The year of 2022 started with the insurance industry having to cope with unprecedented threats from an ongoing global pandemic, climate catastrophes and economic challenges from inflation. Most insurance companies are however optimistic about the overall market outlook. According to a survey from Deloitte, the demand for insurance is expected to keep rising worldwide and as demand grows, growth opportunities prevail in embedded insurance and new services offerings. Insurance companies will need to stay on top of both technological innovations and cultural shifts to capitalize on these trends rather than get left behind.
To give you a picture of what to look out for, here is a roundup of the seven major trends that are set to disrupt the insurance landscape in 2022.
1. AI will enable more agile product offerings
In just a few years’ time, the value of implementing artificial intelligence (AI) technology in business processes has evolved from theoretical to fully practical. Insurers who have yet to integrate some form of AI into their business are sure to fall behind the competition.
AI offers a wide variety of benefits applicable to the insurance industry, such as allowing insurance companies to re-engineer core processes. Take auto insurance as one example. In the case of self-driving cars, the risk factor will no longer be the human behind the wheel, but the AI handling the driving. Claims processing after natural disasters such as hurricanes or climate-related catastrophes will also undergo a huge change as it becomes fully automated and faster due to AI.
What’s more, leading insurance companies will be able to leverage customer data and analytics to develop solutions and services that adjust coverage automatically based on customers’ changing needs over time.
2. Emergence of digital assets will create new risks
Despite uncertainty around the future of cryptocurrencies as a stable investment, trade in non-fungible tokens (NFTs) still exploded in 2021. OpenSea, the world’s largest NFT marketplace, recently exceeded US$10 billion cumulative volume. Global brands such as Nike, McDonald’s, Coca Cola, and Louis Vuitton have entered the realm.
The uptrend in individuals and businesses investing in digital assets means increasing digital exposure and potential vulnerabilities. Therefore, insurers will need to develop products specifically tailored for the risks associated with digital assets.
3. Reliance on cloud will become the mainstream
Digital transformation often begins with replacement of legacy technologies. Cloud migration will assist insurance companies whose core processes are being slowed down by on-premise servers to become more scalable in product development. Cloud will also be essential for enabling the computing power that insurers will need to interpret the immense amount of customer data collected.
According to research from Celent, cloud is already being used extensively by insurance companies around the world, including for mission-critical systems, and usage is expected to expand in 2022. Those who have already made the transition or were cloud-native from the start will come out ahead of other players throughout the ecosystem.
4. IoT will give insurers higher risk visibility
The internet-of-things (IoT) has already been in full swing for a good number of years. The benefit to insurance companies is the steadily increasing number of available data points, which provide unprecedented visibility into risk.
For example, many auto insurers have started using vehicle telematics to upgrade their core solutions. As IoT endpoints become more ubiquitous, we could observe product evolutions facilitated by such technology innovations in other branches of the insurance sector such as health and property.
What’s more, the advent of 5G technologies is enabling the faster transmission of endpoint and edge data, enabling a new range of real-time insurance products and services. One practical use case is predictive maintenance of factory machinery to inform companies of potential malfunctions before a breakdown even happens.
5. Insurers will put ESG at the top of strategic agendas
Cultural and environmental mindsets are evolving in line with technology innovations, and shifts in stakeholder expectations for the insurance industry are putting the onus on insurers to move environmental, social, and governance (ESG) practices to the top of their strategic agendas for 2022.
These strategies could range from closing coverage gaps for environmental catastrophes to developing insurance products that are sensitive to systemic discrimination related to race, gender, or sexuality.
Insurance companies will also be expected to be far more transparent and nuanced in the communication of their ESG policies to different stakeholders. That’s to ensure they send the right messages to partners or customers who might terminate their relationship with insurers they feel aren’t taking the right actions.
6. Increasing cyber security investments
As our technology advances, so do the security risks. However, most insurance companies do not possess the know-how and tools needed to protect against such attacks. That’s why all of them, from incumbents to new players, are increasing their cybersecurity investments.
For example, some are putting their resources in zero-trust security to create resilient networks that are resistant to attacks.
Cyber protection unlocks new possibilities for the insurance industry and presents an entirely new stage for collaboration between insurers and different stakeholders throughout the ecosystem. That’s why we can expect to see a wide variety of new cybersecurity insurance products and business models in 2022.
7. Partnering with insurtechs will be critical for innovation
According to the Celent survey, 90% of CIOs at insurance firms across the world put a strong emphasis on innovation as a priority. The methodologies to accomplish this innovation are diversifying, including cooperation with insurtech partners.
A report from CB Insights and Gallagher Re showed that insurtechs have recently attracted more than US$15.8 billion in investment, and are scaling at pace as a result.
Achieving digital transformation is a task that requires cooperation with multiple vertical and horizontal partners, which is why insurtechs like IXT will play such a critical role in helping insurance companies ealize their objectives. And, as noted in this article, partnering with insurtechs will also be essential to helping insurers achieve goals in terms of digital asset and customer data protection, ESG, and cybersecurity.
Your insurtech partner: IXT
Looking for a partner to disrupt the insurance industry together? Here’s why IXT is an ideal choice: