The insurance industry faced a wake-up call when the pandemic exposed just how unprepared insurers’ digital capabilities were in a crisis. But, in the past two years – particularly in 2021 – the industry has accelerated its digital development, making significant leaps forward in technology investments, workforce evolution and strategic planning.

Now, new SMA research shows that 100% of property & casualty insurers have digital initiatives underway. How will these initiatives and other trends unfold in the coming months? If the past two years have taught us anything, it is that the industry is constantly shifting and adapting to the needs of the world around it. So, with that in mind, below are SMA’s top five predictions for 2022.

1. Core implementation will remain hot: Core systems – policy, billing and claims – have always been foundational in the insurance industry. But insurers now recognize that the core systems of the past will not cut it in today’s digital-driven environment. Insurers need modern platforms that can plug and play with different channels and absorb new data sources. SMA predicts that core systems will remain a principal focus for insurers this year as many get ready to launch or are in the middle of rolling out new platforms. However, a slight dip in core deals is also expected.  

2. The customer experience will receive a greater focus: SMA sees more carriers embracing an outside-in lens this year to truly understand the needs of agents, brokers and policyholders. Insurers will focus on tailoring the customer experience as well as designing self-service systems that provide customers with convenient ways to communicate with their insurers when and how they want.

3. Overcoming talent challenges will be a priority: Acquiring and retaining top talent will be a No. 1 issue for many insurance companies in 2022. The industry already faced talent challenges prior to the pandemic when more of the workforce was retiring and exiting the industry and fewer were entering. In recent months, the Great Resignation has added additional strain as employers struggle to retain employees. Insurers recognize that recruiting only from local talent pools is no longer enough to fill open job positions and will have to up their game to compete against other employers in today’s competitive job market.

See also: Property Claims: It's Time for Innovation

4. MGA boom/Insurtech maturity will continue: Over the last five years, SMA has been tracking nearly 100 startup MGAs in the North American market. At the same time, incumbent MGAs are innovating their own operations and pursuing large acquisitions. SMA predicts that the MGA boom will only continue its rapid pace. Insurtech will also continue to mature and affect the industry as new entrants come into the market and older firms succeed with their current projects.  

5. Digital/AI intake will be a must: The insurance industry cannot afford to focus on paper forms and cumbersome manual processes. Digital and AI intake will be a massive priority across every sector of the industry in 2022 as companies work toward automating processes and improving the extraction and analysis of data.

For more insights on insurers’ plans and priorities in 2022, watch SMA’s new on-demand webinar, “P&C Insurance and the Pandemic: 2021 Reflections, 2022 Predictions.”

Since 2008, insurers have pressured insurance defense (ID) firms to deliver more work, of the same or higher caliber, without raising rates. In response, many firms have pursued “digital transformation” yet found little relief. The reason is that most legal software vendors don’t understand how ID firms work.

ID firms operate in six-minute billing intervals subject to “Outside Counsel Guidelines” (OCGs), the insurer’s reporting requirements and 100 or so rules on what can and cannot be billed. With rates flattening, firms must eliminate, minimize or automate unbillable, clerical tasks to improve their margins.

In my former job as chief information officer for Margolis Edelstein, a nine-office ID firm, I worked with a variety of vendors to try to solve this problem. Eventually, I realized that six-minute intervals and OCGs weren’t merely constraints on the industry; they underscored a transparency problem. Software vendors didn’t grasp this core issue and therefore didn’t address it. 

I want to discuss why the insurance defense industry still needs technological solutions to transparency and outline what they should do.

Transparency within the firm

ID firms often expect their lawyers to bill 150 to 175 hours per month, or up to 1,750 six-minute increments. Legal software ought to make this workload more achievable and quantifiable but usually doesn’t. That leaves a gap between how attorneys think they spend their time and how they really spend it.

For example, ID firms receive a mind-throttling, 24/7 inflow of emails, instant messages and other communications, compounded by need to assess whether work on them is billable. OCGs usually state that firms can bill for analyzing the contents of an email but not for finding it, opening it, organizing it or doing anything else that is deemed “clerical.” 

So, every six minutes, an ID attorney interrupts himself or herself to document work and determine what’s billable, and each new email is, potentially, cause to repeat that process. The kicker: Firms don’t know which unbillable activities take place, for what purpose, for what duration, how repetitively and at what cost. 

Legal software for ID firms must offer quantified transparency into what users actually do. That awareness is the first step toward improving financial results amid flattening rates.

Transparency with clients

Insurers want transparency from ID firms, which seek to build trusting, long-term relationships with them. Documenting six-minute intervals is the minimum. The heavier burden is reporting. 

Typical OCGs call on firms to deliver an initial report and plan for resolution within a certain number of business days; to report on the list of events considered “significant developments”; to report a specified number of days in advance of a court-ordered settlement conference, mediation or arbitration; to provide pre-trial and post-trial reports; to report on depositions, motions and appeals; and much more. 

If this list seems excessive (to non-ID lawyers), that’s the point. The insurer’s bar for transparency is such that ID lawyers constantly churn out reports. The chances of missing deadlines or forgetting a report are high, with consequences for the firm’s relationships with claims adjusters and examiners. 

This suggests another key function for software: translating OCG reporting requirements into digitized projects with deadlines, checklists and systems to ensure they get done. Software should set up the firm to deliver reports on or ahead of time. There’s no overstating how much that can improve relationships with insurers.  

See also: Insurance Technology Trends for 2022

Accountability for the team

To recap, an ID firm’s revenue is the output of minimizing unbillable tasks and maximizing billable hours. The firm’s relationship with insurers depends on a never-ending stream of reports. At their core, these are both issues of transparency and best managed with technology. That technology, however, must recognize that ID teams function as teams with shared accountability. 

Usually, each team is led by a partner who oversees associates, paralegals and administrative assistants. Members back each other up and fluidly pick up tasks. Sticky notes and whiteboards, though commonly used, are not ideal. There is a need for software to centralize communications, case files, project items, OCGs and more, so team members have the same view of the case. This eliminates lots of redundant, unbillable work and ensures that reporting deadlines are hit. 

Why wouldn’t ID firms already use systems like this? In ID firms, technology adoption can take four to five years because the risk of failure—of software sparking costly disputes or straining long-term relationships—is often considered too high. 

