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P&C insurers are racing to capitalize on three key technology trends that will increasingly separate winners from wannabes in 2022—and throughout the decade ahead. But for many, it’ll be easier said than done.
On the one hand, the rollout of COVID vaccines has opened a pathway toward economic recovery. And despite lingering concerns over Omicron and the inevitability of dangerous new variants, a survey from Deloitte finds more than one-third of insurers expect significant revenue growth in coming months.
But challenges abound. Disruptive service models, evolving customer needs, and accelerating consumer technology adoption are putting new pressure on insurers to tap a wider array of distribution channels and deliver hyper-personalized pricing and coverage.
Inflation, new regulations, and an escalating battle for talent certainly won’t help. Neither will Mother Nature. After getting sucker-punched by insured losses of more than $112 billion from natural catastrophes in 2021, the industry must make sizable new investments in technological innovation to mitigate the risks posed by climate change.
Put it all together, and you can see why it is critical for insurers to be empowered to engage their customers personally, innovate rapidly, and grow profitably in new business environments. In the year ahead, carriers will be looking to successfully navigate a trio of key technology trends.
#1: Embedded Insurance Everywhere
To those in the know, embedded insurance is event-triggered cover that’s offered with the purchase of third-party products and services. It’s the travel insurance offered when you book a Norwegian Cruise, the Apple warranty for your iPhone 13, or auto coverage to go with that spiffy new Cybertruck.
It’s also a serious game-changer. According to a report from Instech London, the embedded insurance market is expected to grow to $722 billion by 2030—six times its size today. McKinsey estimates that up to 25 percent of all personal lines premiums could be generated through embedded ecosystems in that time frame. For auto, it could top 30% or more.
Enabled through open APIs, embedded insurance gives carriers access to whole new customer pools by weaving their offers directly into the purchase of consumer products from major retailers at the exact moment consumers are most likely to purchase coverage.
In coming months, look for more partnerships like the one between Swiss RE and IKEA, or between Farmers’ digital insurance brand Toggle and Toyota. In Toyota’s case, embedded insurance may be used as a gateway for multi-lining policyholders with auto, home, renters, and recreational vehicle coverage the auto giant already offers.
But with rivals vying to lock up the most lucrative retail partners, time is of the essence. A modern insurance platform can help insurers launch embedded insurance in a matter of weeks, complete with the ability to cross-sell complementary products, ranging from micro-business to pet insurance, downstream.
#2: Mobile Inspection & UBI Hit the Fast Lane
Thanks to a seismic shift in digital adoption rates, consumer expectations for speed and convenience have hit the stratosphere. At the same time, the cost and risk associated with physical inspections for things like homeowner claims continue to rise.
For customers, claims are the ultimate moment of truth. Those who are pleased with the claims process are 80 percent more likely to renew their policies—contributing to as much as 30 percent higher profitability. And according to JD Powers’ 2021 U.S. Property Claims Satisfaction Survey, insurers offering virtual claims reporting over the past year have seen the highest overall satisfaction scores ever measured in the study’s 14-year-history.
When integrated with a modern insurance core platform, AI-assisted mobile inspection solutions like those from PLNAR, Livegenic, Hover, and Flyreel enable consumers to capture and upload images that are instantly and accurately analyzed using computer vision and other forms of AI to expedite both claims and underwriting processes dramatically.
But that’s not the only mobile-enabled change afoot. Today, usage-based insurance, or UBI, leverages smartphone-based telematics and behavioral analytics to price premiums based on miles traveled, and real-time driving behaviors such as speeding, aggressive cornering, harsh braking, and more. According to Forrester, ownership of “pay as you drive” policies jumped 50 percent over the past year and could account for nearly 20 percent of all auto policies by the end of 2023.
#3: The Climate Crisis Sparks a Rethink on Risk & Innovation
According to the UN’s recent “code red for humanity” climate report, it’s already too late to stop global warming from fueling a significant jump in extreme weather related disasters over the next two decades. And strategies built on repricing portfolios to avoid long-term exposure to catastrophic events is no longer realistic when the historical data used to model that risk is based on climate patterns that no longer exist.
But geospatial analytics is one technology that can help. When integrated with a modern insurance core platform, solutions from companies like Betterview leverage up-to-date aerial imagery, computer vision, and predictive analytics to assess property risk instantly, on-demand. And data can help insurers understand the evolving impact of climate change on surrounding areas, infrastructure, and supply chains that could sap $23 trillion from the world economy by 2050.
New product innovation can help insurers profitably cover newer and more frequent risks too. For instance, parametric insurance based on a triggering event (hurricane, earthquake, wildfire, drought) instead of the value of physical assets, can help corporations transfer risks to pre-certified carriers that act as “shock absorbers” for emerging climate-related threats. The time for this kind of innovation is now.
Thriving Through Resilience & Saving the World
As challenging as it may be, it’s that last trend that may offer the biggest opportunities. In addition to pricing risk profitably, our industry stands to play a central role in curbing growing risks for us all. UBI policies, for instance, can help cut carbon emissions by rewarding individual consumers for driving less. And sector-wide underwriting initiatives like the “Poseidon Principles” aimed at reducing greenhouse gas emissions from maritime shipping fleets by 2050 can also make a difference.
The fact that the insurance industry is the world’s second-largest institutional investor also gives it enormous financial influence. Aviva, Zurich, and other major insurers are already making strides in environmental, social, and governance (ESG) commitments to carbon neutrality in their own operations, as well as the companies and funds in which they invest. Others are sure to follow suit as the movement gains traction.
All things considered, that’s a great way to kick the year off right.
*Cambridge Mobile Telematics acquired TrueMotion in June 2021.
COVID-19 and Insurance Economics: Resilience and Risk in the Connected World