11 Property and Casualty Insurance Industry Trends That Will Shape 2021 and Beyond
Insurance | 7 min READ
    
The State of Insurance Industry
The COVID-19 pandemic has affected the Property and Casualty (P&C) insurance in significant ways, and companies in this industry have experienced a varying impact across geographies and lines of business. While there has been a severe contraction from earned premiums in worker’s comp, other lines like auto, travel and specialty lines are seeing a delay or reduction in written premiums due to waivers, grace periods and usage and telematics-based pricing, and an overall contraction in industry-specific activity and demand.
Milind Sathe

Head and Sales Leader

Insurance

Birlasoft

Shyam Somani

Head

Insurance Solutions

Birlasoft

 
One of the first responses of P&C insurers to combat the pandemic-challenges was enabling remote operations which drove the adoption of video-based services. Moreover, in order to keep the business aligned to the strategic directives, leaders established a higher frequency of communication with stakeholders at the top of the pyramid. Other survival strategies include collaborations with national governments to manage risk, and introducing new product portfolios that fit both contextually and financially in the pandemic-landscape.
A number of trends in the insurance industry are here to stay. Analysts concur on the fact that now is the best time for insurers to move away from pen-and-paper, and build a strong digital presence, backed by innovative pricing models, and a highly efficient, and cost-effective operating model to drive day-to-day business. Here are some trends for P&C insurers to watch out for in 2021.
1. Rise in Cloudification
As telecommuting is likely to stay due to travel restrictions and cost benefits, adoption of video-based technologies will no longer be enough. In the insurance industry, cloud can reduce IT costs by 30-40%, enable seamless remote collaboration to orchestrate enterprise operations, reduce IT incidents by over 70%, and reduce the time to market - which is the ask of over 71% CEOs today. Given that the deployment of public and private-cloud backed operations is shortening to a matter of weeks, cloud-maturity across the P&C industry is likely to rise, and fast.
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2. Digital Workplace Adoption
In 2020, almost all insurance operations that require in-person collaboration and/or travel stood in a deadlock at the onset of the first lockdowns. While the shock of the pandemic on operations was absorbed by temporary digital measures, the game is bound to change in 2021. According to Gartner, real-time workplace collaboration tools are likely to displace email in over 70% teams. In the 2021 P&C enterprise, the underwriter will see what the loss control inspector does via AR/VR, and the adjuster and the claimant will no longer engage in a hunt for the obvious information already available to the enterprise.
3. New Products and Coverages: After-Effect of the Pandemic
As the extended economic and financial ecosystem evolves, yesterday’s products will no longer fit the new growth equation. As a result, the 2021 P&C industry will see a greater degree of synergy with InsurTechs to differentiate their offerings with context-aware products (see #6). Tailoring coverages to the user’s needs is likely to bring new value-propositions to the customer and to the business simultaneously. Pay-as-you-drive and pay-how-you-drive products in the auto insurance sector is one such example. However, these products will be ultimately driven by intuitive and touchless and conversational digital journeys, backed by data-driven customer support processes aimed at minimizing costs while targeting customer-focused continual improvements.
4. Rise in Outsourcing of Non-Strategic Activities
While some insurers already outsource their back-office and customer service processes to bring greater efficiency, outsourcing will become critical to building an innovation-driven insurance enterprise in 2021. While insurers will focus on cost-take outs from non-strategic activities to free up funds for fueling innovation, outsourcing partners will bring greater transparency, dynamic scalability and responsiveness to the table while boosting satisfaction rates for stakeholders and customers. Real-time view of tasks in pipeline and experience levels and a digital-first approach to back-office processes is helping BPO partners bring greater value back to their clients - as a result, the industry will see enhanced benefits from outsourcing, and building a competitive edge going forward.
5. Process Innovation and Conscious Effort on Business Process Improvement
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Beyond new products and business models, process innovation will be the key to delivering new value propositions in a cost-effective manner while bringing new implications on customer experience. For example, the First Notice of Loss (FNOL) process is increasingly being displaced by IoT and AI-enabled processes that detect accidents, enabling the insurer to reach out to customers first, and requesting photographs of the vehicle - which are then processed using computer-vision technology to detect a total loss. Such process reinventions make room for empathetic conversations with the customers in times of distress, reduce the costs for the enterprise, and improve employee experience while bringing a new degree of responsiveness and speed in a line of business that frequently deals with customers in distress.
