The journey of Insurance from 2021 to 2022 Part 2 to Part 3

Insutech advancement and Government policy support and Investment pouring the growth of insurance business and trends during the calendar year

By my Part -1 Posted yesterday, I have tried the beginning of the journey from 3000 years back. Now in the series Part-2 of Part- 3, I will try to the extensive transformation of the InsuTech calendar year 2022. First, we can observe that even many Fintech is also covering most of the advanced features of InsuTech. As these Fintechs startup companies have huge scope to spread many areas in their grasp. As they are mostly using cloud-based servers secured by blockchain software. Insurance companies are based on the benefit of investing in digital technologies to cut operational costs, progress operational efficiency, and customer acquisition.

INTRODUCTION

India’s Insurance industry is one of the premium sectors experiencing upward growth. This upward growth of the insurance industry can be attributed to growing incomes and increasing awareness in the industry. India is the fifth largest life insurance market in the world's emerging insurance markets, growing at a rate of 32-34% each year. In recent years the industry was marked by intention combat to snatch share from one another. ?competition among its peers which has led to new and innovative products within the industry. FDI in the industry under the automatic method is allowed up to 26% and licensing of the industry is supervised by the insurance regulator the IRDAI. This has been well appreciated by FDI as they brought late and innovative products. It also influenced the FDI to forge alliances with new private insurance. The insurance industry of India has 57 insurance companies - 24 are in the life insurance business, while 34 are non-life insurers. The Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment. In addition to these, there is a sole national re-insurer, namely the General Insurance Corporation of India (GIC Re). Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors, and TPAs servicing health insurance claims. None of the TPA in the country has been working ethically and professionally diligently. We also assume that digitalization and advanced software technology will force the TPA to work transparently adapting to AI, ML, AL, etc.

?Several insurtech companies collaborate with insurance companies to offer blockchain technology-based solutions. For instance, in December 2020, Amodo, an Insutech company, made an alliance with Galileo Platforms Limited, a technology company. Both employing blockchain technologies created innovative solutions and delivered unique customer delight. Insurance companies are adopting cryptocurrency-based payments. For instance, in December 2021, Metromile, an auto insurance company, publicized its plan to allow policyholders to pay premiums and claim payments using cryptocurrency. This initiative is expected to help the company strengthen its market position. ?Digital technologies are used to assess customer needs and to enhance their offerings based on the changing customer needs. According to a survey conducted by EIS Group, a software company, 59% of the insurance companies surveyed increased their investment in digital infrastructure in 2021. Benefits offered by blockchain technology, such as cost savings, faster payments, and fraud mitigation, are driving its demand among insurance companies worldwide. Blockchain technology is used in insurance companies for applications such as Know Your Customer (KYC), Anti-money Laundering (AML) procedures, claims to handle, and creating peer-to-peer models. ?Universal Fire & Casualty Insurance Company focused on offering traditional property and casualty insurance to small businesses started in June 2021 accepting cryptocurrency for premium payments. This has given an impetus to the growth of the insurtech market. The demand for on-demand insurance consumers enables them to buy insurance coverage on their smartphones with ease. Businesses in the as-required insurance space are enlarging the latest technologies like IoT, AI, huge data, and prognostic maintenance to reinvent the way on-demand insurance products are underwritten, created, and distributed.

Robust change in 2021 expediated growth in 2022

The seed of the Insutech tree was seeded in 2021 itself by the reassurance of all types of support by promoting the Startup Program of GOI. Some of the steps propelled the insurance industry's growth faster as the foundation has been fortified in 2021. We just recollect the progress in calendar 2022 which took shape in 2021. In February 2021, the FM announced to infuse Rs. 3,000 crores (US$ 413.13 million) into state-owned general insurance companies to improve the overall financial health of companies. In September 2021, the Union Cabinet approved an investment of Rs. 6,000 crores (US$ 804.71 million) into entities, offering export insurance cover to facilitate additional exports worth Rs. 5.6 lakh crore (US$ 75.11 billion) over after the next five years. Insurance penetration is still hugely untapped in our low in India. Overall insurance penetration (premiums as % of GDP) was 4.2% in FY21, just an voiding a huge underserved market.