Time to step back

“Digital transformation” isn’t a synonym for buying new tools. Rather, it is a rethinking of processes, cultural norms, and strategies in light of new capabilities and market forces, like flattening rates. My call to ID firms is to put transparency at the heart of this process. 

I’ve suggested what software can and should do for ID firms. It is on their leadership to decide whether those six-minute intervals will become more meaningful—and profitable.

The nostalgia bug bit me when I heard "The Matrix Resurrections" was set to premiere at the end of December. To prepare for its release, I rewatched the prior movies. I was surprised to find that these movies captivated me in a wholly different way than when I first saw them. As someone who moved into the world of artificial intelligence (AI) and machine learning in the last few years, I found the original movies' themes of reality and choice inspired a lot of thought around AI – specifically in the context of conversational data. 

"If real is what you can feel, smell, taste and see, then real is simply electrical signals interpreted by your brain." – Morpheus, Matrix (1999)

The basic definition of AI is computers or machines performing functions typically associated with intelligent beings. These computers use highly advanced mathematics and robotics to imitate human cognitive and advanced motor functions. The machines can take actions like shaking a hand if someone extends it or recognizing a picture of a four-legged animal as a dog or cat. These capabilities are surprisingly complex when you think about each task that goes into making those assessments. AI can be narrow—the ability to do one dedicated task. Or, it can be general—the ability to do multiple, disparate tasks. 

For our purposes in insurance, let’s divide AI into four major categories:  

1. Vision: The ability to interpret and act on or generate pictures and videos 
2. Speech: The ability to interpret and act on or generate sounds 
3. Natural Language: The ability to interpret and act on or generate written words  
4. Decision-Making: The ability to approximate models of human choice and actions 

For insurance, the one category that can upend our entire system is natural language. The power behind natural language is conversational data. Conversational data originates throughout the insurance lifecycle from policy acquisition to claim resolution and policy renewal in the countless emails, webchats, phone calls and text messages among the policyholder, carrier employees, agents/brokers and ecosystem partners. However, the industry has done little with this data for several reasons, including limited capacity and capabilities. We have spent significant capital and sweat equity to modernize and undergo digital transformation over the last decade. We have also allocated considerable resources to build data infrastructure and compete with other industries to acquire data scientists and data engineers. 

See also: The Challenges of 'Data Wrangling'

These limitations will change in the next few years as the industry catches up. Carriers have started to unlock the power of conversational data through new conversational AI capabilities like chatbots. However, for most carriers, these capabilities have been primarily focused on cost reduction through self-service opportunities to battle the pressure on premium growth from alternative direct-to-consumer offerings from insurtechs and companies in adjacent industries such as automakers and smart home manufacturers.

"Have you ever had a dream, Neo, that you were so sure was real? What if you were unable to wake from that dream, Neo? How would you know the difference between the dream world and the real world? " – Morpheus, Matrix (1999)

In this transitional state with limited conversational AI capability, the bots and processes are more mechanical, presenting many points of potential customer frustration and friction if carriers are not thoughtful in their approach. During this period, carriers can minimize some of the impact by following a few principles:

1. Minimize the bot. Don’t overengineer the process for the sake of automation. Designing intelligent communication flows taught us that if a bot asks a policyholder more than five questions, they are likely to yell or frantically type “talk to a representative.” The carrier will start in the negative for that interaction. Carriers need to ask, “What is the smallest number of questions I can ask to get to the root of the issue to resolve?” Much of that insight comes from poring over the prior data to find the underlying patterns. 

2. Don’t be afraid to tag in a human earlier through failover processes. Doing so will both prevent the interaction from starting poorly and give the bot another trainer. Before moving on to the next task, build in time for the operator to provide feedback from the conversation and policyholder behaviors to inform future training sessions with the bot. It is a small investment today that will pay enormous dividends.

3. Train, train, train. Before releasing any bot, make sure to run it through its paces. Map common journeys and understand policyholder intent and utterances so the bot produces the right response pattern. This requires a good data model with robust infrastructure to meet response speed. Also, having a dedicated research team for new natural language processing algorithms will help immensely, as new models are making it easier to understand context within the text (a good example is transformer models).

Remember these principles to reduce poor experiences during this transition. Eventually, the bots will substantially improve, becoming much better human proxies as machine learning algorithms improve at a breakneck pace. With continuing pressure from alternative options in the market, many carriers will likely acquiesce to the allure of moving many more human tasks in insurance completely over to bots to remain cost-competitive. The insurance industry has been dealing with this commoditization trend over the last decade as carriers underwent the current digital transformation of web, mobile and self-service. As a result, insurance has become a low-engagement, price-sensitive category for the common consumer.

The continuation of this trend will require carriers to constantly manage the optimization between perceived policyholder value for their products, carrier pricing power, cost of service delivery and internal change agility to gain even modest market share versus peers. Carriers will no longer be policyholder experience managers, they will transform into data and technology companies optimally transferring risk, especially as usage-based pricing and new competitors become more prominent across the consumer base. Only the most sophisticated, data-oriented companies survive in this future. 

"Because you didn't come here to make the choice. You've already made it. You're here to try to understand WHY you made it." – Oracle, Matrix Reloaded (2003)

It’s crucial to pay attention to additional environmental changes that are creeping up. The recent backlash on Meta and other firms' use of machine learning and AI to drive customer behaviors may cause consumers/policyholders to revolt because they distrust companies that collect data, thinking they will misuse it or try to “manipulate” them. Additionally, as we discover insights into systematic bias in machine learning and its societal impact, regulators may step in with policies restricting its usage. Finally, we could make the choice ourselves as an industry – do we want to continue down the commoditization path by focusing on rote cost-cutting? 

See also: Why Exactly Does Big Data Matter?

As Merovingian said in "The Matrix Reloaded," “Choice is an illusion created between those with power and those without.”

We should remember why we are in insurance — to create real value for the policyholder, the carrier and other stakeholders — and do everything we can to ensure the power of conversational data is used to reverse the commoditization trend. Our industry began with the dream of human empathy and fear reduction when people were the most uncertain about their future.

Rather than investing in artificial intelligence—teaching machines to work like humans—we can empower agents, adjusters and underwriters to keep human empathy in play by investing in augmented intelligence—using machines to help humans work better. We can use conversational data to create brand segmentation strategies that meet policyholders’ needs for who they are and what they want. And we can use conversational data to both cut costs and automate non-value-added tasks like phone tag while focusing on creating truly loveable experiences for policyholders. Ultimately, it is our rebellion and our choice to take the blue pill or the red one.

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Will Customers Turn to Big Tech? Paul Carroll, Editor-in-Chief of ITL Since I got involved with ITL nearly 8 1/2 years ago, a vague threat has been hanging over the industry: that Big Tech would somehow invade and capture all the profits in much the way that Amazon did with retail commerce. That obviously hasn't happened -- but a recent survey shows that customers remain at least a little Big Tech-curious.  The survey of 1,500 consumers, by Breeze, found, for instance, that 55% of consumers would be inclined to buy a hypothetical insurance product from Amazon over traditional insurance carriers. Fewer than half said they'd prefer Google or Facebook to traditional carriers -- but if the 46% who said they'd prefer Google and the 38% who said they'd prefer Facebook actually bought from a Big Tech company, then the whole industry would be turned upside-down. No company has a 20% market share in any insurance line, so Big Tech could become the dominant player if even a fraction of customer interest were turned into purchases.   continue reading > New Majesco Research Read Majesco's latest report to better understand how the insurance buyer sweet spot has shifted to Millennials and Gen Z and what emerging insurance trends are driving new opportunities. Download the White Paper SIX THINGS Key to Competitive Carrier Strategies by Marie Carr Carriers that continue to work from vague three- to five-year timelines will lose market share and perhaps wind up as someone else’s acquisition. Read More Eliminating AI Bias in Insurance by Anthony Habayeb Insurers face a conundrum: Insurance requires bias (in terms of how risks are priced) but must be fair. Read More Game-Changing Trends in 2022 for the Future of Insurance Sponsored by Majesco Read this report to better understand the recent changes in customer behaviors and expectations and how new capabilities and technology can make emerging opportunities become a reality. Read More 3 Powerful Data-Driven Strategies by Leandro DalleMule With super granular data continuously becoming more accurate and available, some companies will take advantage and win the market Read More Managing New Age of Construction Risks by Michael Pignataro The global construction market is set for a sustained period of strong growth post-COVID-19, with radical changes in design, materials and processes. Read More Emerging Risks With Long Tails by Donna Galer Brokers and risk managers should prepare for possible claims many years from now related to climate litigation and "forever chemicals." Read More How AI Can Solve Prior Authorization by Mark Scott Physicians spend nearly two full business days per week on prior authorization requests as part of an antiquated, manual process. Read More The Virtual Insurance Agent Sponsored by Creative Virtual  With conversational AI, insurance companies can deliver easier and more convenient digital support to customers, improve agent experience and productivity, and reduce contact center traffic. Read Now MORE FROM ITL January Focus: Parametric Insurance "By having a simple yes/no metric, such as a temperature that rises above a certain level or drops below a specified level for an agreed-upon amount of time, parametric insurance removes the need to have an adjuster go into the field to inspect..." Read More   How to Lay the Groundwork for Innovation in Commercial Underwriting   Sponsored by Intellect SEEC In this webinar, ITL Editor-in-Chief Paul Carroll sits down with Jim McKenney, chief strategy officer and products business head at Intellect SEEC, and Sandeep Tandon, CTO of Intellect SEEC. Read More   Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2022 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward

1. Automated Underwriting Will Grow

The benefits of saving time and money have led to many insurers implementing automated underwriting. LIMRA says more than a quarter of U.S. life insurers have expanded their automated underwriting practices.

Now carriers are turning to software vendors that offer robotic process automation and AI to enable automated underwriting for group and voluntary benefits providers.

2. Ditto for Automated Claims

More than half of claims activities have already been replaced with automation, McKinsey found.  Fully digital claims have reduced the average payment time by up to 5.5 days and assisted in achieving the highest satisfaction scores ever measured by the J.D. Power U.S. Property Claims Satisfaction Study. 

Expect major investments in machine learning made in 2021 to accelerate back-end claims processing in 2022. Additionally, as insurers grow their partner ecosystems, application programming interfaces (APIs) will be increasingly deployed to smooth out the transaction and settle claims using third-party anti-fraud algorithms, databases and various machine learning applications.

3. Customers Want More Touchpoints

However, many consumers remain skeptical of the increased use of technology and automation in the insurance industry. A study by Accenture finds only 12% of insurance consumers trust an automated phone/web service when making a claim, while 49% trust a human adviser.

Insurers need to give customers more touchpoints. For example, regular electronic newsletters can highlight new product offerings, and company updates can point out that customer reps are always available. 

4. Consumer Resistance to Virtual Assistants Must Be Addressed 

Insurers can drastically reduce costs and turnaround time by adopting high-quality digital assistants that use conversational AI-based chatbots. While chatbots pose great opportunities, many consumers are skeptical about doing business with voice assistants. They still want to communicate with humans even if they have to wait in a queue.  

Striking a balance between approaches is key, and it will require some trial and error to determine when a chatbot should let a human take over to best meet a customer’s needs.

5. Machine Learning Will Help Detect Fraud

This is an increasingly valuable way for insurers to detect and prevent fraudulent claims. Claims management and fraud prevention will continue in 2022 to advance as one of the most prominent areas where machine learning works for insurers. 

6. “Cloudy” Weather Means Security Is Needed

While teams that take care of your system updates also work around the clock to ensure their cloud platform is secure, this does not mean that the cloud is a silver bullet when it comes to security. 

Insurers preparing for cloud deployments must understand the importance of the shared responsibility model. While cloud infrastructure providers like Amazon, Microsoft and Google are responsible for the security of the cloud (infrastructure level), SaaS providers and their customers are responsible for security in the cloud at the application level. 

Ransomware is growing. Insurers must adhere to security best practices relentlessly.

7. Blockchain Technology Will Advance

Many carriers are improving underwriting with smart contracts and blockchain. Underwriting improves because insurers can review accurate information on past insurance policies and claims and offer more precise pricing and selections for their insurance products using this new insurance technology. 

While blockchain and smart contracts possess great opportunities for insurers, many are struggling to adapt. But adoption will continue to grow.

8. The Metaverse Will Draw Interest 

The launch of the metaverse got insurance companies thinking about using extended reality to their advantage. A study by Accenture indicates 85% of insurance executives believe it’s essential to leverage XR insurance technology to close the physical distance gap when engaging with employees and customers.

9. Digital Distribution and Self-Service Will Become More Robust

Digital distribution enables customers to buy insurance products online, speeding the purchasing process and improving the customer experience. For example, State Farm’s self-service portal lets clients buy insurance policies online without taking a medical exam. The result has led to State Farm ranking second in client satisfaction among life insurers. 

Digital distribution allows agents to do business with more clients, letting insurance companies lower commission costs per sale. In addition, the desire for superior digital tools among agents is more vital than ever. Many agents rate investing in digital or customer tools as the best way their employers can support them. 

10. Insurtech Ecosystems Will Improve

McKinsey predicts ecosystems will account for 30% of global insurance revenues by 2025. Additionally, research from Accenture found 84% of insurance executives say ecosystems are essential to their strategy. These numbers indicate ecosystems will continue to be the insurance industry’s next big frontier for disruption.

11. Low-Code/No-Code Platforms Will Grow

Low-code/no-code software can reduce application deployment time from several months to a few hours! In 2022, this will be more pertinent than ever. Appian’s research shows IT departments are losing control over their growing digital infrastructure, and project backlogs are outpacing the addition of new IT resources. Low-code/no-code platforms don’t replace IT departments. Rather, they give IT breathing room to deploy their technical resources more strategically.

Low-code and no-code platforms may run the risk of encouraging “shadow IT” environments – managed outside of the IT department. This could result in security and workflow issues, inconsistencies in business logic and other unforeseen problems. Low-code/no-code solutions should be implemented following software development lifecycle and architectural best practices in collaboration with IT.

12. Predictive Analytics Will Aid in Competitive Benchmarking and Modeling

In 2022, insurers and distribution partners will be able to do much more with their data by using predictive analytics. PA takes historical data and feeds it into models that are trained over time with machine learning to generate predictions about trends and behavior patterns. Insurers can then make informed decisions about quoting, workload optimization, product recommendations and more.

This is especially valuable in employee benefits sales and underwriting. Insurers can leverage machine learning to process historical or synthetic data to identify the most successful sold plan designs for particular group sizes and industries. Using AI to generate a recommended alternative quote provides a valuable benchmark based on reliable data and reduces the guesswork.

13. Accelerated Underwriting Will Expand 

Since the pandemic began, many insurers have had to embrace accelerated underwriting, supported by digital self-service tools and insurance technology. Now some lower-risk applicants can fly through the underwriting process without taking tests requiring body fluids. A survey found 74% of insurance companies say accelerated underwriting has reduced wait times for policies, 59% say it has diminished policy issue costs and 37% say it has increased sales.  

Additionally, predictive analytics and machine-learning algorithms in underwriting make it easier and faster for customers to obtain life insurance coverage by skipping traditional tedious underwriting processes. 

14. Open APIs Will Enable Growth 

Open application programming interfaces are publicly available application programming interfaces that give other developers access to a software application or web service. They also manage how applications can communicate and interact with each other.  

Open APIs let insurance companies showcase their services to the outside world so external partners can use them and bring added value to their customers. Companies connected through APIs can create an insurance technology ecosystem to offer a best-of-breed customer experience by intertwining digital services provided by multiple companies. 

For example, a car dealer that uses open APIs could partner with an auto insurer to help sell car insurance right through the car dealer’s app. This would make it easier for customers to buy a car and insurance simultaneously.

15. Proactive Risk Management Will Grow With AI and Big Data

Life and health insurance companies are increasing their use of AI and predictive analytics to develop more preventative measures for their clients. 

Big data offers revolutionary insight into a customer’s lifestyle, diet and general health. Insurers can better understand potential risk factors and make recommendations such as encouraging healthy habits to avoid future health issues. Potentially, an insurer could recommend the insured go to an emergency room because of the acute risk of a heart attack.

Additionally, big data collected from wearable devices can provide critical health and fitness information for life and health insurers. This information is crucial to developing interactive life insurance policies that track fitness and health data wearable devices and smartphones. 

16. Tech Will Facilitate Embedded Insurance

InsTech London defines embedded insurance as ​​“abstracting insurance functionality into technology in a way that enables any third-party distributor (usually a product or service providers in other sectors) to seamlessly integrate insurance products and solutions into their own customer propositions and journeys.”

For banks, car manufacturers and other distributors, implementing embedded insurance as part of a sale can help increase revenue and improve the overall value of their products or services. This is a win-win for both insurers and distributors as insurers can save money on distribution costs by implementing their products directly into the distributor’s platform. 

17. Machine Vision Will Prove to Be, Well, Visionary

Machine vision refers to the AI-based analysis of images from sources such as smartphones, satellites and drones. In simple terms, machine vision is the eyes of applications and machines. It uses software algorithms to assess visual images based on existing data sets already assessed by humans. 

In employee benefits, machine vision can greatly streamline the quoting process. Many requests for proposal still come in as images and PDF documents that cannot be interpreted as text by a typical computer. Moreover, client information cannot be copied and pasted from this format into the quoting tool, requiring manual rekeying of information by a human underwriter or salesperson whose time is better spent elsewhere. Expect adoption to increase in 2022.

18. Health Wearables Will Take Hold

The demand for health wearables is booming as advanced insurance technology allows people to monitor their health progress and get rewards for healthy living. 

These services track a wealth of data, such as daily steps, sleeping patterns, activity levels, heart rates, calories consumed, UV levels, temperature preferences, when people are home and not, and distance traveled in cars. 

Data collected from wearables can provide critical health and fitness information. This information is vital to developing interactive life insurance policies that track fitness and health data through wearable devices and smartphones. In addition, the data gathered can give complimentary coverage or improved rates for both individuals and employee benefits using health and risk scores.  

19. Automated Renewals Will Boom

Automated renewal applications can limit the need for carrier intervention for stock quotes by automatically queuing quotes for manual review and auto-generating policy renewal packages. 

