The insurance industry has been under pressure to innovate for quite some time. The adoption of Big Data analytics in insurance may have proven controversial, but recent research argues that Big Data analytics is changing how insurance governs risk. Layering the implications of the COVID-19 pandemic on top of this, General Liability Insurers are forced to find new ways of working and engaging with customers.
Throughout 2022 it can be expected to see insurers reacting to the long-term effects of the pandemic while continuing to embrace the digital transformation of the insurance industry.
Understanding The Impact of Winter Storm Uri
2021 has been a hard year for insurers, characterized by hard market conditions which led to higher premiums and higher claim rejection rates. The onset of 2021 saw single-digit rate increases, a significant drop from previous years when rates increased by 15% to 20%. This meant high capacity and peaking rates, driving property markets to build larger budgets. When Winter Storm Uri hit Texas in February of this year, it caused billions in damage.
Some estimates placed the financial impact well over $200 billion. The impact was significant, giving markets low expectations for profitability before even considering the impact of other seasonal events such as wildfires. While the market remains competitive, insurers are selective in the risks that they write while trying to retain their current portfolio.
In 2022 it is expected that insurers will continue to make efforts to restore consumers’ faith in the industry. It stands to reason that insurers will focus on improving the customer experience by increasing transparency and simplifying the claims process, as this would help boost retention rates and strengthen consumer brand loyalty.
Insurance Industry Expected to Take a Firmer Stance on Environmental, Social and Governance Issues
Environmental, social and governance (ESG) issues are expected to have wide-ranging implications for insurers when looking ahead. It is expected that a growing number of general liability insurance providers will consider ESG risk factors when underwriting. According to the world’s fourth largest credit ratings agency, DBRS Morningstar, large institutions are facing greater pressure from external shareholders to better manage their exposures to ESG risks.
Marketing and Sales Likely to Become Personalized
Following the trend of data-driven insurance, marketing and sales are likely the next elements of insurance that could become automated. Data-driven marketing strategies can help general liability insurers offer more personalized content that could prove more useful to customers, thus driving a higher conversion rate when compared to traditional “wide net” advertising.
Another way in which data-driven marketing can be used to improve insurance is its ability to show insurers where the gaps in the market lie. By paying attention to which products consumers prefer, insurers can use the insights gained to innovate products and market it to the right audience.
Remote Working Translates to Greater Workforce Support
The pandemic has helped to hasten the trend towards remote working. The insurance industry is no exception, as many employees in the industry work from home for at least part of the week. Apart from the obvious benefit of more flexibility for staff, remote working can lead to a fragmented workforce.
This divide can be partially attributed to distance and partially to fragmented staff structures that subject staff members to different rules. A possible solution would involve insurers taking steps to introduce effective employee engagement strategies, without having to resort to micromanaging staff members.
Rising Customer Expectations Highlight Digital Shortcomings
The pandemic forced many to rely on digital means to meet their needs, contributing to heightened customer expectations for everything to be digital, including insurance. This places digitally deficient insurers in the proverbial “rock and a hard place” as customers increasingly expect everything to be transparent, digital and user-friendly.
Customers increasingly expect clear communications at every stage of the journey when purchasing insurance, including self-service tools where they can monitor progress themselves. Insurance providers who have not bridged the digital divide yet, may find it increasingly difficult to expand their customer base as the laptop lifestyle is becoming a norm. It is likely that the insurance industry will take a digital-first approach.