*Insurance Regulatory and Development Authority of India (IRDAI) allowed insurers to invest in debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs); this is expected to provide more investment options for the country's emerging start-up ecosystem. The gross first-year premium of Life insurers increased by 6.94% in 2021-22 until 31st January 2022, this was Rs. 2,27,188 crore (US$ 29.54 billion) huge growth of demand considering emerging attractive opportunities because of two trigger Covid-19 pandemic, and geopolitical upheaval, wide fluctuation and full of uncertainty after Russia invasion on Ukraine. The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023. India’s insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life insurance penetration at 1.0%. In terms of insurance density, India’s overall density stood at US$ 78 in FY21. Premiums from India’s life insurance industry is expected to reach Rs. 24 lakh crore (US$ 317.98 billion) by FY31. In FY23 (Until October 2022), premiums from new businesses of life insurance companies in India stood at US$ 25.3 billion. In October 2022, life insurers’ new business premiums grew to Rs. 15,920.13 crores (US$ 1.94 billion), according to Life Insurance Council data. The gross first-year premium of life insurers increased by 12.93% in 2021-22 to Rs. 314,262.42 crores (US$ 40.06 billion).

Between April 2021-March 2022, gross premiums written off by non-life insurers reached Rs. 220,772.07 crores (US$ 28.14 billion), an increase of 11.1% over the same period in FY21. In May 2022, the total premium earned by the non-life insurance segment stood at Rs. 36,680.73 crores (US$ 4.61 billion), a 24.15% increase as compared to the same period in the previous year. The market share of private sector companies in the general and health insurance market increased from 48.03% in FY20 to 49.31% in FY21. Six standalone private sector health insurance companies registered a jump of 66.6% in their gross premium at Rs 1,406.64 crore (US$ 191.84 million) in May 2021, as against Rs. 844.13 crores (US$ 115.12 million) earlier.

?NEXT GENERATION TECHNOLOGIES: INSURTECH MARKET SIZE, INDUSTRY REPORT, 2022-2030

?The global InsuTech market size was valued at USD 3.85 billion in 2021 and is expected to expand at a CAGR of 51.7% from 2022 to 2030. Presently, exponential growth due to Covid, burnout, etc. claims globally the key major factors stressing the market growth. Auto, life, and home are the most common insurance claims secured by people worldwide. According to a 2021 study by the Insurance Barometer, 36% of American respondents planned to purchase life insurance in 2021.

COVID-19 Impact Analysis

The COVID-19 pandemic is projected positively impacting on market growth in 2021. Numerous insurance companies reassessing their long-term strategies and short-term needs as COVID-19 and its impacts have accelerated the operation of online platforms and new mobile applications to meet consumer needs. Several insurance companies are entering into partnerships with digital solution providers to enhance their offerings. For instance, Duck Creek Technologies, a core system provider for Property and Casualty (P&C) insurers in December 2021, publicized that SECURA Insurance, a P&C insurance carrier, selected Duck Creek Rating, Claims, Policy, and Insights to justify its P&C business.

?Type Insights

The health segment dominated the market in 2021 and accounted for more than 24.0% share of the global revenue. The increasing demand for digital platforms, which connect exchanges, brokers, providers, and carriers in health insurance, is anticipated to fuel the demand for the health segment. Insurers are also focusing on combining their health insurance services with mobility features for added convenience.

Service Insights

?The managed services segment held the leading revenue share of more than 42.0% in 2021. Managed services providers can provide insurers a measured gateway to transformation by incorporating expertise and talent with new technologies, the best processes, practices, and regulatory considerations to insurers. Moreover, managed services enable insurers to address challenges and opportunities in insurance IT and operations. Insurers have started acknowledging and embracing the value of improved business models, thereby creating growth opportunities for the managed services segment. The support and maintenance segment is anticipated to register the highest growth over the forecast period.

Technology Insights

The cloud computing segment led the market with a revenue share of over 24.0% in 2021. Cloud computing has transformed the insurance industry with its resourcefulness, ease of deployment, and flexibility. Widespread acceptance of Bring Your Own Device (BYOD) policies, coupled with the growing amount of data insurance companies collect, is expected to drive the growth. Insurance companies are adopting cloud computing solutions owing to benefits, such as rapid deployment, cost-effectiveness, and scalability. Besides, the cloud computing solution providers and insurance companies are helping companies to enhance their insurtech products, which is expected to drive market growth. For instance, in November 2021, Amazon Web Services Inc. announced that American International Group, Inc., an insurance company is a preferred public cloud provider. Through this initiative, American International Group aims to deliver better services to its customers. Insurtech companies are forecasted to aggressively opt for blockchain technology owing to its features such as smart contracts, advanced automation, and strong cybersecurity.

End-use Insights

The BFSI segment dominated the market and accounted for more than 20.0% share of the global revenue in 2021.BFSI businesses are widely adopting insurtech solutions for improving business efficiency. The increase in the number of connected devices in the BFSI sector is leading to the generation of a huge amount of data. They have realized to use such data to deliver better services, optimize costs, gain insights, and boost revenues.