Additionally, automated renewal applications can connect with policy administration and claims systems by leveraging data for re-calculations at the anniversary of a policy’s renewal. This allows insurers to not worry about tracking renewals and the manual preparation of renewal quotes and letters. Employee benefits insurers can reduce renewal turnaround and touchpoints by 75%.

20. Automated Workload Balancing for Quotes Will Take Hold

During periods like open enrollment for employee benefits, the high volume of quotes requiring underwriter review can slow processes due to an inefficient allocation of human resources. About 30% to 40% of an underwriter’s time is spent on administrative tasks, such as rekeying data or manually executing analyses. 

With AI, workload recommendations can be generated automatically. Carriers can train machine-learning models to assist sales and underwriting managers in suggesting the most effective distribution of quotes across the underwriting team.

Let’s try some word association. Maybe we could begin with the word “change.” What does the word mean to you? You can tell a lot about people (and about companies) by their responses to the concept of change. Does change cause excitement or dread or both? Of course, much depends on what is changing. Do we have reason to be excited? Can we embrace a little of the unknown to grab hold of the positive side of change?

If today’s market trends are any indicator, the level of change has never been greater, and insurance’s opportunities have never been more numerous. People and businesses need insurance and they can look at the world right now and see every motivation to protect their interests.

Majesco recently released its 2022 Consumer Report, Your Insurance Customers: A Crystal Ball of Big Changes in a Small Window of Time. The report is both an overview of real insurance trends, as captured by our customer survey, and an analysis of what those trends mean to insurer adaptability and overall opportunity. In today’s blog, we’re going to look at two related segments of the report: individual and family changes that are affecting life and health insurance and numerous demographic trends that will affect life, health and voluntary benefits.

Which trends are most likely to drive insurance purchases?

Family changes will boost life and health products

Insurers have commonly looked at the points of family change for opportunities to sell insurance. Today, however, insurers have the opportunity to improve products and placement. In the Majesco report, Gen Z & millennials have high expectations that their families will change soon. This undoubtedly helped raise the importance of insurance to them, with 25% planning to have children and 22% expecting to be caring for an aging parent or relative (Figure 1).  Furthermore, 15% expect to get married. Among the older Gen Z and millennials, 14% expect to have a child in college or tech school, reflecting the transition into later family life stage changes and subsequently the opportunity for insurers to offer life and health insurance, both as individual and as voluntary benefits. 

In contrast, the older generation is entering their later life stages with retirement and will focus on maximizing their income through life, annuity and other investments as well as retaining coverages they want once they leave full-time employment. The ability for insurers to help them retain their money and manage their income, while also providing insurance to manage the increasing risk of age, is becoming a significant market opportunity that will require new products, services and partnerships to deliver.

Figure 1: Expected family-related changes in the next 3 years

 

Life insurance takes an unexpected turn

Interest in life insurance in 2021 and beyond had an intriguing decline. (See Figure 2). Majesco’s 2020 survey responses were received as the pandemic was heating up, explaining the jump in individual life insurance among Gen Z and millennials, something we saw play out in the market and media. Gen X and Boomers remained largely unchanged.

What is less understood is the anticipated drop in individual life insurance between 2021 and 2024. A number of factors could be influencing this decline, including not needing any additional purchases, a shift in employment where insurance may not be available, retirement, a lack of life policy portability from employee benefits or even a lack of affordability, because life insurance is a discretionary purchase.

Insurers will need to continue to innovate with digital life products and look at new channels to capture customers and retain growth in this insurance segment. They will also need to continue to track customer sentiment that might be related to the pandemic and consider how the pandemic has, at the very least, exposed areas of family vulnerability. Is life insurance one of the first expenses to get dropped when home budgets get squeezed? Is there a way for insurers to “protect the protection” and give customers a better feeling about all that their coverage supplies?  Are the right channels being used to buy insurance?  Is the product easy to buy?

Once again, stability is the core motivator. If insurers can isolate those portions of the population who need improved stability and meet them at the easiest points of entry, there will be an overall improvement in coverage and an uptick in policy purchasing.

Figure 2: Households with purchased individual life insurance

Interest in value-added services is high for life and health benefits

As I mentioned in an earlier blog, Game-Changing Trends in 2022 for the Future of Insurance, there is an increased desire for value-added services within insurance. Value-added services offered within life, health or voluntary benefits received very high marks of 73%-87% for Gen Z & Millennials. (See Figure 3.) While there was lower interest of 44%-67% for Gen X & Boomers, these numbers still suggest specific demographics within this segment would be interested. Together these numbers reflect a strong opportunity for insurers to experiment with new offerings, such as a fitness tracker program that would encourage healthy lifestyles, provide alerts on potential health issues, and assist with financial wellness planning.  These offerings would provide a new level of engagement with customers and develop trusting relationships that can ensure retention, but more importantly they can uncover potential new sales opportunities. 

Figure 3: Interest in life, health, voluntary benefits value-added services

Sales channel insights for life/health/accident insurance

Both generational segments strongly agree that traditional insurance company and agent channels deliver the best purchase experience for this insurance segment, while they split interest for the new and high-tech channels (a pattern for other types of insurance, as we’ll see later) as reflected in Figure 4. Pay special attention to the New and High Tech segments of Figure 4 and the gaps between the generations. Gen Z & Millennials are significantly interested in these newer channels.  They use them regularly, building loyalty and trust.

Insurers should rapidly embrace a multi-channel environment with innovative partnerships if they are to capture and retain the business of this younger generation, as they begin to evolve their lives and have increased insurance needs.

Figure 4: Interest in life, health, accident insurance purchase channels

Real premiums based on real life tracked in real time

Overwhelmingly, basing life, health and accident insurance premiums upon digital real-time data is popular with Gen Z & Millennials on a range of 71%-78%. While popularity among Gen X and Boomers is not nearly as high, they still have a solid interest of over 50%. Over our annual surveys, we have seen the younger generation open to using personal and other data as long as they get value. These numbers reflect that perspective.

The use of a fitness tracker for that data is popular and will likely grow given the focus on wellness by both generational groups.

Stability in motion

People love to travel, but they would like the stability of knowing they are covered without the inconvenience of having to sign up for insurance on every trip. There is a high interest in accident insurance coverage triggered when a mobile phone senses traveling. This will require insurers to use new data sources, but it will result in the convenience, ease and stability sought by customers. Both generations are interested, but when you consider the 79% interest level of Gen Z & Millennials (see Figure 5) combined with their plans for increased travel in the next three years, this offers a potential new on-demand product and market opportunity. 

