Once considered as predictable and stable as they come, in 2022 that is no longer the case for the insurance industry. Growth is much more difficult to achieve without decreasing profit margins, climate change is affecting risk profiles in new and often indeterminate ways, and customer expectations are of an omnichannel approach that is more tailored than ever before. At the same time, technological advancements continue to cause constant disruptions and incumbent players are finding their footing and stand poised to shake up customer acquisition. Success is now dependent on industry executives’ ability to adapt to this whirlpool of changes.
To top it all off, the coronavirus pandemic has only served to further accelerate these trends. Over the course of the last two years expectations have shifted monumentally for both customers and workers, and companies have been forced to adapt at an extremely rapid pace. Even as 2021 saw the widespread dispersal of vaccines and an easing of many pandemic-related restrictions, there are still many uncertainties hanging in the air that don’t look like they will be resolved in the near future.
Hauser Insurance, a Cincinnati-based risk advisory and insurance brokerage firm, believes that despite the myriad of obstacles faced, the overall outlook for the insurance industry in 2022 is a positive one of expected growth. Having grown from a small local insurance agency to a national, full-service brokerage over the course of the past 25 years, Hauser Insurance’s finger on the pulse of the industry is what has allowed it to thrive through a time in which change has come with increasing rapidity.
While challenges around talent, sustainability and evolving consumer preferences will inevitably be present in the coming year, with effective investments in people and emerging technologies the solutions to these problems can create better results in the long-run. Utilizing data acquired by Deloitte, EY and McKinsey, below are some of just a few insights that Hauser Insurance agrees will be important in the coming year.
According to a survey of over 400 insurers from North American, European and Asia-Pacific countries conducted by Deloitte, most respondents had plans in place to increase investments in technology and evolving talent models, building on the digital and virtual platforms that were adapted at the height of the pandemic. Roughly one-third of those surveyed also said they expected revenues to be “significantly better” in 2022, and according to the Swiss Re Institute the demand for insurance is expected to continue to rise globally. However, the potential for sustained inflation and ever-pressing sustainability concerns in light of climate change are just a few of the hurdles that will be faced in order for these expectations to be realized.
Another challenge will be finding the balance between utilizing emerging technologies while maintaining the feeling of a human connection. The world as a whole is increasingly dependent on technologies, and for the most part they have brought with them benefits such as better operating efficiency, tighter cybersecurity and increased capabilities in general. According to McKinsey, the average insurer will have reduced costs by a quarter in five years time, and savings for those in the top quartile will go as high as 40 percent. Through utilizing information technologies such as artificial intelligence and big data, insurers can have access to analytics and automation that will enable them to streamline processes, providing consumers with what they need through the correct channel when they need it.
However, insurers will also need to remain conscious of the “human element” of it all, and ensure that with automation comes a truly customer-centric approach. McKinsey found that the majority of insurance industry customers said they were concerned with getting good value for their money, while 48 percent included convenience in their list and 24 percent were concerned with fairness – in particular Generation Z. In order to acquiesce to these needs, insurers must focus on solving problems relevant to the 2022 customer: insurance against life-altering circumstances, identifying the potential for these circumstances during the sales process and providing pertinent advice on it, and resolving claims with rapidity, ease and fairness.
The unique circumstances of 2022 have also created in them a chance to further improve customer trust. Today’s consumer is much more scrutinizing of the companies they patronize for goods and services, and those that take their stakeholders into account rather than just their shareholders will not only earn the trust of their customers, but also likely build a business model that is more sustainable in the long-term. As personal data security has become a hot topic in recent years, insurers can bolster trust by improving transparency in how they collect and use such data.
Insurers can also work to develop holistic solutions to issues at a societal level such as the potential for future pandemics and climate change-related natural disasters. Indeed, purpose and profit at this point have become inextricably intertwined in business as a whole, and the insurance industry is not immune to this change. ESG investing has reached an all-time high, and as companies have dealt with the coronavirus pandemic, the “S” of ESG –– the social considerations -– have come to the forefront of the conversation.
This isn’t to say that environmental factors are no longer an important consideration. In the past, those within insurance and indeed any industry were able to approach sustainability from a theoretical standpoint, making public declarations of support but often without any concrete policies to back it up. This will not fly today. In 2022, actionable steps must be taken in tandem with pledges and promises, and indeed results are increasingly showing that those who implement ESG factors into their business models are able to achieve better profitability and sustainability as a result.
Insurers taking a strong position when it comes to these factors in 2022 will also help them in attracting and retaining talent. Just as consumers are looking to put purpose behind their purchases, the rising generation of workers are searching for more purposeful work and insurers who can easily demonstrate how their services and products benefit society as a whole will have an advantage. In today’s highly competitive job market – particularly for those with advanced technology and data analytics skills –– the most talented workers have the power to dictate how, when and where they want to work.
COVID-19 changed the shape of the way we as a society work, and the hybrid work model does not appear to be going away any time soon. Amidst the scarcity of key skills and “the Great Resignation” insurers will need to find ways to attract top talent, and providing flexibility to employees is one way to do so. Although technologies such as machine learning and artificial intelligence are increasingly becoming more advanced, they are ultimately only as good as the workers who have the skills to utilize them.
The coronavirus pandemic served to illustrate the essential nature of the insurance industry. It is important not only to global economic health, increased financial wellness, but also to protecting what people value most. This year brings with it an increased visibility, and leadership needs to be prepared to make transformational changes that will shape the future of the insurance industry and impact billions of people as a result. Hauser Insurance has found that by paying attention to emerging technology trends, focusing on sustainable business models and placing importance on all stakeholders, 2022 will hold promising results.