Regional Insights

North America dominated the market for insurance in 2021 and accounted for more than a 36.0% share of global revenue. The growing number of insurtech startups across the region is also driving the market growth in the region. Asia Pacific is anticipated to emerge as the fastest-growing regional market over the forecast period. The region is expected to witness significant growth because of numerous emerging economies and financial hubs in Singapore, India, and Hong Kong. Insurance service providers in the region are aiming to offer affordable insurance premium plans.

Key Companies & Market Share Insights

?The market is more disintegrated and typically by the presence of a large number of small players, which cater to the fill of life- and non-life insurance sectors. Market players are focused on strategies such as partnerships to help them strengthen their market positions. For instance, in November 2021, Heritage Insurance Holdings Inc., a property and casualty insurance company, announced its partnership with Slide, an insurtech P&C carrier. Through this partnership, the former company would leverage Slide’s capabilities to improve underwriting and rating decisions.

Some of the prominent players operating in the global insurtech market are Damco Group, DXC Technology Company, Insurance Technology Services, Majesco, Oscar Insurance, Quantemplate, Shift Technology, Travel Inc., Wipro Limited, ZhongAn Insurance, etc.

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Report Attribute

Details

The market size value in 2022

USD 5.45 billion

The revenue forecast in 2030

USD 152.43 billion

Growth Rate

CAGR of 51.7% from 2022 to 2030

Grand View Research has segmented the global insurance market report based on type, service, technology, end-user, and region:

The report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Type Outlook (Revenue, USD Million, 2017 - 2030).

Competitors can co-create the future of insurance, Five insurance companies work with the EY organization to join forces and co-create new business models to be future-proof in a rapidly changing market.

?2021 has been a year when many digital transformation projects that were previously put on a backburner made their way to the front of the line. Improving agility, delivering better service, and improving customer and employee experience became the number one priority.?We see an expedited adoption of remote signing and customer servicing technologies, tools for digital collaboration, and new innovative digital products. As digital becomes the new normal, what lies ahead, and what should insurance leaders prepare for? The insurance industry is in a state of flux. The old models are being replaced with new ones, and the only thing that is certain is change. We see an expedited adoption of remote signing and customer servicing technologies, tools for digital collaboration, and new innovative digital products. As digital becomes the new normal, what lies ahead, and what should insurance leaders prepare for?

THE EVOLUTION OF TECHNOLOGY: MORE TRENDS AND DEVELOPMENT THAN 20

1.???The rise of low-code/no-code development in enterprise IT

One of the most pronounced trends within the normalization of?low-code/no-code?development is enterprise IT. While in the SMB segment, no-code tools became the new norm, enterprises, for the most part, continued to rely on traditional development projects powered by internal resources or external integrators. The rise of low-code/no-code development is a direct result of the growing number of digital transformation projects that enterprises are implementing to meet customer demands, improve agility and deliver better service. Such as accelerated time to market, improved employee productivity, Simplify optimization and testing, and Boost security and?compliance.

2. The rise of "headless tech"

It might sound somewhat gruesome, but "headless tech" is quite harmless and has been with us for a while. The most well-known example of headless technology can be found in website development. Traditional websites have a?back-end and a front-end?as well as a graphical user interface. Insurers can now separate their front-end presentation layer from their back-end data functionality to create custom digital experiences. Separating customer-facing front-ends and back-end processes while ensuring that the data flows freely between the two is another trend that we will see getting stronger in the near future. Our prediction is that we will see more insurance products and applications that adopt the same principle.

3. Hybrid cloud architecture is on the rise

According to Mordor Intelligence, the hybrid cloud market is expected to reach $128.01 billion by 2025, at a CAGR of 18.73% over the forecast period 2020 - 2025. Organizations increasingly adopt the hybrid cloud as they aim to leverage the advantages of both cloud and public clouds. Hybrid cloud architectures improve both speed and flexibility by allowing organizations to go back and forth between their own tools and the cloud providers' toolkits.

4. Augmenting legacy IT

Insurers are under no illusion that legacy applications are not going anywhere. However,?a new generation of computing tools for digital natives is sweeping across the enterprise IT landscape. These technologies will help insurers to solve existing problems with legacy architectures and improve customer experience, operational efficiency, and business agility at the same time.

5. Push for personalization and tailored digital products

Personalization capabilities are the new competitive edge. Offering a particular client, a particular product at a particular price point can significantly increase a policy sale probability.?