6. Collaboration with InsurTech
While top insurers are already reinventing their enterprises top-down, most still reside at low levels of digital maturity, with adoption rates standing critically low. At the same time, an explosion of new needs and expectations from customers have resulted in insurers collaborating with InsurTech firms to cushion and capture the evolving market. These digital-first partnerships have resulted in paradigm shifts: some examples are claims triaging with AI to reduce processing time to seconds, fraud identification with machine learning, NLP-powered chatbots for self-service (expected to drive 95% service interactions by 2025), and novel risk-management strategies with 3rd party data integrations and IoT networks.
7. Sharp Focus on Data Management for Effective Risk Management
In today’s data-rich business ecosystem, the capability to leverage the right data to the fullest can help insurers redefine their risk-management strategy and their outcomes. For example, in property insurance, global insured catastrophe losses add up to ~$83 bn. In such lines, an ineffective pricing strategy and manual processes can set the enterprise up for losses at a later point. Today, insurers are integrating 3rd party data sources that provide a granular visibility into risk factors and exposure, leveraging digital solutions that can automate risk-based pricing in underwriting, and appropriately process inputs for new claims. An example of reinventions in risk management is location data augmentation, GIS-based visualization and reporting, validation and augmentation of exposure data backed by an MDM framework for managing pricing property risk. Such solutions can improve annual profitability and risk exposure accuracy, and lower reinsurance costs.
8. Rise in Adoption of Artificial Intelligence and Advanced Analytics
AI and advanced analytics have become strong drivers of top-line and bottom-line impact for 68% and 86% insurers in the US. The story is not very different globally. Here are some reinventions that will be seen in 2021:
Touchless claims
Beyond 2020, touchless claims will see an increase in use of new data sources like social media and images in personal insurance lines, and unstructured data in commercial lines.
Chatbots and self-service portals
Beyond sales and service, chatbots will find greater application in conversational commerce too - some companies are already leveraging chatbots to delivery policy documents via WhatsApp, help customers with billing and policy information, and integrating chatbots into the extended personal device ecosystems like Alexa and Google home.
By leveraging deep learning models, insurers are now generating underwriting decisions and bringing better accuracy to underwriting decisioning.
9. Improvements in Distribution Management to Drive Revenue
In a May 2020 McKinsey survey, over 50% insurers found remote relationship building with customers a challenge. At the same time 50% find that some products are too complex to be sold digitally. Insurers will have to rethink the right channel mix, bring in-person efficacy to their remote environments, and most will have to support a remote-only distribution workforce. However, supporting the agents with digital portals that leverage enterprise search capabilities, enable 24x7 operations and make it easier for the agent to conduct business will be critical to driving portal adoption and realizing the associated cost benefits without losing business.
10. Expansion into New Geographies
In order to be successful in new geographies, insurers must invest in large platforms and ecosystems and look at integrated insurance offerings by building presence at the point of sales of underlying products. Investing in top tech will also help insurers attract cross-skilled tech talent across geographies, and help insurers build a solid digital-first customer acquisition strategy that pays off. Avoiding the temptation to reuse legacy software while scaling and expanding, and instead, embracing a transparent culture across the organization with agile ways of working can help traditional insurers formulate and execute a successful expansion strategy that ultimately drives revenue.
11. Underwriting Automation
Insurers that leveraged automated underwriting platforms have seen a 14% boost in sales volume over two years. Leveraging AI and Robotic Process Automation (RPA), underwriting automation also makes use of 3rd party data for enhanced decisioning, and can reduce the underwriting time to seconds.
In building RPA-backed underwriting systems, insurers must set up cross-functional collaboration, especially with agents and brokers, who are a critical source of customer insights. However, such solutions will inevitably be backed by state-of-the-art clouds, that can help enterprises achieve complete integration and open the doors for end-to-end automation.
 
 
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