In 2023, insurance leaders will navigate turmoil unseen since the financial crisis of 2008. As noted by Forrester, insurance cover will shrink or disappear as consumers and small businesses face cash-flow pressures. Carriers will curtail increases in their IT spending to reduce costs, however, cuts will not be unform. Investments will still be made in areas likely to create efficiencies, such as smart automation and robotics.
These are only some of the predictions for this year. We’re defining five of the key upcoming trends for insurance.
One of Forrester’s predictions for 2023 is that insurance carriers will pass higher costs on to consumers due to high inflation and weather-related losses. Those customers will push back, and policy lapses will rise this year — in fact, policy lapses will increase by 20% as customers decrease spending. Carriers who adapt will focus more on right-size coverage with subscription-based, on-demand, by-the-bite, and buy-now-pay-later premium programs.
“As challenging as these times are for carriers, we must not forget the emotional toll they take on insureds. As much as they want to hear from their carriers more often, they often engage with their insurer during times of need. My company, Duck Creek Technologies, found that interactions and engagement with an agent—especially when it comes to high-touch requests—make customers feel heard, have access to accurate updates and feel engaged throughout the process.”
Mike Jackowski, Chief Executive Officer at Duck Creek
Embedded insurance can usually be purchased during the buying process for a different product (such as personal auto insurance bought at a car dealership). A recent Chubb Insurance article noted that by 2030 the size of the global embedded insurance in Property & Casualty alone could account for over $700 billion in gross written premiums globally, or 25% of the total market.
How else will embedded insurance drive new growth? One key example for retail in particular is the warranty shift in Germany (as stated by the Earlybird Digital West Investment Team) which is likely to extend to the whole EU. Selling warranty extensions is now legally regarded as “insurance sales” (as soon as it is sold as an explicit opt-in solution, and not simply priced-in among usual products or maintenance plans). Consequently, retailers need to acquire their own licenses for insurance sales in order to sell warranty extensions, or they can partner up with an insurance company. When choosing an insurance partner, they will benefit from tech-focused players with a simple and flexible API offering.
Environmental, social, and governance (ESG) has become standard practice in any insurer’s due diligence. Insurers are not only evaluated by their sustainability reports but also by their how their efforts actually limit the impact of climate change and tackle carbon emissions at the source. Environmental initiatives are not all though since their reputations are also improved by taking steps to diversify their workforce and increasing transparency in their governance structures. Due to the importance of ESG for the insurance industry, Deloitte predicts that company leaders make it a competitive differentiator at the core of their strategy.
“Growing financial pressures on consumers will drive product innovation, as insurance providers look at scaled-back ‘value’ products to meet changing demand. This will throw up a particular conundrum for insurers with complex legacy systems: how to successfully bring these new product lines to market without incurring hefty digital development costs you can no longer afford.”
Bart Patrick, Chief Revenue Officer at Genasys Technologies
Genasys is a partner of Imburse and more information from Bart can be found at Insurance Edge.
In recent years across the insurance industry, demand for cross-selling and upselling has steadily increased. While cross-selling gives a chance for brokers and underwriters to sell more insurance, it provides customers the option to have all their risk management requirements met by a single vendor.
The need for personalized insurance plans and customized premiums will likely work well with the push for cross-selling in 2023 (as stated by Artificial). In this digital economy, customers will choose personalized insurance covers instead of off-the-shelf products that are offered currently. Microinsurance, P2P insurance, and flexible coverage options are anticipated to be the most suited options in the long run.
To remain competitive in a changing market, attaining first-mover advantage with new product lines will be a priority for business leaders in 2023 (as stated by Socotra). Carriers push to be first to bring innovative products to market so that they can realize a faster increase in gross written premiums. Product innovation also leads to increased brand recognition and perceived value.
For existing products, speed to market with product updates is an equally important objective. When facing margin pressure, carriers seek to pinpoint areas of underperformance in their portfolios, and then quickly implement pricing or other product changes to protect profitability. The ability to make timely updates to coverage offerings and pricing can help protect profitability when unfavourable trends emerge. Keeping up to date with compliance or legislative changes can also help avoid costly fines and unnecessary regulatory scrutiny.
In this article we have explained some of the key insurance trends for 2023, including a rise in policy lapses, growth due to embedded insurance, a greater focus on ESG, personalised insurance going hand-in-hand with cross-selling, and speed to market being more important than ever.
Deloitte’s research suggests that insurance carriers should move from responding to the requirements of regulators and other industry overseers to more proactively anticipating and fulfilling distributor and policyholder expectations; and broaden their historical focus from risk and cost reduction to prioritize greater levels of experimentation and risk-taking that drives ongoing innovation, competitive differentiation, and profitable growth.
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