?6. Digital channel as the primary channel

Insurance traditionally has been sold through physical channels, including agents or brokers, resellers, offices, and call centers. But now, the digital channel is gaining the edge.?Compliance is also being increasingly automated,?which allows insurers to stay on top of regulatory changes. Automated audit trail?reports can help insurers detect and prevent compliance violations. At the same time, digital data can be automatically converted into PDF documents for archive, compliance, and audit purposes.

7. Digitizing the customer journey

According to a survey by J.D. Power, nearly half of all insurance customers are likely to switch carriers within the next year if they discover that their insurer does not offer digital services such as automated claims submissions or 24/h service via mobile devices. In the insurance world, a truly digital customer experience not only means faster and more efficient claims processing or policy management. By taking advantage of innovative technologies such as cognitive computing, insurers can offer customers customized product recommendations based on their unique preferences.

8. The impact of AI-driven chatbots

AI is changing the way companies interact with customers for a number of reasons: firstly, chatbots are able to process information very quickly, which helps insurers provide customers with immediate answers. In 2023 we expect to see more insurance providers offer AI-driven bots on their websites and mobile apps. By providing customers with a quick and easy self-service experience through these automated interfaces, insurers will be able to lower costs while improving the customer experience.

9. Welcome to the hybrid workspace

Work from home has been an exception, rather than the rule, for a very long time. However, it seems that even after the COVID-19 pandemic is behind us, the work-from-home culture will stay with us. Organizations may not necessarily have to give up on either: they can set up flexible workspaces that make it possible for their employees and teams to work from home or go into an office as needed (after all, we are now only?a few months away from a world where indoor spaces are mostly safe).

.10. Inefficient, manual processes have to go

Inefficient paper pushing has been the norm in the insurance industry for centuries. However, this is no longer feasible. Insurers cannot continue to treat inefficient paperwork as a necessary evil and need to find solutions to improve customer experience on that front.?As?eSignatures?and digital forms are being normalized, customers expect to complete nearly all (if not all) actions with their insurer remotely via digital tools - from account openings to policy renewals. In 2023, the combination of artificial intelligence and digital transformation will allow organizations to aggressively cut down on their operating costs. In fact, many believe that these two trends will spur a new wave of disruption in the industry.

11. Employee empowerment through tech is a necessity

Managing teams of remote and on-site employees require a careful balance of efficiency and empowerment. Employee-facing apps that encourage teamwork, and efficient collaboration, and empower employees are a must in the new normal. So inward-facing innovation is likely to become a strong focus in the insurance industry.

12. The shift in culture from conservatism to innovation?

Insurance has traditionally been a very conservative industry. But it is now rapidly changing with the influx of new blood in the form of digital-first insurers, tech giants, and innovative startups.

13. IoT increases the need for streaming analytics to innovate

The Internet of Things supports insurance technology by providing accurate and real-time data. This improves the accuracy of risk assessment and gives insurance holders the ability to gauge their policy pricing accurately.

?14. Blockchain technology is here to stay, explore its possibilities

Blockchain promises to reduce the time and costs associated with payments, claims processing, compliance checks, etc. while increasing trust between insurers and their customers. By 2023, we expect to see more companies invest in blockchain technology as it can be used for a variety of use cases such as securing data and reducing operational costs by eliminating intermediaries or providing currencies powered by smart contracts.

.15. The sharing economy is gaining traction in insurance industry

The so-called 'sharing economy' will play a big role in the future of insurance, according to research from Swiss Re, which states that it could be worth $220 billion by 2025 across 25 countries with nearly 70 percent of customers expecting their insurer to offer products?from sharing economy companies.

The sharing economy has multiple ways it affects the insurance industry. Firstly, it increases the need for peer-to-peer distribution channels. For example, Insurance holders could purchase their policy from a sharing economy company or an insurer that offers products from those companies.

16. Cybersecurity is still a big concern for insurers

In the digital age, cybersecurity remains one of the insurance's most pressing concerns and will continue to be so in 2023. In fact, according to recent research from Accenture Strategy, nearly half of all businesses have been victims of cyberattacks in 2017 alone, with?an average of $15 million in damages. By 2023, we expect companies to make cybersecurity a priority and come out with new strategies (some more effective than others) for protecting themselves. In such an environment, insurers should take advantage by using the technology effectively and offering their services as part of cyber-risk protection packages. Cybersecurity is becoming a top priority for all industries, including insurance. ?According to an IBM Security survey report, data breaches now cost surveyed companies $4.24 million per incident on average – the highest cost in the 17-year history of the report.

