In 2023, insurers will continue investing in innovation to enhance customer experiences while driving operational efficiencies and adhering to regulatory compliance.
Businesses will leverage business collaborations and ecosystem partnerships to reach more consumers, including embedded insurance products that allow non-insurers to incorporate them into customer journeys seamlessly.
1. Insurers and insurtechs will play nicely in the sandbox
2023 will see insurers and insurtechs collaborate more efficiently. Insurers will leverage insurtech partnerships that offer back office efficiencies, risk advisory services, or data enhancement solutions at scale; similarly, they may partner with insurtechs that help develop and pilot new products quickly to market.
Partnerships like these allow insurers to reach more customers at the point of interest using digital processes that create an end-to-end view of the customer journey. This will allow insurers to provide tailored offers with easy understanding and comparison. They will also reduce cycle times by replacing intermediary structures with automation.
Insurers will make more intelligent use of the cloud. For instance, they’ll utilize application programming interfaces to streamline data flow, speed up claim processing, and turn claims into shopping experiences with alternative payment mechanisms such as per-mile/journey insurance supported by telematics.
Ampabathina contends that innovative insurers will turn to cloud computing technology to meet customer needs better. For instance, they might use it to construct a scalable platform that supports their business model but can also be extended by market forces over time.
2. Insurers will look to bring in third parties at scale
As customers increasingly expect more humanized experiences from insurers, insurers must break free from traditional operational and technology constraints. This requires them to bring in third parties at scale – not simply as replacement workers or outsourcing of daily tasks but instead codify institutional knowledge and develop rules-based digital systems which offer reliable long-term business models.
Insurers will leverage next-gen SaaS platforms to shift business focus away from policies to customers, the process to experience, static to dynamic pricing models, and historical views of data toward predictive and prescriptive analysis. They will also look for ways to streamline and automate claims processing while improving the overall customer experience.
Insurance protects people and businesses against risk, but global challenges, natural disasters, rising inflation, and new regulations create uncertainty that makes implementing commercial carriers’ missions increasingly challenging. By 2023 they’ll need to address four competing pressures:
First is embedded insurance – where manufacturers, retailers, or other non-insurance brands seamlessly incorporate insurance products into a customer journey – an expected $622 billion market by 2030. Insurers will use prudent underwriting with innovative product design and delivery to capitalize on this opportunity while seeking distribution partnerships via digitally enabled platforms to reach more people easily with insurance products.
3. Insurers will focus on digital transformation
In 2023, insurers will seek to transform their core operations digitally. They’ll use strategies like cloud computing to support business collaboration and ecosystem partnerships or automate processes and offer digital customer experiences like per-mile/journey car insurance policies.
Digital transformations will focus on improving the business rather than the bottom line, with insurers using technologies like process automation, chatbots, and AI to drive efficiency while improving their customers’ experiences. This type of innovation is known as essential innovation, and most insurers today prioritize it over anything else.
Transformational innovation presents the most significant challenge, as insurers must devise bold and ambitious visions of their future business models and devise solutions to deliver them. Companies that succeed will become leaders of tomorrow’s insurance landscape.
Reimagining existing business models and processes is no simple task for insurers; for example, a new product introduction can take eight months on average, while making changes can take four. Furthermore, legacy investments make reimagining products, processes, and customer experiences harder.
4. Insurers will look to respond to the climate crisis
As they evolve, insurers are seeking ways to better support customers. This may involve creating more tailored offers at points of interest or optimizing distribution partnerships to expand customer reach. They’re also exploring tools such as AI, ML, and automation, which could enable more proactive management of threats rather than reactive measures being taken against threats.
Climate change poses a formidable challenge to insurers and reinsurers. On one hand, climate-related events like wildfires or hurricanes expose them to increased financial risks. In contrast, on the other side, it increases their investment and underwriting portfolio exposure due to the fossil fuel transition and greener technology transition.
So as a response, insurers have started exploring ways to become more climate-friendly, taking steps such as considering their carbon footprint and its effect on their business. Some have even set ambitious carbon neutrality goals or net zero emissions by 2020! Insurers also engage with eco-friendly industries or reduce investments in carbon-intensive companies to become more climate-friendly.
Insurance providers possess an invaluable asset: trillions in assets. By employing this as leverage to address climate change, insurers have leveraged it to push for policies that reduce disaster risks and assist communities in adapting. Furthermore, insurers are gradually withdrawing stocks in coal companies and declining to offer protection for fossil fuel projects.