As the calendar turns from 2018 to 2019, we all look for new opportunities and areas of growth both personally and professionally. As an insurance professional observing the events of recent years, it’s impossible to neglect the impact technology has had on all aspects of our lives, the highest natural catastrophe losses since 1980 in 2017, and the increasing “I need it now” expectations of consumers. Technology and digitalization are reinventing possibilities for insurers to issue modern products and satisfy customers through innovation. $135bn of catastrophe losses alongside declining economic growth in Chinese and European markets have led to margin pressures. Consumers expect more targeted, personalized, and mobile services and products. Although challenges do exist, there are ways for insurers to turn these challenges into opportunities and beat out the competition, increasing profitability in the new year.
2019 Insurance Trend: Technology and Digitalization
The incessant advancement of technology has impacted not only our daily lives but also nearly every industry imaginable. The insurance industry is no exception to this rule. Advances in software architecture, cloud technology, blockchain, and artificial intelligence are manifesting themselves in insurance technology every year.
There has been a concerted effort to move away from utilizing unstructured data in order to reap the benefits of artificial intelligence and machine learning. Structured data implies that the information is organized in a known data structure which can be consumed or processed electronically. Insurers can capitalize on structured data by reducing the reliance on manual data entry and manipulation which is both time-intensive and inefficient. Additionally, data from IoT devices are now informing usage-based premium calculations for auto and health coverages, to name a few. Another example use case is the ability for agents and brokers to extract submission information from an expiring policy document. Another one could be extracting claims, inspection or other subjectivity information from unstructured data sources. These kinds of innovative, behaviorally priced insurance products rely on structured data and modern software architecture.
Another technology contributing to the reimagination of insurance currently is blockchain. In short, blockchain technology is a method for linking pieces of information originating or evolving from various disjoint and disparate business entities & IT systems. Examples of such entities and systems are insureds, retail agencies, brokers, wholesalers, carriers, service providers, actuarial systems, government entities, other reporting agencies, etc. Blockchain provides a universal network infrastructure to add and extend information originating and changing through different entities at different timeframes during the full life cycle of a policy.
Blockchain provides ways to enhance the availability, authenticity, accuracy, and traceability of information on who changed what and when over the entire policy life cycle. It also provides accessibility and availability of information from anywhere & everywhere based on privileges provided in the network. A simple use case could be checking Proof of insurance (POI) for validation of coverage on a real-time basis, which is trustable and traceable. The service provider can validate and trust the information while providing the service promised in the policy. It’s a modern approach to storing data in a highly encrypted, secured, distributed and clustered cloud environment. Blockchain could be provided on public or private blockchain network.
Insurance companies could consider providing a private blockchain network within their trusted partners and entities like insureds, agencies, MGAs, TPAs, services providers, etc who then can maintain and manage their own data in their own system. Blockchain can provide a universal view of the current state of policy information on a real-time basis. According to Solartis CTO, Siby Nidhiry, blockchain has three main benefits for insurers:
Authenticity of policy information - on what is covered, when covered, etc.
Transparency of policy information - on what & how the policy data evolved based on mid-term endorsement, cancellation, reinstatements and renewals
Auditability of policy information - on how it gets there, who provided what and when
Information/data protection with encryption data in the blockchain
Blockchain eliminates lots of inefficiencies in the insurance policy lifecycle process across all parties involved.
In providing information to generate the policy. Many times, the authenticity or the data itself is questionable.
In providing appropriate services in real-time when it is needed.
In removing several intermediaries who cover up current inefficiencies.
2019 Insurance Trend: Declining Profitability
The property and casualty insurance industry as a whole bounced back from poor results experienced in the second half of 2017 during the first half of 2018. Deloitte estimates, based on data sourced from S&P Global, that the first half of 2018 saw an increase in net premiums written of 12.7%. However, as alluded to earlier, insurers were subject to abnormally high catastrophe losses and declining margins just a year prior.
In order to combat these trends, it’s critical for insurers to diversify their offerings while finding new and innovative ways of selling insurance. The age-old adage, “don’t put all your eggs in one basket”, applies. Spread your risk not only across insurance LOBs but also by targeting different demographics in different geographic regions. Don’t be heavily reliant on any one product. Diversifying is easier if launching new products is made less burdensome. Consider signing up for access to our microservices sandbox to see how you can get to market in under 90 days with a niche and innovative product.
2019 Insurance Trend: Rising Consumer Expectations
Consumers’ expectations of the companies they buy from and the services they receive are rising every year. Because of developments in other industries, the insurance sector is pressured to keep up. Think about it: anybody with a mobile device can browse Amazon for 5 minutes and get any product delivered to their home within 24 hours! The experience of purchasing insurance looks nothing like this!
There are many avenues by which insurance executives can modernize their offerings to consumers. Incorporate chatbots into the insurance purchase process and streamline the accessing of details without relying on the manual effort of employees. Capitalize on SMS and common messaging apps like Facebook Messenger to send policy details for niche products after a consumer purchase. For example, after a large purchase (vehicle, home, motorcycle, boat etc), insurance coverage details could be texted directly to that consumer’s phone to purchase the needed insurance right there on the spot. Create more avenues to meet potential customers where they are and increase DWPs by emphasizing modern methods of distribution.
For More Information on Insurance Industry Trends
Download our eBook, Microservices Architecture and the Insurance Paradigm Shift, for more details on property and casualty insurance industry trends. Meet 21st challenges head-on by upgrading your software architecture and make the most of 2019.