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The pandemic has thrown everyone a little off course for 2020, and the insurance industry is no different.
The insurance industry is robust, and it should be able to weather whatever the pandemic throws at it. According to research by Swiss Re, global insurance premiums have fallen in 2020 but are set to recover quickly in 2021, with emerging markets coming out ahead.
Assuming predictions about a fast recovery are correct, most insurance industry trends for 2021 will be driven by new technologies that can be used to streamline and improve insurance processes.
These tech trends are paving the way for the future of insurance, allowing insurers to create new products which suit a younger generation, and to make savings that brokers can pass on to customers.
1. Hard market conditions
Due to the hit that the economy has taken this year, insurers must prepare for hard market conditions in 2021: this will include limited growth and higher premiums. Insurers in 2021 will be no doubt erring on the side of caution, introducing new coverage limits and adding new terms and conditions to policies to ensure they aren't hit too hard by any potential further waves of Covid-19.
Higher rates might be par for the course in 2021, but insurers will no doubt double down on their efforts to add value and ensure that customers don't move away when premiums rise. The companies that take feedback on-board and use it to develop innovative new products that maximise customer retention rates will win - even in a tough market.
2. Data-driven insurance
Insurance has always been a data-driven industry, but new tech means that insurers can now utilise big data to their advantage. More data means that insurance policies can be customised to individuals, and that insurers can minimise risk and improve the accuracy of their calculations by considering more metrics during the underwriting process.
Throughout 2021, insurers will be incorporating new data points into their risk assessment and premium calculations. This data - which can be gathered from Internet of Things (IoT) devices, social media pages, and credit reports - can be used to more accurately price policies.
In the long run, this will save insurers money and ensure that pricing is fair. This is because low-risk customers can enjoy lower premiums, and only truly high-risk customers will be required to pay steeper rates.
3. Tailored products, fairer premiums
Driven by big data, insurance products are becoming more flexible every year. Millennials - customers in their 20s and 30s - are now one of the biggest population groups, and insurers need to market products towards this tech-savvy group if they want to stay on top.
Millennials expect more product personalisation and customer engagement, which means insurers need to brush up on their digital skills. Pulling in data from IoT devices - including wearable fitness trackers and car telematics - can be a simple way to personalise insurance products so that discerning younger customers feel they're getting good value on insurance products which are priced according to their own needs and behaviours.
Commercial insurers also need to take note. Millennials are also now mature enough in their careers to be holding decision-making powers, usually bringing their consumer mindset and expectations to their companies.
4. Cloud computing
Cloud computing, and particularly Software as a Service (SaaS) has been steadily on the rise for years now, and 2021 will see cloud computing coming into its element. As insurers rely more heavily on new technologies, cloud services will be more essential than ever before.
SaaS cloud technology can be used with an agile IT model to deliver new applications and software which brokers will need to make the most of big data and to engage with customers in 2021's tech-driven market.
5. Automation and machine learning
AI and machine learning technologies mean that many aspects of insurance can now be automated, freeing up insurers and underwriters for more important tasks while improving accuracy and efficiency.
AI software can be used to automate parts of underwriting, risk assessment, and fraud identification processes, and machine learning technology means that the AI software can become savvier to insurance industry trends with each year that passes.
The more data your AI software has to analyse, the more new emerging patterns it will pick up and incorporate into its algorithms.
6. Extended Reality (XR)
This one's still in its early days, but Extended Reality (XR) technology could turn the insurance industry on its head. XR could make data-gathering much simpler, safer, and faster by allowing investigators to assess risk and damage using a 3D image without having to visit the site themselves. XR tech can also be used to train new insurers in 'virtual' settings.
It sounds like the stuff of the future, but from 2021 XR may be ready to launch.
7. Cybersecurity and blockchain technology
Cybersecurity remains a concern in 2021, and hopefully this year we'll see more companies addressing the issue of cybersecurity and acknowledging that something must be done to improve security in the insurance sector against long-haul stealth attacks.
Emerging blockchain technology can go some of the way to making the industry more secure. Blockchain can be used by insurers to create smart contracts which are self-executing, meaning they can track claims and update conditions.
This means less work for insurers and more transparency for customers, as well as enhanced security: it's win-win on every front.
2021's insurance industry predictions are driven by technology
The emerging insurance industry trends of 2021 highlight the desire for bespoke insurance products and tailored policies, and the need for insurers to be open-minded about just how much value AI and other new technologies can bring to the table.