From the initial and ongoing impact of the pandemic to geopolitical conflicts that continue to play out in today’s headlines, monumental challenges over the past several years have forced insurance carriers and the industry at large to become more agile, forward-thinking, and technology-focused; suffice to say, with a global recession on the horizon and continued uncertainty on the geopolitical front, insurance firms must continue to find ways to innovate cost-effectively, while at the same time growing the business in spite of and in response to these challenges.
These efforts can be observed in many of the insurance trends in the coming months and years. In this article, we’ll discuss some of these top trends shaping the future of the insurance industry in 2023 and beyond.
Deeper AI/ML Integration and Adoption
Insurance firms were early adopters of AI/ML technologies, primarily implementing them for handling customer service (e.g., chatbot-driven support) related tasks and streamlining/automating backend, manual processes. AI will become an increasingly indispensable tool for risk and insurance professionals to optimize claims and underwriting efforts. And given the general public’s recent, heightened interest in AI/ML, primarily sparked by offerings like ChatGPT, insurance players should expect a myriad of new offerings to enter the market that both address deeper industry challenges and allow insurance firms to realize new opportunities. For example, continuously improving machine learning language models will further streamline communications with customers and partners in new/foreign markets.
Zero Trust Adoption
Unfortunately, as insurance firms innovate and embrace new technologies, they also take on more cyber risk. The implications of this tradeoff are evident in the increasing frequency and severity of cyber attacks targeting the insurance sector; according to a recent Black Kite report, 82% of the largest insurance carriers are the focus of ransomware attacks from cyber criminals. Insurance firms will continue to adopt new security models such as Zero Trust to safely navigate an increasingly hostile cyber threat landscape.
On the customer side, insured enterprise parties can expect insurance carriers to respond favorably to demonstrated Zero Trust adoption, in the form of lower cyber insurance premiums and other incentives.
Insurers are in the business of helping their customers effectively mitigate, manage/control, and ultimately transfer their risk; unfortunately, traditional and emerging risks/threat agents have converged on the same stage, making it increasingly difficult to accurately quantify an enterprise’s risk exposure. For example, global industries experienced a sharp rise in cyber attacks during the pandemic; since the end of the pandemic, cyber threats have increased by 81%.
Ongoing geopolitical tensions between the world’s superpowers are also playing out in the digital arena, with politically-motivated actors targeting both government agencies and private enterprises. For insurance firms, this means proactively addressing threats by implementing measures for achieving and maintaining resilience, even as future risks and threat agents are unknown. To this end, insurance firms will continue to adopt more sophisticated security tools and enterprise risk management platforms capable of integrating data across locales, business operations, and third-party vendors.
Digitized Processes for Underwriting
As risk becomes more complex and multi-faceted, so too does the underwriting practice. Fortunately, innovations in predictive analytics, multiple data source integrations, and applied AI/ML for identifying patterns in vast seas of data allow for more comprehensive and accurate underwriting measures.
Alongside digitized processes for underwriting, expanding connectivity will continue to improve the coverage provided by insurance offerings—for example, the use of telematics is becoming increasingly common among auto insurers looking to analyze driving data, reduce fraud, and provide more accurate post-accident assessments and estimates. By using a combination of technologies (e.g., GPS, Wi-Fi/ Bluetooth, GSM, RF, connected sensors, and supporting cloud infrastructure), auto insurance carriers can maintain continuous, data-driven situational awareness and digital forensic capabilities
Continued Focus on Customers
As mentioned previously, initial AI/ML adoption in the insurance industry has resulted in more automation and less reliance on human agents to perform menial tasks. In turn, employees are free to focus on more high-value initiatives such as providing better customer service, creating operational efficiencies in their respective departments/groups, and more. These new avenues for employee-driven value creation will ultimately result in a more customer-focused insurance industry in 2023 and beyond.
More Personalized Insurance Offerings
In short, the coming months and years will likely pose more challenges for the insurance industry. According to McKinsey’s 2022 Global Insurance Report, 50% of insurers globally fall short of their cost of capital in revenue. Organizations in the insurance value chain should prepare for critical trends that will drive cost reductions, reduce headcount, and trigger other austerity measures for weathering a difficult economic climate—all while meeting increased customer expectations and demands.
By bringing together hyperconnectivity with a continued focus on customers, insurance carriers will further refine their personalized insurance offerings—specifically, through the continuous collection of crucial client data from a myriad of IoT and connected devices. Insurers will define policies that account for more risk factors, quantify risk with greater accuracy, and ultimately provide a better product and service to the customer.
To learn more about Ventiv’s solutions and how they’re helping insurance enterprises remain agile and responsive to industry trends, contact us today for a consultation.