Figure 5: Interest in ways to activate and determine the cost of life, health, or accident insurance

Stability through the employer: Are group and voluntary products staying relevant?

Use of employee health and voluntary benefits showed sharp declines in our current survey, and surprisingly low expected levels of usage in the next three years as highlighted in Figure 6. The decline is another indicator of COVID-driven job loss and the “Great Resignation.” We speculate that the low expectations for the future are driven by the changing nature of work among Gen Z & Millennials described above, and Gen X & Boomers retiring and leaving the workforce in increasing numbers. 

It’s clear that group and voluntary benefits companies must innovate around their products with coverages for a younger generation who have different lifestyle needs as well as for on-demand workers who are estimated to be an increasing part of the workforce. Innovative new plans and insurance options such as pet, cyber and identify theft insurance as well as portability will become increasingly important for employers to attract and retain employees, but also for insurers to keep customers as they change jobs. In addition, offering individual insurance products as part of a benefit plan that allows people to keep the insurance if they leave their employer is increasingly important. Portability of group underwritten policies do not always do well because of the higher premiums, whereas offering individual products as a part of a benefit plan avoids that issue. In a roundtable we did late last year, this was a key topic of discussion and interest.

Figure 6: Households with employer and voluntary benefits

Within voluntary benefits, Majesco took a deeper dive into which benefits would be most desirable in the future. It’s important to note, however, that even niche products are showing the potential for growth and some common “traditional” products are showing interest growth through the employer channel. (See Figure 7.)

Traditional benefits for health, dental, vision and life garner the highest interest from both generation segments, with health particularly important to Gen X & Boomers (76%). Accident, disability income, critical illness and long-term care has a medium level of interest, with disability income exceptionally higher for Gen X & Boomers (73%) as compared to Gen Z & Millennials (46%). Newer, non-traditional voluntary benefits averaging 15%-20%, reflecting potential growth opportunities. These products can be significant differentiators for employers to attract and retain talent with the younger generation. For example, homeowners insurance and student loan assistance have strong appeal with Gen Z & Millennials, while others in this group like identity theft and auto insurance appeal to both generation segments.

Figure 7: Breakdown of anticipated/expected Voluntary Benefits

Portability is rising in importance

Offering these benefits as part of different plans for different employee demographics and making them portable offers employers an opportunity to strengthen employee satisfaction and address the continuing fight for talent that will continue. As the older generation moves into retirement or semi-retirement, the desire to retain valued benefits via portability is also high, given that Medicare does not cover all their needs. For portability, the key is for the product to be individually underwritten versus group underwritten, where the premium becomes too expensive. In our research last year, 64% of Gen Z & Millennials and 57% of Gen X & Boomers said this would be valuable to them. This jumped significantly for Gen X & Boomers this year, to 70%. (See Figure 8.)

Figure 8: Importance of Voluntary Benefits portability

Seize the future

Stability, for customers, is about seeing into the future and anticipating where issues might crop up that would damage their lives. As Majesco’s report shows, insurers can’t go wrong if they are making every effort to meet these current and future demands for security. The formula is simple: Offer the products desired in the places needed with the convenience of seamless experience. The follow-through is more complicated: Bring systems and processes into line with the customer’s lifestyle and demands.

For a thorough look at the consumer trends that will affect your future, be sure to download Your Insurance Customers: A Crystal Ball of Big Changes in a Small Window of Time.

During InsureTech Connect (ITC) 2021, the world’s largest gathering of insurance industry executives, tech entrepreneurs, and investors, Chisel AI’s President and CEO Jason McDermott participated on a panel discussing “The Future of Commercial Insurance Underwriting” moderated by Mike Fitzgerald, principal insurance analyst, CB Insights. Mike posed a timely and compelling question: “What are the traits that make a commercial insurer successful at any digital transformation?”

McDermott’s responded: “As I see it, it has nothing to do with the right technologies or skills – but it has a lot to do with courage. Yes, courage. Don’t get me wrong – change is happening now. Disruption is occurring. But in my opinion, we can do better. We need to be more courageous. We need change agents who want to lead their organizations on this journey of transformation.”

McDermott challenged the audience of commercial lines insurers and insurtech peers to be courageous and take a page out of the "tech startup" playbook: “Having spent 30-plus years of my career working with technology startups, I’ve experienced first-hand how it feels to take a leap of faith and stand on the ledge of uncertainty. We’ve all been scared at one time or another. Change is a constant in our personal and professional lives, but for many it’s not easy to accept or embrace change. So, we need agents of change – to provoke change, to act as the catalyst for change and to emphatically guide co-workers and peers through the transformation. It takes courage and the right level of empowerment to deliver business-changing innovation.”

 

Championing Your Change Agents

McDermott’s comments echo those of many within the commercial insurance industry and the insurtech ecosystem that serves it. We’ve been talking about the need for commercial insurance to digitize, evolve and transform for many years, but are we moving fast enough to keep pace with changing market conditions and customer expectations, and are we building the right culture and change management practices to encourage bold thinking and mobilize meaningful innovation that can really move the needle for the industry?

“I think our digital aspirations need to be a lot bolder,” argues Tina Osen, president, Hub International Canada. “We’re comfortable with a year where we deliver solid single- or low-double-digit growth, and we think that’s awesome. But I believe that, if we set these bold aspirations for our digital strategies, we can really see tremendous results. I also think, while it’s important that we can get gains in efficiency and cut costs, we really need to look at digital as an enabler to generate new revenue that will drive numbers that are significantly stronger than we’re currently driving as an industry.”

Successful digital transformations are predicated on three factors: people, process and technology. With technology as the enabler, it takes individuals with the grit and determination to thrust innovation forward within their organizations, rally others for the change ahead and reimagine new approaches to drive tangible business outcomes. One of the greatest roadblocks to digital transformation in commercial insurance is a lack of organizational courage. In an industry composed of professional risk managers, courage to challenge the status quo is not a natural strong suit; it must be cultivated and nurtured.

