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The Insurance industry is mostly expected to search for growth through new service-based models, innovative products and better focus on fraud prevention.
2020 has been a year of unprecedented disruption for many industries, and insurance companies often found themselves struggling to adapt to change. The pandemic has triggered many structural changes in various sectors including the insurance industry. As retrenchments, salary cuts and furloughs have forced many people to curb discretionary spends, the environment has become more competitive for insurance players.
On the positive side, lockdown and other pandemic-related restrictions have fueled demand for digital transactions, including insurance policies. As customers are cautious of either stepping out or meeting insurance agents in person, online insurance buying seems safer, without compromising on conventional benefits.
As digital becomes the new normal, what lies ahead, and what should insurance leaders prepare for? Following are the top insurance trends to look out for in 2021:
- Surge in health and wellness services: The COVID-19 pandemic has pushed health and wellness to the forefront of customers’ concerns. Insurers have responded by bolstering their traditional medical and life cover with an array of digital health and wellness products and services. Carriers that quickly establish a strong presence across the health ecosystem will gain a big advantage over competitors.
- Life insurers are adopting intelligent automation: Life insurers are exploring options to automate repetitive processes to reduce operational costs and speed up operations. The rising volume of unstructured data from multiple customer touchpoints enables life insurers to explore advanced data mining techniques and leverage AI and ML models for intelligent automation.
‘Phygital from physical’ push: The COVID-19 pandemic has pushed the insurance sector to Phygital from physical. To thrive and survive in this new landscape, insurers will have to take a structured approach to digital strategy and talent, to deal with customers empathetically in the new frontier of the touchless.
- Digital service and distribution channels will oust carriers’ traditional channels as the primary point of customer engagement, but the inputs of physical channels and experts will remain sought after for advice on complex decisions and offerings.
- Consumers have used the digital services during the pandemic and few will return to their previous habits. Digital services that are seamlessly combined with phygital experiences, particularly on mobile platforms, will emerge as the key differentiator when consumers buy insurance.
- Those carriers that are slow to roll-out enticing digital offerings will lose customers.
- Insurers plan to double down on cybersecurity: As insurers begin to focus more on the thrive phase, most companies will reallocate technology spending as they reprioritize ongoing and planned projects. Insurers should consider implementing “zero trust” principles by imposing verification requirements on anyone seeking access to data or systems, regardless of being internal or external, while adopting “security by design” principles during technology development.
- Tailored products, fairer premiums: Insurers need to brush up on their digital skills as millennials expect more product personalization and customer engagement. Pulling in data from IoT devices – including wearable fitness trackers and car telematics – can be a simple way to personalize insurance products so that discerning younger customers feel more valued.
- Niche products to surge: Insurers launched an array of innovative risk-management offerings in the wake of the COVID-19 pandemic. Demand for tailored products, such as business-continuity cover for small enterprises, cyber-threat protection, pandemic insurance, and event-cancellation policies, will soar. Interest in insurance products aimed at specific demographic groups, such as young adults or retirees, will be especially strong, presenting partnership opportunities between incumbents and insurtechs.
- Trust becomes non-negotiable: Consumer trust will become a critical feature of business in 2021. Consumers will not only expect their providers to give them good service and value for money, they’ll also require them to protect their personal information and behave ethically in all facets of their businesses. Insurers that are perceived to have breached the trust of their customers risk substantial reputational damage.
- Life insurers are detecting and preventing fraud through new methods: Life insurers are now turning to advanced data analytics, artificial intelligence, and predictive modelling for effective fraud detection and timely prevention.
- Pay-as-you-go to rise: Demand for pay-as-you-go insurance services as more and more consumers enjoy the flexibility and cost-savings offered by these new offerings.
- The giants will grow: Innovative new insurers have enjoyed the limelight in the past few years, attracting substantial funding. However, traditional carriers will come to the fore this year. Their asset strength and extensive in-house resources will enable them to weather possible adverse economic conditions and secure new revenue opportunities. The insurance industry is likely to see some significant mergers and acquisitions in 2021.
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