The global pandemic has changed the CEO agenda in a way that is profound and lasting. We have seen a C-suite shift to focus on digitization and leveraging technology as a way to serve clients more effectively and create a competitive advantage – not merely as a way of saving costs.
The emerging business model relies on real-time client interactions and advanced insights. InsurTech and other emerging technology are bridging the gap to achieve this – and with over 2,500 innovators, there is plenty of opportunity to drive growth and improve operational efficiency.
Discover the key trends for 2021 that could drive growth for your firm through InsurTech:
1. Digital distribution for small and medium businesses brings new opportunities
Personal lines insurers were early adopters of digital distribution. This channel is now shifting towards small and medium enterprises to secure an important but underserved market segment. This digital approach is enabling insurers to connect with customers quickly and in a scalable way. Examples include digital marketplaces which are automating the buying process and giving choice to buyers while tech-enabled MGAs can match risk to capital, even in areas where there is a significant protection gap, like intangible assets.
2. Evolution of embedded insurance for increased customer engagement
Much like FinTech and initiatives around payments such as ‘buy now pay later’, we will see insurance further embedded into retail and financial transactions. Whether it is buying an extended warranty for a product, addressing small business insurance needs within accounting platforms or a gig economy worker buying the required insurance within a contractor marketplace, it can all be addressed in a single platform for ease of use and efficiency. The growth of complementary ecosystems offers a one stop shop for risk mitigation needs where buying intent and engagement with the customer is high at the point of sale.
3. Advances in underwriting automation for dynamic risk assessment
Underwriting automation is changing the way insurers acquire, ingest, analyze and utilize data. Predictive analytics tools enable insurers to supplement existing information such as historical claims with new insights to more accurately assess future outcomes and price risks. Machine learning is an extension of predictive analytics and provides the modeling and computational capabilities required to scale. Combined, it can automate the decision-making process for a book of business. Underwriting automation can also be applied to provide prescriptive actions for risk control when triaged with big data and human intervention.
4. More IoT-enabled insurance products for risk pricing and mitigation
The use of the Internet of Things (IoT) to prevent and reduce physical losses is further accelerated by the development of 5G which will enable rapid data collection at scale. With over 43 billion IoT devices worldwide by 2023, there is massive opportunity to leverage the data to provide actionable insights for risk pricing and mitigation. IoT platforms that aggregate data across multiple sensors addressing different types of risk will unlock potential across multiple industries including automotive, construction and manufacturing.
5. Consolidation leads to more powerful partnerships
With ~$20B in InsurTech funding over the last four years, we will continue to see momentum through technology and insurance firms finding powerful connection points. Despite robust capital flows, there is a pent-up market demand for M&A and consolidation. For example, the acquisition of the commercial lines marketplace, Bold Penguin, by American Family highlights a collaborative approach to innovating and serving small business customers. In addition, InsurTechs will also look to acquire smaller organizations which are looking to scale to boost in-house capabilities. This is demonstrated by Next Insurance’s acquisition of Juniper Labs which provides predictive analytics capabilities that can be applied to its portfolio.
What you can do today to prepare?
- Assess your business objectives and consider if any of the above trends can help you achieve these
- Understand your current skills and capability gaps to meet your business objectives
- Establish a strategy to build, buy or partner and leverage emerging technology to embrace innovation
About the Author
Preeti Asthana is Head of Global Programs – Innovation & Partnerships at Aon. She is responsible for managing innovation programs globally across Aon and developing partnerships with the emerging technology ecosystem. Preeti has a background in business strategy and consulting. Prior to joining Aon, Preeti worked at Bain & Company, a global management consulting firm. She holds an MBA in Marketing from University of Delhi, India and a Certificate Program in Project Management Strategy from the University of Chicago.