With 2022 in full swing, the InsurTech industry is already heating up. FinTech Global asked industry experts what their predictions are for the year ahead.
Digitalisation and the demand for digital
The pandemic made digitalisation a critical development and according to Scanbot’s chief sales officer Max Stratmann, digitalisation and the streamlining of back-office processes will remain in the spotlight this year.
This is not just for the behind-the scenes processes – there is an increasing demand from customers for digital experiences. This, Stratmann said, presents an opportunity for InsurTechs to help large corporations evolve, “From registering new customers over remote work to claims processing, insurance groups increasingly depend on InsurTechs to digitise all processes along their value chain. In 2022, insurance companies will have to work even harder on improving and digitising the customer experience to succeed in the market.”
Roi Agababa, CEO at Novidea, a cloud-based solutions provider for the insurance industry, agreed that in the last couple of years, customer expectations for seamless and personalised digital interactions have accelerated across digital and mobile channels. He said that 82% of customers now expect multi-channel interactions with their insurance provider as standard.
“This has led to the development of self-service digital portals through which customers can manage their account, buy products and handle claims, a trend that is only likely to intensify in 2022.”
The so-called “race to digitalise” is labelled as such for good reason, companies must embrace new technologies in order to succeed in today’s climate. Yaron Lavie, vice president of products at Earnix, said, “Inertia is not an option for organisations that seek to grow and exceed the demands of its customers.
Lavie said that Earnix expects insurers will continue to embrace digital transformation technologies that will enable fully personalised dynamic offerings, “Innovative solutions that allow for pricing, rating and product personalisation in real-time will continue to redefine how insurers, legacy or newcomers, will address the revolutionary changes that are occurring in the market today.”
The growing appetite for digital processes goes hand-in-hand with the drive to improve customer experiences and put them at the centre. Ruth Fisk, vice president insurance marketing at Smart Communications, expects to see Insurers continue to advance their use of digital technologies to not only enable growth and improve efficiency, but also to improve the customer experience.
“Crucial to the success of today’s Insurer is the ability for insurance organisations to respond to the new range of expectations being set by digital savvy customers, who expect real-time, hyper-personalised service whenever they need it, from whatever medium they choose,” she said.
Novidea’s Agababa concurred that customer-centricity will be key to success in 2022 and beyond. This is in part due to the demands of a generation that is accustomed to convenience and the rise of on-demand apps. “This is largely driven by changing customer expectations, based on their experience of using the likes of Uber, Netflix and Amazon,” Agababa explained.
“Certainly, Gen Z is not going to accept the long, complex and tedious processes still endemic with some legacy insurers, when other new InsurTech options are available, especially when they are used to 24/7 on-demand, easy-to-use, services elsewhere.”
Alex Johnson, head of insurance solutions at data and analytics software company Quantexa, added that having more customer-centric data-led initiatives will become increasingly important. “I think that there’s going to be a really key focus on customer experience and hyper personalisation. How can insurers use the data that they’ve got available to them to better understand their customers? Whether that be how and when to market to them while they’re developing their products, or when looking at the entire customer experience across digital channels.”
This may lead to significant investment from the insurance industry into digital channels, Johnson continued. Particularly how can data be used to effectively streamline, and fill in data points that normally a customer would have to fill in themselves, making the process quicker and more efficient.
Earnix’s Lavie predicts that the demand from consumers for highly personalised offerings will give impetus to usage-based insurance (UBI) as a central solution. “Consumers will expect rates to be determined by their usage and driving behaviour rather than determined by a single score,” he said. “Addressing that need, carriers will need to be able to operationalise the vast telematics data, achieve fast deployment of offers, precisely assess drivers’ risk, as well as adjust pricing and product offerings.”
The adoption of artificial intelligence and machine learning
Tractable, which gained unicorn status in 2021 after its Series D funding round, predicted that the adoption of artificial intelligence (AI) will grow in insurance in 2022, particularly with an emphasis on implementing a touchless claims process.
Jimmy Spears, head of automotive at the company, said that although insurance as an industry has been widely perceived to lag in the adoption of cutting-edge technologies, like AI and machine learning, 82% of insurers believe Covid-19 has created an impetus to implement such solutions.
“One of the most significant transformations AI offers to the insurance industry is the ability to execute touchless claims, or claims that are entirely processed through AI, and despite little attention, this automation is happening right now,” Spears said. “With major insurers realising its benefits – timelines cut from weeks to seconds, spared resources so experts can focus on complex cases and overall happier customers who settle faster – we’ll only keep hearing about touchless claims and it won’t be long before it becomes an industry standard.”
Indeed, Novidea’s Agababa said that AI has the power to transform the insurance sector for the better by freeing up individuals to “do what they’re good at”. “And whilst many are talking about it, market leaders are already using it for a wide range of uses, including to enhance their current products and services, develop new products, and reduce operating costs.”
Earnix’s Lavie agrees, “The demand for AI to power up business decisions is growing and will continue to grow in 2022. Manual efforts waste time, and worse, they result in errors that lead to missed business opportunities and threaten market share.”
Agababa added that AI will also be used to enhance the customer experience and current products and services; develop new products and services that add value to the increasingly personalised demands of policyholders; improve operational efficiencies; preserve the integrity and security of data and operations; and take service quality to the next level.
Smart Communications’ Fisk noted that conversational AI in particular, will play a crucial role in helping Insurer orchestrate the digital reactions that customers are demanding. “Conversational artificial intelligence is revolutionising the way that customers communicate with their insurers. Conversational channels – from voice assistants like Alexa, to text-based channels such as Facebook Messenger and WhatsApp through to text-voice hybrids such as Siri – present opportunities both to drive engagement and to enable seamless self-service automation,” she explained.
