Insurance trends that are shaping the insurance industry 2023

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The insurance industry has been revolutionized by technological advances. Due to advancements in pricing strategies, and claim fraud mitigation, lead generation can now be handled with ease. With the automation of manual processes, insurtechs are offering efficiencies that were previously unavailable. They are helping insurers to better engage with their customers and tap into new data sources.


Here are insurance trends that are shaping the industry in 2023:


Predictive analytics


Collecting and interpreting data is critical when it comes to predicting customer behaviours. In addition to understanding customer behaviour, predictive analytics can also be used to help improve the accuracy of data.


 Here’s the list of things predictive analytics can help with:

  • Analyzing the risk of new and pending claims relative to past losses.
  •  Map out future trends.
  • Inform more specific customer segmentation.
  • Inform about the customers who are more likely to cancel or reduce coverage 
  • Use predictive underwriting to assess the danger of risk.
  • Inform clients about future trends.
  • Compare factors of new and pending claims to those of previous losses.


According to 60% of companies, predictive analytics has increased profitability and sales by reducing underwriting expenses and issues, while two-thirds of companies reported the same result. In addition, direct premiums were improved by 53%, compared to an average of 18%.


All this is great but you may be wondering how predictive analysis is used by insurers in real life.

Auto insurers can use data from a car’s bio-geographic coordinates to predict whether a policyholder is likely to be involved in a car crash, have their vehicle stolen, or suffer other mishaps.


Smartwatches can be used to reward those that are truly active every day. This is just the tip of the iceberg it also indicates a future where wearables will be used to sense chronic illnesses, stress and glucose without breaking the skin.


Artificial Intelligence


Did you know? There has been a rapid change in how devices are being used across the world thanks to artificial intelligence.

According to Statista in 2020, 4.2 billion digital voice assistants were in use worldwide, compared to 8.4 billion users by 2024, which exceeds the human population. The insurance industry can leverage large amounts of consumer data to create customized experiences in light of their habits by using AI.


What’s more, using AI can reduce claim turnaround times and underwriting processes by half. Data can be accessed faster using AI tools, resulting in shorter reporting times.


Let’s see some practical uses by insurers of AI

We have seen GOQii use wearable devices and its own artificial intelligence to track health vitals and provide healthy living advice and risk reports to individual users. This data helps them predict claims payouts and lower premiums for health insurance customers.


Blockchain Data


Every block is time-stamped in a blockchain, ensuring that data is recorded without error leaving no chance to be virtually corruptible. To learn more about what are blockchains check out our article.


Blockchains can significantly increase efficiency, save money, provide transparency, enable faster up payouts, and reduce fraud while allowing for real-time data sharing among various parties in a secure and verifiable fashion. Blockchains could also enable new insurance methods to develop better products and markets.


Insurance application of blockchain technology.


Fraud detection and risk prevention


Blockchain technology’s ability to track immutable records can help eliminate common sources of fraud in the insurance industry.


Property and casualty (P&C) insurance


Property and casualty insurance policies are currently executed manually in most cases, resulting in significant inefficiency. With a shared ledger and smart contracts, these insurance policies can be executed automatically.


Health insurance


Blockchain can revolutionize healthcare: It can secure medical records while increasing interoperability between health providers.

Reinsurance


By harnessing the power of smart contracts, blockchain technology can streamline the flow of information and payments between insurers and reinsurers.


Travel insurance


By automating the claims process and sharing information more efficiently, blockchain can save insurers time while reducing the burden on travellers.


So, how are blockchains being practically used?


ClaimShare is an app that uses blockchain technology to combat double-dipping when one claimant fraudulently receives a payout from multiple insurers on the same incident.


Once an insurer files a claim, ClaimShare sorts the information related to the claim into 2 categories: personally identifiable information (PII) and non-PII. The non-PII information is then shared in real-time with other insurers using a distributed ledger technology known as Corda.


This information is then passed through a confidential computing platform called Conclave, which runs code to detect fraudulent patterns.


Cases of potential fraud can be investigated by linking back to the personally identifiable information of the insurance companies.


Usage-Based Models


Since the onset of the outbreak, usage-based insurance models have become more appealing to consumers. In 2021, there was a substantial increase in usage-based car insurance policies, in particular. Since nobody was driving there was a large awareness of how much money was being wasted on car insurance for vehicles sitting in our driveways. More of these kinds of plans will enable insurance consumers to only pay for what they use, boosting satisfaction and loyalty in return.


How are Usage-based models used by insurers in real life?

SARA Assicurazione and Automobile Club Italia are enticing drivers to install ADAS systems in exchange for a 20% insurance premium discount.


ADAS systems not just reduce the chances of injury-causing collisions, but also help drivers adopt safer driving habits.

A recent study notes that ADAS systems can reduce:

  • The rate of personal injury liability claims by 4-25%,
  • The liability claim rate for property damage caused by traffic accidents by 7%-22%


Chatbots


By 2025, 95% of customer conversations and interactions will be powered by chatbots.


