5 trends we predict will transform the insurance sector by 2020
January 23, 2017
Like many other sectors, the insurance industry and its supply chain operations are undergoing a period of continued change, driven by changes in new and disruptive technologies. However, these behind-the-scenes operational advancements are also being driven by external insurance industry trends.
Some analysts suggest there are as many as 32 industry trends to monitor. However, we believe that the following five will have the biggest impact on the sector.
- Customers will take the driving seat
Their experiences with other industries, particularly self-service, on-demand applications, means that customers expect to be able to control their own accounts. Besides, just simply being able to purchase and view their policy online, customers will also expect to be able to control specific details – such as increasing or decreasing their level of coverage at different times of the year, or even different times throughout the day.
Insurers will need to build and deploy systems capable of allowing an increasing degree of control and flexibility – or risk losing customers to competitors who do.
- Emerging markets will mature
Several markets including; Brazil, China, India, Russia, Mexico and Indonesia are expected to finally mature to the point of being classed as “developed” in the near future. Should this happen, insurers will find new opportunities to expand, even as traditional established markets (UK, USA etc.) stagnate.
Insurance industry trends suggest that these markets will require increased coverage for construction, land development, transportation and energy sectors. Which means that insurers will need to be ready to act quickly, or risk losing market share to newcomers emerging from those same markets.
- Automated capture of insights from Big Data
Capturing Big Data has been a leading insurance industry trend for a while now, as insurers try to better balance risk and costs. Over the next three years, we expect to see more artificial intelligence (AI) and machine learning being used to provide an increased level of automated insight from the Big Data being captured.
These advances will be necessary to help insurers analyse external data that provides additional context about their customers – and to ensure that each person is offered the most appropriate coverage. Automation will lead to a new industry trend – the move from a reactive business model, to a preventative one, built around targeting the lowest risk, highest margin customers.
- Impact of global environmental factors
Climate change and the weather is believed to be the most significant threat to humanity and increasingly severe weather events bear out this truth. Insurance industry research suggests that hurricanes and tropical storms are becoming more frequent and increasing in intensity.
As a result, insurers may end up settling more claims – particularly relating to business continuity. Insurance industry trends dictate that firms will need to improve their risk modelling capabilities. They will also need to develop new risk-sharing and risk-transfer deals to offset what is an almost certain outcome – unless there is a sustained global effort to significantly reduce carbon emissions, which are thought to be behind more severe weather events.
Insurers may also look to integrate weather validation systems into the claims fulfilment process in order to cross-reference claims, deter fraud and automatically pay out against minor weather claims.
- Politics will define the economic future
The Brexit vote, followed by the election of Donald Trump has created a dilemma in the insurance industry. Where suitable trade agreements cannot be agreed between the UK, EU, and US we may see the development of regional, protectionist markets that add to the complexity and cost for insurers.
Alternatively, negotiations may see the development of more closely integrated economies, helping to reduce red tape and opening new markets to insurers. Insurers will need to prepare as far as possible for both scenarios. However, until Brexit, TTIP and EU trade agreements are resolved, it is very hard to predict the best course of action.
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