Climate change was a regular topic of discussion in 2021 and Tractable’s Spears, believes we will see insurers weigh tech solutions to address the impact of climate change in 2022. Spears cited a report from the Washington Post which revealed that one in three Americans experienced a natural disaster in the summer of 2021. With a global spotlight on climate change, Spears said, such comes the imperative for businesses and insurers to address its impact. “The insurance industry is in a unique and pivotal position to uncover solutions that directly support customers, who so far this year are estimated to have endured a record $104.8bn in damage,” he said.
However, Spears continued, insurance leaders have the opportunity to invest in products that tackle the disruptions caused by climate change. He pointed to a survey from BlackRock that reported that 95% of global insurers anticipate climate risk to impact portfolio development over the next two years. With almost two thirds of respondents also reporting plans to increase spend in tech solutions in the next two years.
Cyber risk management
With the ONS reporting a significant increase in the prevalence of cybercrime, Melanie Hayes, chief marketing officer and co-founder at KYND, believes cyber risk management will be a predominant focus for both organisations and insurers in 2022.
Hayes said that InsurTech will be pivotal in this arena, and products featuring transformative technology like KYND’s will be used not only to help carriers make better underwriting decisions by providing instant insight into cyber risk exposure for better underwriting decisions but will also be used additionally during the lifecycle of the policy to ensure they continuously improve their cyber security posture. What’s more, Hayes explained, is that as insurers are unlikely to have this technical capability in-house, partnering with companies that bring these skills and technology to the table will likely grow in 2022.
“Another key trend will be for InsurTech to be used in the cyber insurance application process in a way it hasn’t previously,” Hayes continued. “For example, cyber policy holders will not only fill in applications but to demonstrably prove they have the controls they say they have in place. This is where KYND’s InsurTech comes in as it provides simple and accessible cyber risk technology that brokers and insurers can access to support cyber insurance applications.”
Increased competitive pressures
Faced with innovating new entrants, established incumbents in the insurance industry will feel the pressure to accelerate their tech offerings in order to compete. Tractable’s Spears said not only will InsurTechs continue to experience explosive growth in 2022, but the insurance industry will be faced with another shift as the next generation of customers begins buying insurance. “Legacy industry players, including the top P&C insurers, will be forced to evaluate their tech stack and integration of innovative tools to stay competitive – both against fellow incumbents and digital insurers like Lemonade and Hippo, who already embrace new technology,” he said.
Novidea’s CEO Agababa said that as a result of these increased competitive pressures, we are likely to see a rise in the number of mergers and acquisitions among insurance agents and brokers. “Agency M&A deals in the US surged by 20% year-on-year in 2020 and hit the highest levels on record in H1 2021, led by private-equity backed buyers,” he said. “This trend shows no sign of abating, and with competitive pressures as high as ever, the US, UK and Global markets are likely to see even higher levels of M&A throughout 2022.”
Alan Haskins, North America insurance business development director at Quantexa, agreed that we are likely to see more consolidation within the industry. “What the industry will do is, either the large companies will get larger, or the insurance the smaller insurance companies will get smarter… we also will see these smaller mid-sized companies actually compete with the big-larger companies because they’re going to deploy new types of technology,” he said.
In addition to a growing number of mergers and acquisitions in the InsurTech space, we are also likely to see a greater level of collaboration. KYND’s Hayes said that in the cyber insurance sector, the industry is moving away from the model where insurers, brokers and insureds themselves have set role and only speak during the application, renewal or a claim “All three will work more collaboratively during the entire lifecycle of the policy,” she said.
“The insurer’s role is not just to insure; they’ll provide a plethora of other services that add value with particular focus on cyber risk management. For the broker, they will be expected to have their clients prepared prior to submitting applications and offer cyber risk services themselves to clients to achieve this.” She added that insureds will be expected to manage and improve their cyber risk posture and prove they are doing this during the whole of the policy.
A focus on sustainable recovery
Areefih Ghaith at Quantexa predicts that in 2022 there will be a greater focus on sustainable recovery, and that has already begun with insurers placing ESG at the top of their agendas.
“We’ve already seen some front runners in terms of embedding ESG within the operating model of insurance… And we’ve also seen that insurers have realised that it’s not just their own practices that need to be ESG compliant, it’s also their book of business and their portfolio of investments.”
Using ESG data within the underwriting process is going to be key, Ghaith continued. This is not just good for sustainability and the environment, but also is good for financial strength. “We already know that ESG organisations are good for the loss ratio, they’re less likely to get sued, less likely to get embroiled in scandals, and they have in place things like good health and safety practices. They’re less likely to claim. So, they’re good for business as well.”
Recruiting top talent
As companies compete in the race to digitalise, some in the industry are concerned of a future talent gap. Scanbot’s Stratmann noted, “The high demand for top talents and developers will continue to be a big issue in 2022… In this respect, the most significant task for InsurTechs will be to create an attractive working environment for talents, one in which they enjoy working, learning, and growing personally.”
Agabab at Novidea dubbed this the “war on talent,” and predicts this will only escalate going into 2022, as firms seek those with the technology skills that are going to be needed to enable true digital transformation.”
However, Smart Communications’ Fisk said the move to working from home for many companies could present a solution for this, “The shift to work from home because of the pandemic now allows a long-term benefit that provides opportunities for Insurers to hire talent from anywhere in the world – broadening the reach for talent and coverage.”
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