A chatbot feature allows the program to walk customers through common questions that don’t require human intervention or send them to the appropriate team member for quicker issue resolution. Chatbots are playing a greater role with insurance companies to streamline customer interactions and learn about customer behaviour online. While insurance is a human-enabled business, we have seen that customers prefer to have the option of tech-enabled processes, whether it is for claims processing or for policy purchasing. Chatbots help businesses give a fast answer or direct a customer to the right person.


How Chatbots are used by insurers in real life?

Sensely, a chatbot-powered platform that helps insurance plan members and patients find the healthcare resources they need, is named a 2019 “Cool Vendor” in Healthcare Artificial Intelligence by Gartner.


Intelligent chatbots can be built to understand and answer queries over email, chat and phone calls. This can free up significant time and resources for insurers, who can deploy these resources toward more profitable activities.


Non-Tech Trends

 

Fundings – interest growing in the insurance


Global – Global investments in insurtech reached $10.1 billion, representing a 38% increase from 2020 and signaling a new historical upswing and consolidation of the market. In fact, insurtechs have received 50% of their all-time funding in the last two years alone.

India specific – India has at least 66 insurtech companies and accounted for 35% of the $3.66 billion in insurtech-focused venture capital invested in the APAC region. According to the report, the Indian life insurance market will expand at an exceptional pace of 6.6% (in real terms) in 2022 and then 7.1% in 2023.


The growth in investments is also a reflection of increasing interest in insurtech and a few factors of it can be. 

– Significant expertise in building, testing, and showcasing technology solutions at scale.

– Engineers, data scientists, and UI/UX designers with the ability to build technology products for global markets.

– A large talent pool of insurance professionals, including actuaries, underwriters, and managers.


CARE-Based Distribution Channels


Insurance companies are working hard to provide customers with better and more convenient experiences. One strategy they’re using is the CARE model which stands for Convenience, Advice and Reach.


By providing digital tools to support this process, insurance providers hope to bring new customers into their businesses.


Convenience – Easy purchasing of insurance to make the experience convenient.

Advice – Customers should be able to access all the relevant information in order to make the right choice.

REach – Availability is key in ensuring clients get what they need when they need it.


Micro Insurance – phone insurance –


In India, a large number of people live underprivileged lives. They do not have access to the financial services they need because they cannot afford them and adding to it in accordance to where they live access to services from banks and insurance companies are less.


This is where microinsurance comes into the picture –

Microinsurance products provide financial protection to households that have little or no savings and cover the loss of wealth due to illness, injury, or death.


Here are some highlights of what’s happening with Microinsurance in India.

Certain non-governmental organizations, self-help groups and microfinance institutions distribute these policies.

Premiums for such plans are nominal to widen the reach and ensure engagement at a large scale.


Insurers have the freedom to offer composite covers or a packaged product belonging to either the general insurance or life insurance category. Insurers also offer some microinsurance policies if the sum assured of a policy is within the range specified by authorities.


But microinsurance is not restricted to helping vulnerable classes it has also opened doors for various insurance covers for a shorter tenure and smaller  assets like  electronic gadgets laptops, mobile phones and many more 


One of the best examples of microinsurance :

Ola in-trip insurance –

Anyone can get insurance by turning on the toggle in the ola app while they are booking a ride. The option of opting for insurance is available under ‘ride insurance’ when we go to the ‘profile’ tab through the menu.


In-trip micro-insurance helps travellers protect themselves against loss of baggage, accidental medical expenses, accidental death or disability, OPD treatment and certain unique benefits such as loss or damage to a laptop.

 

Underwriting and climatic changes


Insured losses from natural catastrophes have increased 250% in the last 30 years.


Climate change is hurting the insurance industry and only 8% of insurers are preparing adequately for its impact, consultants Capgemini and financial industry body EFMA (European Financial Management Association) said in a report (May 17, 2022).

74% of the insurers interviewed felt that climate change made it hard to ensure some areas.


Now because of such drastic events taking place frequently the importance of impact underwriting practices is emphasized more than ever. In simple terms, these are initiatives taken by insurers to incentivize policyholders to take on preventive measures to reduce their carbon footprint and climate risk. EIOPA (European Insurance and Occupational Pensions Authority) recommends that the entity accounts for the implications of climate change in its pricing and underwriting strategy such as –

  • Determining if existing underwriting and exposure limits are appropriate given the climate-change experience.
  • Underwriting action and risk mitigation activities could help reduce the adverse climate-change experiences and NAT CAT loss exposure.
  • Current underwriting and exposure limits may not be accepted if there is an increased risk of adverse underwriting experience.


Bima Sugam


The online platform provides everything a user will need in terms of information about insurance, giving access to buying policies, portability facilities and the ability to change insurance agents.

The Bima Sugam platform will allow buyers to purchase life, motor, or health insurance policies directly. Besides, web aggregators and brokers will act as facilitators in selling insurance policies. An e-insurance account will also be provided by the Bima Sugam to policyholders ( EIA ).

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