Insurance Industry Trends
Customization, digital strategies and DARQ are some of the trends affecting the insurance industry in the U.S. The following information presents details about each trend.
Customization is Key to Stay Relevant
- Eighty percent of clients are looking for personalized options, pricing and recommendations from insurance providers. Consumers are now looking for innovative and customized packages that address their unique needs and circumstances.
- Usage-based insurance policies, for example, dive into consumer data to charge users according to their particular needs and behaviors, putting the customer in charge of their own fees.
Why it is a trend
- According to Deloitte, the sharing and gig economy is rising expectations for enhanced customer experience and personalization, while “blurring the boundaries of commercial and personal insurance lines as well as undermining the relevance of many standard coverages.”
- Twenty-five percent of those operating in the sharing economy want coverage they can activate or deactivate as they need. Furthermore, consumers are looking for more control over their coverage; for instance, a recent survey discovered that 90% of life insurance buyers preferred to self-manage existing policies through digital channels.
- Not only are customers looking for personalization, 77% are willing to provide personal data in exchange for lower premiums, quicker settlement or recommendations. Further research by Ernst and Young indicates that personalized customer experience can improve policyholder conversion by up to 20%.
- Some companies are leveraging IoT technology to provide personalization to its clients and collect data.
- Sixty-four percent of the times clients shift from one provider to another, it’s to seek a more relevant product, service or experience. A further 32% said they’d stop doing business with an insurer that wasn’t relevant. As reported by Accenture, insurers need to be agile and accommodate customer’s needs and circumstances as they change if they want to stay relevant.
- The company’s research suggests that the potential revenue companies lost in the U.S. alone in 2017 to competitors, by not striving to remain relevant, was almost $1 trillion.
- Moreover, over 75% of banking and insurance consumers stated that customized promotions encourage them to buy products and services they haven’t acquired before. Meanwhile, only 38% of decision-makers in banking and insurance say they are significantly pursuing personalization in their organizations.
- Personalization may also impact the role of intermediaries in insurance distribution, as clients may no longer need specialized guidance on policies since products are prone to become more transparent and straightforward.
- Customer satisfaction and retention are set to be a more critical key performance indicator (KPI) than operational efficiency.
Companies Leading the Way
- Trōv, a global on-demand insurance agency based in San Francisco, uses an application to enable customers to insurance single items with coverage that can be activated and terminated at any time over a mobile app.
- U.S.-based auto insurance Metromile offers pay-per-mile insurance driven by a free device that can be plugged into the customer’s car. The company charges clients based on the miles they drive, not a fixed policy.
- Beam uses IoT technology to provide dental insurance. Clients receive a smart toothbrush that follows how well they take care of their teeth and provides personalized insurance plans based on the data collected.
Adoption of Digital Strategies
- Every aspect of the insurance value chain is being impacted by digitization, from interaction with customers, to how claims are made, to how policies are evaluated and bought.
Why it is a trend
- Not only digitization raises savings and efficiency, but 61% of customers stated they prefer to check their applications online.
- Accenture discovered that 31% of customers would like their bank or insurer to offer new channels, such as wearable devices, while 44% would be willing to buy insurance from online providers, such as Amazon or Google.
- Digitization redesigns the claims' customer journey by providing product simplification, a customer and intermediary self-service, an intelligent case management, front line and back-office process digitization, back-office automation, and overall improving communication.
- Digital claims transformation generates impact across all key performance indicators, such as a 20% increase in customer satisfaction and a 25% reduction in claim expenses, while improving claims handling accuracy.
- According to McKinsey, the digital age brings a new claim process, where companies need to go beyond traditional after-the-fact claims management to provide real value to its costumers. Insurers should strive to adopt a more agile, analytics-driven approach to claims handling and fully automate the claims handling processes for clear and straightforward cases.
- Ninety-six percent of IT executives in the insurance industry surveyed by Accenture reported that the pace of innovation in their company has accelerated over the past three years due to emerging technologies.
- Sixty percent are already using technology to build products or services that boost the frequency and quality of customer engagement; 35 percent are not doing so yet, but plan to.
- Research suggests that the industry will be transformed in three or four years. KPMG noted that insurers must have a digitally focused and automated digital and customer-first business that would be “comparable to the tech giants today.”
Companies Leading the Way
- Lemonade has managed to redefine the customer experience with an innovative, chatbot-based FNOL system that generates automated claims payouts within seconds.
- Anthem started its digital transformation in 2017, moving from being a healthcare business using technology to consider itself a “technology company that is running a healthcare business.”
D.A.R.Q. Power and New Technologies
- DARQ stands for distributed ledger technology, artificial intelligence, extended reality, and quantum computing. Each technology represents opportunities for insurance businesses to differentiate themselves and their products.
Why it is a trend
- Ninety-three percent of insurance business are already experimenting with one or more DARQ technologies, as reported by Accenture. Each technology is at a different point of adoption, but the company claims that the “first wave of insurance companies using DARQ technologies to drive differentiation is already here.”
- AI is already a vital component of the insurance business, optimizing processes and influencing strategic decisions as it automates business functions, gathers and analysis unprecedented amounts of data, and makes the benefits of analytics more widely available.
- Extended realities in the form of AR/VR create new ways for people to experience and engage with new immersive environments and on-demand and hands-free information.
- Extended reality helps to provide value to customers through new experiences and allows employees to collaborate from separate locations in ways not possible before. AR and VR also provide tools to improve insurance policy education and virtual driving tests.
- By realizing the structure for new technologies, such as cryptocurrency and blockchain, Distributed Ledger Technology (DLT) allows customers and companies to control their data and conduct transactions in a way not possible before.
- With a single source of data, people can securely manage transactions and collaborate on a large scale, DLT provides enterprises control and verification of data. Insurance companies are increasingly using DLT for self-executing contracts.
- Quantum computing is a new emerging technology that will empower researchers to resolve computational problems that were previously unthinkable. Besides advancements that could result in new drugs and products, the technology also facilitates traffic optimization, supply chain, logistics, and cybersecurity.
Companies Leading the Way
- AXA XL is leading AI and natural language processing to help the process information, in an effort to free underwriters from a manual task. The solution automates the survey reports used for providing insurance coverage and accurate pricing.
- Accenture debuted a blockchain-based solution that helps insurers’ customers manage surety bonds.
- Atidot enables insurers to go digital by wading through piles of data for them. This predictive analytics platform employs machine learning, AI, and big data to give insurers more significant insights.
To present some of the trends currently affecting the overall insurance industry in the U.S., the research team leveraged analysis by reputable sources such as Deloitte, McKinsey, KPMG, and Accenture to identify the trends. Each trend and company was chosen based on their reports and confirmed by other outlets.