2014 Insurance industry trends

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2014 Insurance industry trends

Source: inforsystems, deloitte, January 2014

Improve consumer protection • Insurers will increasingly look to provide financial security to consumers (covering all properties and life risks) instead of

transactional risk services. Not only will they look to understand and educate consumers, but they will try to teach consumers about good behavior. This in turn, will help consumers save money and in the process improve consumer protection; for example – driving patterns, home security, wellness programs.

Understand, educate and reward consumers • Insurance companies will sharpen focus on the younger demographic segments, where huge opportunity awaits. It is

projected that by 2020, Gen Y will be the second largest generation after Baby Boomers; more importantly, they will have overtaken the latter in terms of purchasing power well before that time. In a 2010 survey, 48% of Gen Y respondents confirmed their intention to buy life insurance within three years, and 20% said they would do so within one year.

− These intentions haven’t materialized into business. Per capita spending on insurance continues to slide, largely because the young aren’t taking adequate cover. The industry is not fully geared to fulfill the younger generation’s expectations of digital consumption. This needs to change, and fast. Insurers, today, need to better understand consumers, educate them and eventually, reward their good behavior – like a good driver could pay lesser premium than a relatively rash driver.

Manage growing risk • Insurers are faced with an unprecedented volume and variety of data and data sources. The strain on IT systems is

compounded by the increasing frequency of catastrophes and natural disasters, which is reshaping the global view on reinsurance and underwriting. All of these are driving the need for large-scale modernization of IT infrastructure. Insurers will increasingly look to apply innovative risk transfer mechanisms to minimize exposure to catastrophic losses.

The insurance industry is going through a critical phase. Perhaps for the first time ever, it is facing the pulls of economic and risk uncertainty on the one hand, and of opportunity on the other. In 2014, insurers will need to make significant changes in their approach to business to come out on top. It is the belief that technology will be the most important lever of that transformation.

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2014 Insurance industry trends

Source: inforsystems, deloitte, January 2014

Promote self-care

• The cost of health insurance and expense is on the rise. In order to limit the rising costs, insurers will look to minimize administrative costs, and focus on promoting self-care by using technology to educate consumers.

• A recent report on the global insurance industry reveals that customers desire a mix of channels. Customers prefer online networks to agent networks for comparing policies, accessing information and rate information. While customers prefer to purchase their policies from their agents, they do not rely on them soley for advice on which brand of insurance to buy.

Adapt transformative business models

• 2014 could be the year that the industry starts to use technology to transform the heart of its business, which is the management of risk. There is a strong need to shore up underwriting income, which will help compensate for the muted investment income in a low-interest environment. A technology-transformed insurance industry is visible in the prediction by one of the world’s leading IT research/advisory firms: “(By 2024) At least 10 percent of activities potentially injurious to human life will require mandatory use of a non-overrideable ‘smart system’.”

Enter new markets

• Another trend highlights the growing importance of emerging markets. Insurers will look to leverage structured, unstructured and external sources to improve underwriting. Insurers in the United States and Europe are battling two serious challenges – a low investment return environment along with market saturation. This is driving them to explore new opportunities in the emerging world.