7 Key Trends for the Insurance Sector in 2022
It is customary for many of us to begin the New Year by making commitments to improve our physical and mental health and well-being. Whether in business or in our personal life, we must evaluate the many circumstances that might either endanger or facilitate our achievement of our goals. It is no different in the insurance sector.
This time last year, the globe was looking forward to the arrival of COVID-19 vaccinations, which would put an end to the epidemic and the necessity for physical separation and travel restrictions. While we have seen some improvement, new viral varieties have evolved, necessitating our continual monitoring in order to keep the infection from spreading.
Although there is still a lot of uncertainty, the economic recovery is still going strong, with global GDP predicted to expand by 4.9 percent in 2022. This increase in GDP would imply that there would be an increase in demand for insurance goods and services in the future.
Our Insurance Revenue Landscape 2025 analysis predicts that global insurance sector revenues will reach $7.5 trillion by the end of 2025, an increase from the current level of $6.5 trillion. For insurers hoping to gain a piece of that money in 2022, here are five options to consider.
1. A continued disruption of Insurance operating models
Insurance companies today operate on the fault line of two tectonic plates: COVID-19 and the Great Resignation, both of which have shifted in recent years. As a result of the constraints and adjustments created by these factors, insurers will be forced to disrupt long-standing apprenticeship models that the sector has depended on for skilling in critical tasks like as claims and underwriting by 2022. They also compound the existing challenges of attracting and retaining personnel in positions important to the transformation of the insurance industry, including as technology, analytics, and actuarial. Humans will always be required by insurance companies. However, with fewer employees, they are more reliant on people who are assisted by robots, which is changing the way work is done regardless of who is doing it or where it is done.
2. Restarting the underwriting process from scratch
Insurers are eager to see the results of their digital transformation and cloud platform investments, which have been in place for the last two years, in the form of cost savings and new business. It is expected that transformation projects will be implemented in underwriting in 2022 with the goal of lowering cost ratios and increasing profitability via greater process efficiency and decision effectiveness. While fast and effective underwriting procedures and choices are essential, the majority of insurers' underwriting systems are incapable of handling the amount and complexity of data that is necessary in the modern world. As my colleague Michael Reilly put it, "We need a third generation of underwriting platforms...basically a big data platform that is suited to the underwriting process."
3. Improved Digital experience that off a greater level of personalization
Since most Insurance customers want to interact with agents, brokers, and insurers on the channel of their choice. They will continue to want to leverage digital services, particularly via mobile devices, while knowing they are dealing with a real person, they want that interaction personalized. They want whoever responds to them to have context of their situation, their policies, and provide advice—not just transactional service. While customers want the freedom of fully digital and automated journeys, they also want empathy. Technology can provide the interfaces, the automation, (and with AI) even the personalized interactions. Moreover, technology can help professionals and service reps deliver a more personal and empathetic level of customer service that will help continue to drive loyalty.
4. Electric cars are expected to become a significant growth category for insurers.
The worldwide market for electric cars is projected to expand from $171 billion in 2020 to $725 billion in 2026, representing a compound annual growth rate (CAGR) of more than 27%. We anticipate that there will be 115 million electric fleet cars on the road worldwide by 2030. Those automobiles, trucks, and vans join the global insurance market at a time when the pace of rise in current vehicle premiums in key economies such as the United States, the United Kingdom, Germany, and China is slowing.
Instead of just substituting for declining conventional car premiums, there is a potential for growth! Customers who drive electric cars will have extra requirements, such as the ability to charge their vehicles at home and easy access to charging stations while they are away from home. Innovation-driven, customer-centric insurers that provide these types of value-added products and services will have a competitive advantage—especially in a risk sector that is high on most sustainability and ESG priority lists!
5. Product innovation will be accelerated as a result of sustained supply chain and inventory management risk.
The interruption to supply networks caused by COVID-19 is expected to last far into 2022, according to the CDC. However, with the reinvention of conventional freight and cargo insurance products, it is possible that the accompanying interruptions to companies and the frustrations they cause may be alleviated. As a result of the digitalization of cross-border commerce as well as the development of sensors and other Internet of Things and linked technologies across supply chains, real-time access to risk data is possible. Insurers can now provide risk reduction and management solutions, as well as automate the payment of claims when required, thanks to advances in analytics and artificial intelligence.
As valuable supplies of COVID-19 vaccinations made their way across the globe in 2021, the number of insurance companies providing such coverage increased. We can anticipate to see more insurers deploy these technologies more extensively in the future, going beyond indemnification to assist their clients in addressing fundamental operational risk by 2022.
6. A shift towards customer experience
Given the increased competition and decreased client loyalty that insurers are facing today, providing a positive customer experience is more important than ever. When it comes to buying choices, 73 percent of consumers say that the customer experience is important, and high customer turnover makes it difficult for carriers to create and retain a loyal following. Policyholders want quick, dependable, and easily available hands-on services, and carriers must use the most up-to-date technologies to win the race for the best customer experience and distinguish themselves from disruptors in order to remain competitive.
7. A correction on property prices and profitability in the near future
Property insurance premiums are being driven up by inflationary pressures, which are compounding the more systemic concerns of upended risk models and increased capital needs, which were already pushing up property insurance rates. In November 2021, the annual inflation rate in the United States reached 6.8 percent, the highest level in more than four decades. Within the next two decades, it is projected that both premiums and the concentration of risk from catastrophic events connected to climate change and increased urbanization in emerging markets would skyrocket, particularly in the developing world. The year 2022 will be the year in which the property's price and profitability will be determined.
It is becoming more difficult to manage risks. The specific consequences for insurers will differ depending on their book of business and market positioning. However, scenario-based planning is critical to ensuring that insurance companies remain flexible in order to stay at the forefront of the numerous changing trends 2022 and in the years following.
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