“Change management is a skill that few organizations have mastered,” says Ryan Collier, chief digital officer and president of executive lines at Risk Placement Services, a leading MGA and wholesale insurance broker. “A company with a strong, adaptive digital culture has a far greater chance of successfully transforming and continually growing than one whose culture resists change. To really do business differently, it requires a commitment and vision from leadership. Bold leadership done right inspires and builds trust. When people trust leadership and believe in the vision, they will lean into change rather than fight it.”

"One thing that insurance companies can learn from non-insurance companies is that it’s okay to fail,” says Bob Frady, vice president, HazardHub, part of Guidewire. “One of the hardest things I had to learn is that insurance people are rewarded for not being wrong rather than being rewarded for being right. It makes for some very risk-averse people and processes. Sometimes you just have to spin the wheel and see what comes up. Just because something is different doesn’t mean it’s bad. That’s not something that comes naturally to many people in the insurance industry.”

Brian Falchuk, author of The Future of Insurance: From Disruption to Evolution, TEDx speaker, former insurtech executive and managing partner of Insurance Evolution Partners, believes that this established idea of “That’s not how we’ve always done it” is the “number one killer of change.”

Amy Radin, author of The Change Maker’s Playbook: How to Seek, Seed and Scale Innovation in Any Company, says, “You have to cultivate a culture where people understand that innovation is part of what is going to make us successful and so people feel safe taking risks, putting their necks out and working on things that may take several iterations to pan out or may never pan out. If on the other hand, it’s a culture of fear where people don’t trust each other, and where people don’t feel that management has their back on taking the risks that are inherent in innovation, they will not bring their best innovative selves to work.”

Navigating by the North Star

Building and maintaining an innovation-focused culture within established insurance organizations can be easier said than done. Risk aversion is deeply ingrained in the industry, and in the DNA of many insurance professionals. It takes strong, clear and decisive leadership to change a culture.

“First and foremost, culture is critically important, because it is the connection to your strategy and the DNA of the team,” says Tony Fenton, vice president of commercial lines underwriting and product, Nationwide. “Culture is what folks do when someone’s not around, and truly creating that operational principle for the team to really strive toward the results, as well as have that North Star in terms of what you stand for as an organization. I do think that without the right cultural pillars, you probably don't have the North Star in terms of what you're aiming to accomplish."

Fenton continues, “If you don't have a strong culture, if you don't have the pillars, you probably don't have the North Star in terms of what are you strategically trying to accomplish and connecting each of the individuals into that strategy. One thing I've found over the years is all professionals want to see themselves in the strategic picture. Having the right cultural DNA against your operational strategy is the glue that really keeps the company moving forward.” 

The ability to sustain momentum is critically important because large-scale digital transformations don’t happen overnight; they’re multi-year initiatives that require a long-term strategic vision as well as the concerted effort of many different people at all levels of the organization who are on the front line of the transformation.

Hub International’s Tina Osen says, “I’m a big believer in bite-size pieces, fail fast, iterate, try again, prove it out and then expand. So, you garner that success, the momentum and energy to move it to the next level."

Empowering the Doers

“Change management truly is an organizational movement; you can’t do a top-down change management or a bottom-up change management. You must do them both together,” Travis MacMillian, chief business officer, Xceedance, believes. “First, you have to have leadership that’s completely on board with a transformational change, and they're sponsoring it, and they're aligning it to their strategic direction to say, 'Organizationally, here's where we want to go.'

“At the same time, they need to surround a group of folks that are the doers. They're the workers doing it every day, and get them to embrace the vision, and how they can see the transformation really impacting their roles from a bottom-up standpoint. And when you attack it from both vantage points, the outcome there is successful. If you do one or the other, you have the potential of failing, from my experience. So, it has to be attacked from both ends, and I think that when it’s done right, I think that companies will be successful. The other thing that I would lay out there is that you can’t take that journey alone.”

Abel Travis, VP and head of Fundamental Underwriters, a division of AF Group, says: “While digital transformation feels like a technology initiative, really, it’s not a technology initiative. It’s a business initiative that impacts the entire culture. You have to have change agents, plural, and not just one owner for all the digital transformation. Because it’s something that is going to have implications for folks all across the entire enterprise, you have to have change agents in each of the different areas across the enterprise. It’s necessary to have a business change agent and a technology change agent.”

Tina Osen says, “I think probably one of the hardest things when you’re doing big change management projects is you have to put your best people that are influencers in the organization on these change management projects. That can be hard to execute because those are the folks that are having such an impact in the day-to-day. But those are the individuals who can identify the business problems that are going to arise, who have that influence through the organization, and who really can create change in a way that anticipates some of the challenges that will come at you.”

Brian Falchuk stresses that you need to think about who is in the room when it comes to planning and executing innovation initiatives: “It takes those teams having the right mix of seniority. If you have really senior people in there, chances are really junior people, especially if you don’t have an ‘obligation to dissent’ kind of culture, they’re going to clam up, and they’re going to be scared to talk. So, you need to think about, culturally, how can you make sure the people in that group are willing to say things. But then you need the right sort of sponsorship…. You don’t want your C-suite executive sitting on them to squash them. You want someone who recognizes, ‘My role here is to help this move forward,’ and to trust that this group of people across lots of different roles and functions and levels in the company really put in the effort to understand this problem and to design a solution.”

Amy Radin believes that a key element of empowering change agents is investing in education and skill development: “You can’t just wake up in the morning and say, ‘Okay, we’re going to be innovative, and now go be innovative.’ It really requires unique skills and capabilities. Part of empowering is making sure that you’re helping people develop the skills and that you’re investing in the capabilities that they need.” 

Osen says, “Every time when we have failed on change management projects, it’s usually tied to two things, poor communication or poor training and education.” 

Fortune Favors the Brave

To achieve business-changing innovation, insurers need to find ways to embolden change agents and embed courage into their culture so that it permeates every level of the organization from top to bottom.

“You can’t be afraid to try something new,” says Xceedance’s Travis MacMillian. “We’ve done things as an industry very traditionally. Step out, be the change agent, be the leader and push the boundaries. And again, you may fail. Fail fast, correct, try again, until you’re successful. And that’s a repeatable process.”

