?MGA business.
2023 in?a?Nutshell
2023 can expect to?see more of?everything digital?— more cloud, more SaaS, more unification, more data insights and analytics, more sensors, more wearables... the list is?almost endless. And as?a?result, insurers are becoming increasingly dependent on?emerging technologies and data sources to?drive efficiency, enhance?cybersecurity, and expand capabilities across their organization. But solely looking inwards during your digitalization journey will not suffice; insurers must also focus on?improving their customers’ experience by?streamlining processes with automation and providing customized service where needed or?preferred.
This is?a?tall order for many incumbents already struggling to?remain abreast of?the continually evolving insurance landscape; but never fear, help is?available.?Contact DataArt?to?learn how our insurance industry experts can drive your competitiveness and harness these trends to?your advantage.
Originally published here.