Driving the New Standard in Insurance

Over 90% of respondents felt the insurance industry could increase its relevance and grow faster than inflation and the general economy.

Earlier this year, we commissioned an independent global benchmark survey exploring the new standard in insurance – what it should look like and how it is affecting business. Coupled with a digitally enabled architecture, the new standard enables insurers to bring new product to market with greater speed, scale and agility and drive profitable growth through reducing expenses, creating differentiation and improving customer engagement. 

As we head into 2022, we’re hearing from companies that digitization will continue to be on top of the priority list, allowing for the delivery of customized products to better serve customers with speed and agility. While undergoing digital transformation, carriers are asking how technologies such as artificial intelligence (AI) and machine learning (ML) can be leveraged to create better digital experiences, not just for customers but for workers, too.

Paving the Way for Parametric

Over 45% of respondents said new consumer preferences and behaviors are the leading trend affecting the global industry. Second was 31% selecting the viability of technologies like artificial intelligence (AI), the Internet of Things (IOT) and blockchain.

Over the past year, I’ve heard quite a lot about parametric insurance – the concept of a smart policy that knows how and when claims occur against it based on data. We are starting to see uptake of parametric and the ability to intelligently pay out claims. For example, if you are a commercial shipping line and you have a cargo ship en route from A to B, you can automatically monitor the weather to determine what conditions the ship will be encountering. Crop insurance is similar, with the ability to monitor rainfall, hail and other weather-related damages and gauge shortages of production. This ability can support a claim in being automatically adjudicated. 

We might see an uptick here in personal lines, as well, especially with people working from home and “daily” routines becoming increasingly individualized. For example, pay-as-you-go is here to stay. As data catalogues and algorithms become tested and more mature, pay-as-you-go is changing the way drivers are insured. With “miles driven” still so unpredictable, and hybrid work and the migration of employees in-and-out of cities continuing to be the norm, usage-based insurance will see an uptick. With all these changes, carriers are catering to the needs of emerging younger drivers who prefer digital products.

An Opportunity to Never Upgrade Again

Nearly 35% (over one-third) of respondents identified high operating costs as the biggest obstacle to insurance businesses achieving profitable growth

A return to profitability and a return to high top-line premium growth makes way for a lot of projects. This presents an opportunity for the industry to move away from the need to upgrade or overhaul systems – insurers can leverage evergreen systems to stay up to date and take advantage of the latest software and security features. 

Carriers are looking to minimize both IT expense and burden. In fact, one in three carriers is experiencing this challenge that affects their growth trajectory. This has to change. Startups are known for their nimbleness and ability to react quickly to market conditions – we’re seeing this mindset now being adopted by all sizes of carriers. If the technology is keeping up, carriers can take advantage of its benefits. 

Moving to an evergreen system allows carriers to run an efficient, nimble product factory. With this comes speed, and the ability to better allocate dollars and resources that directly affect a company’s bottom line. 

See also: Achieving Digital Balance in an Agency

Deliver at Scale

Nearly 70% of respondents felt that delivering big ideas at scale across a business is the biggest obstacle to creating value.

To me, this reads as follows: the importance of aligning all stakeholders on a cultural level to the process of running a product factory. I interpret a big idea to be launching an innovative product, bringing a new capability to the marketplace, creating a better business model or scaling at speed. I think the idea of being nimble rings true here as well.

Overcoming this obstacle begins with eliminating unnecessary IT burden and aligning resources with driving business, not bogging them down with upgrades or upkeep of software. 

There are carriers whose programs have blossomed running on evergreen systems with emerging technologies. This gives them the ability to innovate with speed and deliver at scale. Ten years ago, this agility was unheard of in insurance – it was uncommon to see carriers truly push the boundaries on maximizing technology capabilities. We are seeing dollars shift in real time, and the insurance industry continues to progress as a true innovator.

Competition Breeds Innovation

Over 90% of respondents felt there was scope for the insurance industry to increase its relevance and growth above and beyond inflation and general economic growth

This is the finding that has me most excited about working in insurance – and the bright future the industry has ahead of it. Competition always drives the biggest and brightest to achieve more. Historically, in insurance, larger players are known for selling products to the same customer base. So, competition was traditionally about better price and better coverage. 

Fast forward to today, and we’re at a level of maturity where we now focus on offering new capabilities, new ways to service customers and policies and more tailored coverage options. What this does is drive innovation, and the industry elevates itself from within. Yes, external pressures from industries that have forced the issue on what true customer service is have had a similar effect on insurance, but we’re now pushing each other to be more competitive. 

Looking back at the statistic, when I hear relevance I don’t necessarily think “more” product – I think that insurance will take a different place in the world and can reimagine its perception. Insurance companies have always been seen as recovery mechanisms. Technology is helping the industry delivery more for the economy and its people – it is taking control and helping people avoid problems from the outset. 

Preventative rather than recovery: Simple examples include detectors and sensors in homes or telematics in cars – examples that have shown promise early on but have never been truly delivered at scale, nor for a broader market. Preventive measures are now being monetized to avoid the pain and hassle with losses, particularly in lines like automotive, where dollars are going toward helping customers mitigate loss versus dealing with challenging recovery. 

See also: The ‘Race to Zero’ in Insurance SaaS

I believe we will see an explosion of growth in insurance as more companies take chances and accelerate what I believe will be a new standard in insurance -- freeing resources to solve more challenging problems, finding ways to mesh capabilities together to improve product offering and partnering with more innovative third parties to elevate services. 

This is an exciting time in insurance – creating a responsibility I know we don’t take lightly.

Jeff Wargin

Profile picture for user JeffWargin

Jeff Wargin

Jeff Wargin leads development of Duck Creek’s industry-leading solutions, responsible for strategy, direction, planning and road mapping. Wargin has spent 20-plus years in the P&C insurance software market.


Read More