Chisel AI's Jason McDermott adds, “Forward-thinking insurance organizations that embrace innovation and successfully transform will be the ones that have a change agent at the helm, who have willingly raised their hands to inspire and influence others to change. Make no mistake – it takes courage to step up to the challenge and accept risk. It’s not for the faint of heart, but so rewarding – it will challenge and test you. I promise you that it will be personally and professionally fulfilling and enrich your day tenfold when compared with the alternative of doing nothing and accepting complacency.”

Watch this Space

In the coming months, we’ll dig deeper into this topic to define the characteristics of an effective change agent and discuss practical approaches insurers can use to identify and empower these individuals to drive meaningful innovation within their organizations.

Since I got involved with ITL nearly 8 1/2 years ago, a vague threat has been hanging over the industry: that Big Tech would somehow invade and capture all the profits in much the way that Amazon did with retail commerce. That obviously hasn't happened -- but a recent survey shows that customers remain at least a little Big Tech-curious. 

The survey of 1,500 consumers, by Breeze, found, for instance, that 55% of consumers would be inclined to buy a hypothetical insurance product from Amazon over traditional insurance carriers. Fewer than half said they'd prefer Google or Facebook to traditional carriers -- but if the 46% who said they'd prefer Google and the 38% who said they'd prefer Facebook actually bought from a Big Tech company, then the whole industry would be turned upside-down. No company has a 20% market share in any insurance line, so Big Tech could become the dominant player if even a fraction of customer interest were turned into purchases.  

The potential threat doesn't stop with Big Tech, either. The Breeze survey found that "66% would be interested in buying auto insurance from an automobile manufacturer like Tesla, Ford, or Honda instead of from a traditional carrier." (I've written about how interested car makers are in selling insurance.) "61% would be interested in buying renters or homeowners insurance from a real estate company like Zillow or Trulia instead of from a traditional carrier.... 59% would be interested in buying health or life insurance from a health and wellness company or pharmacy like CVS or Walgreens instead of from a traditional carrier.... 51% would be interested in buying disability insurance from a payroll and HR company like Zenefits or Bill.com."

Now, we all know that surveys are flawed, and they're especially unreliable when a hypothetical product or service is involved. I remember the chairman of Compaq once complaining to me in advance of a much-hyped announcement from IBM that hypothetical products always had "infinite capability and zero cost." (The product line was, in fact, a bust.) Who knows what sort of product an Amazon, Walmart, CVS or Zenefits might come up with, or how customers would react when it comes time to sign a policy? 

But the mere fact that so many customers express interest should, I believe, reinforce the need for insurers to maintain a ruthless focus on the sort of operational efficiency (and, thus, low cost) and easy customer experience that makes Big Tech so attractive. Those companies may never make a major incursion into insurance -- but it'd be best to be prepared in case they do.

Cheers,

Paul

That technology will be the fuel that powers the insurance industry machine is inevitable. And with exciting innovations in AI, data and cloud computing, the dreams of many insurers can become reality. Gone are the days of relying on slow, clunky systems and paper-based methods. Instead, insurers today can build, test and run product lines using entirely digital means, managing agile product streams and bringing new lines to market in record time. 

In 2022, insurers should continue to fine-tune operations, creating the sleekest and most agile model possible to keep up with the ever-changing requirements of today’s customers. This means incorporating every resource possible into a smoothly running underwriting process -- and data will bring on one of the most radical improvements the industry has seen. 

Large players in data will lend a hand 

In the world of predicting and pricing risk, the more you know, the better. Data goes hand in hand with knowledge in the insurance industry, as insurers collect larger quantities of more accurate information than ever before as they attempt to build the best quote possible for their customers. It is no surprise, then, that data companies have been slowly but surely building influence in the insurance space, providing carriers with up-to-date insights to enrich their offering. 

Tech heavyweights like Google, Apple and Amazon are predicted to affect the industry with their seemingly infinite data stores. Still, insurers are considering just where and how they will do so. Will they simply offer resources for a price? Or could they move into simplistic forms of insurance for themselves, staging a coup? Though possible, the latter seems unlikely; rather, these companies will extend their services to work in the background, nestling up to firms and providing data resources. 

This will enable insurers to pinpoint and effectively target niche markets, using the wealth of information they gather to highlight new and evolving risks. Importantly, just having raw information will not be what pushes insurers to progress - if carriers cannot easily extract key insights from the data, the exercise can be fruitless. Large and small data companies alike must provide actionable insights, accessible through user-friendly interfaces and clickable features. 

A revolution in product distribution 

Big tech not only has resources to offer insurers but also distribution strategies and abilities. Creativity will be the name of the game as powerhouses, like Amazon, apply their recommendation concepts to insurance, as they have done for so many other industries. Perhaps we will see “recommended for you” and “based on your previous purchases” beginning to pepper product pages on insurance sites. Amazon has creative distribution down to a T, making products in multiple verticals and industries extremely easy to purchase. When you can buy so much online in seconds - from clothes to cars to holidays - insurers must question why they aren’t keeping up with other markets. In this sense, Big Tech will help greatly, offering constant availability and instant results. 

Recommendations are part of a larger influence that Big Tech wields over the population, as they offer consumers more choice than ever before. Large companies influence not only what customers buy but also how they buy it, what device they use to purchase it, how to pay for it and much more. As a result, markets are more competitive than ever before, and insurance is not far behind. As a result, insurers must expand their offering regarding technology, using every available resource and tactic Big Tech has to offer. The industry does not need to expect “Amazon Insurance” just yet (though we should not rule it out), but forward-thinking insurers will be sure to take advantage of the opportunities that Big Tech can provide.

 

 

New research from Majesco highlights the urgency of rapidly adapting to a new reality for all customers, and Millennials and Gen Z in particular. They are the dominant buyers for both life and non-life insurance products with a focus on five specific segments: life/health/accident, employee/voluntary benefits, auto, mobility, and homeowners/renter’s insurance.

Download the Free Report

 

Read this report to better understand:

• How the insurance buyer sweet spot has shifted to Millennials and Gen Z
• Why that shift demands new business approaches
• Customer work, financial, life, and digital behaviors reshaping expectations
• Expectations of new products, value-added services, payment options and channels
• The demand and use of technologies and data for personalized insurance and experiences
• Emerging insurance trends driving new opportunities

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Sponsored by Majesco