What will 2021 bring for the insurance industry?

Main visual : What will 2021 bring for the insurance industry?

Manan Sagar - CTO Insurance Services Fujitsu UK & Ireland shares his top insurance industry predictions for 2021.

At the beginning of 2020, insurers were looking at the decade ahead and considering their plans to increase investment in transformation projects.

Fast forward 12 months and, for the insurance industry, Covid-19 has had a significant impact. In an industry historically lagging in agility, Covid-19 has accelerated flexible and remote working.

Overnight, staff, including claim specialists, brokers, underwriters, analysts, and customer service teams were unable to go to their place of work. Insurers were left needing to adapt and find new ways to operate. They were forced to rethink how digital technology could enable seamless collaboration amongst employees and ease the strain on customer services.

With the help of cloud platforms, AI, data analytics and other sophisticated technologies, they were able to adjust quickly and efficiently. However, AI ranks by far as the biggest existing skills gap to fill and a lack of investment in this ‘gamechanger technology’ will impact insurers resilience and agility.

By implementing AI, insurers will empower and free their people to focus on adding more value to their customer interactions. According to Gartner, investment in the AI-enablement of workers will increase by 40% as insurers shift from automation to human support initiatives.

Covid-19 has shown long-standing organizations operating with a more traditional model, that technology isn’t to be feared. It’s a disruptor that can enable them to catch-up, adapt and innovate in an increasingly digital world.

The coronavirus pandemic has finally given insurers the perspective and clarity to see that technology is fundamental to long-term success. Going forward, if customers are happy to continue operating through virtual channels, why return to the office? This change will enable insurers to remove unnecessary operating costs and move forward with a renewed focus to ensure the sector no longer lags behind in technology adoption.

In the face of drastic widespread digital transformation, Manan outlines his top four predictions for insurance over the coming year.

Increased focus on digital transformation

Within the insurance industry, the coronavirus pandemic has given digital activity the push it needed. For years, traditional insurers looked on as digital entrants implemented new technologies empowering them to grow and thrive.

Historically, insurers failed to embrace emerging technology because existing practices were considered sufficient, and as the saying goes, if it’s not broken, why fix it? Covid-19 gave insurers the digital push they needed, forcing a major shift in their mindset and how they view technology.

2021 will see insurers continue on their road to digital with the adoption of technology that will ensure customers receive the digital insurance services they require. There will be a fresh focus on digitalization, underpinned by evidence that technology can transform the way insurers work, deal with claims, attract new customers and develop new products.

Through digitalization, insurers are in a position to set themselves up for long term success. Only recently, Lloyds of London, one of the largest and oldest insurance organizations, gave a big push towards digital transformation in its digital ‘Blueprint One and Two’ as it looks to integrate data and technology into its services. Before Covid-19, insurance placements were still on paper, in binder files.

Predict and prevent models powered by data

Whilst digital technology will continue to be the general enabler, it has opened insurers up to adopting a data-led approach. Data is the key ingredient to successful transformation and underpins the shift from protection to prevention.

According to 2020 Deloitte research, insurers advised their intention to increase investment in technology across several areas including data analytics, with 95% of respondents anticipating a significant increase in the use of advanced analytics over the next three years.

Access to risk data is essential in allowing insurers to establish trust with their customers and ensure long-term profitability. The aftermath of Covid-19 will be challenging; customers have been greeted with many innovative solutions driven by technology.

Ultimately, it’ll boil down to insurers adopting predict and prevent models, powered by data to attract and retain customers. For example, AI with analytics and algorithmic risk assessment can drive fraud and credit risk detection with higher accuracy and at a larger scale to deliver better outcomes.

The explosion of digital technology has driven increasing amounts of readily available real-time data - whether that’s to analyze water pressure, personal fitness, how we drive, the status of machine components and much more. Often insurers sell a policy, and a customer commits with the hope that it will never be used – using it means there has been an accident or loss.

When the insurance model is traditional i.e. when it is a “repair and replace” model, premiums are based on historical data. However, now that customers ask far more questions related to a policy, with the majority related to Covid-19, there’s a higher expectation for insurers to provide a satisfactory solution. A common example would be eligibility for money back on car insurance. This trend was confirmed when in the UK, Admiral automatically gave customers a £25 car insurance refund during the first national lockdown.

How we work has changed forever

Some industries were better equipped than others to deal with the overnight change in work culture, but the insurance industry was somewhat caught off guard. Working from home was not common for most brokers and insurers as large complex commercial risks have traditionally been transacted in person.

Regardless, the industry soon adapted. Now, businesses have a better understanding of both the positives and negatives of remote working; productivity has risen, work-life balance has improved, travel has reduced environmental impacts and much more.

This has helped the industry map out what the future could look like. Ultimately, it will be the businesses that succeed that will adapt best to the ‘new normal’. It’s widely anticipated that some form of flexible working will be commonplace even when offices are allowed to fully reopen, so brokers and insurers will need to rise to the challenge and ensure their future plans cater to this inevitable work-life shift.

Tesla-driven change in the car insurance market

A sub-sector that will need to undergo a huge change, exacerbated by a renewed focus on technology and data models, will be car insurance. Autonomous and semi-autonomous vehicles are gaining momentum with self-driving cars potentially allowed in many countries as early as this year.

The Highway Code is changing, and insurance must follow. For example, Tesla has already announced its own insurance arm which is 30% cheaper, as a result of its advances and understanding of automotive.

To remain competitive, traditional insurers will need to be prepared to offer insurance for autonomous and semi-autonomous – these need to be two-pronged policies. One policy will be needed for the driver and one for the car manufacturer.

The way consumers are driving and using their cars has changed, whether its EVs, self-driving or just a reduction in time spent on the road. Insurers will have to get a hold of new driving methods and patterns by leveraging advanced data analytics to ensure safety, serviceability and affordability are at a premium.

Visit our website to discover more about how technology will transform insurance and financial services.

Editor's Picks

From compliance to competitiveness: Reframing the role of ESG in manufacturing
Discover how Fujitsu's Value loop framework is transforming ESG compliance into a competitive advan…
Fujitsu / October 9, 2024
Main visual illustrating Fujitsu's approach to generative AI. Aged person interacting with a generative AI interface.
Forefront of Banks' Digital Transformation: Generative AI Value Creation
Banking is characterized by human-driven operations that rely on language and the handling of large…
Fujitsu / October 8, 2024
Growing water for India from fruit and vegetables: Fujitsu's blockchain helps startup tackle water crisis
Blockchain helps Terry Paule of Botanical Water Technologies tackling India’s water crisis with wat…
Fujitsu / October 7, 2024