17. Claims management is going digital

The claims management process in the insurance industry will see significant improvements with greater digitization. Startups have already started disrupting this market by using chatbots for faster response and customer support while leveraging data analytics to enhance efficiency and reduce costs across the board. In the next few years, we expect this trend to continue and accelerate as most insurers move towards an automated claims management process.

18. The new role of brokers

With digitization transforming the insurance industry from top to bottom, a growing number of startups are also disrupting the brokerage space with innovative business models that connect customers directly with carriers while cutting out the brokers. This trend started a few years ago and is expected to continue in 2023, especially as fintech focus more on insurance going forward.

?19. Increased focus on algorithmic risk assessment

Artificial Intelligence plays a significant role in the insurance industry. The AI-based tools provide solutions for insurance operations and claims settlement teams.But Machine Learning has value beyond claims processing; it has the power to help insurers automate the entire process. As files are becoming increasingly digitized, they can be easily analyzed using AI algorithms, eliminating manual processing entirely.

20. The rise of fintechs and insurtechs

The insurance industry has started to open up to new companies that aim at disrupting the incumbents with innovative business models, leveraging technology and data analytics capabilities for better efficiency and speed while providing customers with personalized services on demand. In 2016 alone, over $11 billion was invested?in insurtech companies, and this number will continue to grow as more startups turn their focus toward insurance. In 2023, we expect the fintech that has already disrupted other industries such as lending to have a significant impact on the insurance industry by offering better customer experience while reducing costs for both customers and insurers alike.?

21. Competition is becoming tougher

Competition is becoming tougher. Reinsurance News announces that Amazon is gearing up to enter the auto insurance market, and digital-first insurers such as Lemonade are bringing new digital experiences to the market. Incumbent insurers have a difficult time competing with these newcomers to their previously sheltered markets.

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22. Focus on maximizing conversions in policy sales

Just "going digital" is no longer enough. Maximizing conversion and improving sales funnels on digital channels becomes ever more important. Converting online visits into actual policy sales is a combination of art and science.

23. Insurtech joint ventures

Partnerships between InsurTechs and incumbents are a growing trend, and for a good reason - it is often a win-win proposition.?

24. Proactive risk assessment and future-proofing

IoT technology keeps gaining momentum in the insurance industry, including risk assessment and underwriting. Most crucial of all, IoT theoretically can empower insurers to move from their traditional role in risk protection to risk prevention.

25. Data and analytics in the spotlight

Data and analytic capabilities will be key differentiators for insurers going forward, as companies scramble to get their hands on even more granular information about customers' behaviors, needs, and preferences. Predictive analytics is another way data can be used to help insurers create better customer experiences. Successful digital transformation is all about delivering superior customer experiences. At the end of the day, it doesn't matter how much data you have or how advanced your analytics capabilities are if you can't deliver a great product and service to your customers. The best way for insurers to compete in today's market is by creating a more streamlined, personalized, and enjoyable customer experience.

• ?Tech-driven insurers: How to thrive in 2030

Insurance operating models are on the verge of a fundamental change. To thrive in 2030, insurers must commit to a specific role and take action now to secure the tech capabilities they need.

?CONCLUSION

?The urgency for change is clear:?Already, insurers with more?sophisticated IT capabilities?have an obvious advantage in terms of agility, growth, and cost ratios, and they are better able to match the increased need for digital offerings. And insurers with?market-leading analytics capabilities?have a five-year revenue CAGR that’s four times higher than that of competitors. Other industries may reveal the general direction in which things are headed. Incumbents are struggling to keep up with the significant shifts demanded by technology. New, purely digital players, such as PayPal and N26 in retail banking, have not only emerged but also achieved a significant market share in a short time—and even partially captured a market-shaping position. In telco and entertainment, a new set of tech-powered market leaders have gone a step further and fully reshaped the industry—leaving incumbents struggling with rapidly declining market shares or even forcing them to exit the market. And former value chains and operating models are all but obsolete as companies harness new opportunities from digitally enabled partnerships. Take mobility as an example: while traditional carmakers have had exclusive access to their customers, these customers are beginning to weigh purchase decisions based on various elements besides the vehicle’s “hardware.” Indeed, as cars are increasingly developed through partnerships, customers may soon purchase vehicles based solely on the software provider.

So what’s the next move for insurers? After a history of incremental change in insurance, companies are facing an absolute imperative to adapt their traditional operating models. But no one insurer can tackle all the compounding changes. Succeeding in 2030 will require insurers to define where they can excel and where they can form partnerships—and leave the rest to others. And all insurers will need to rethink every aspect of how they operate, from their technology and structures to their processes and people.