Trends suggest a half full glass in 2019

By now, most of us are accustomed with the terms digital native and digital immigrants. Digital natives refers to the portion of the population who were born into a world of technology. Digital immigrants invest significant amounts of time and money to get to the level that digital natives naturally find themselves in. Change is a very scary prospect for digital immigrants.

The insurance industry is experiencing a wave of change. Global business consultancy firm Capgemini recently released a report showing the trends that will impact the long term insurance industry in 2019. 

Dynamic, flexible products

Insurers and brokers are entering a whole new world where most of their clients are Millennials. Most of these clients are digital natives and expect their insurers to reflect the innovation that they interact with in their daily lives. 

In order to keep up with these changing demands, insurers will have to offer dynamic, flexible products in the future. 

The Capgemini report points out that low interest rates and stagnant premiums over an extended period in advanced markets will be key drivers of this. This will force insurers to explore new revenue streams more frequently.  

Longevity is also an increasing trend in the market. Therefore, clients are looking for products that will be flexible enough to offer affordable coverage for this increase in life expectancy. 

The report shows that life insurers are offering flexible and on-demand products by leveraging emerging technologies such as mobile, advanced analytics, and real time data capturing and processing. 

Conventional insurers (digital immigrants) and InsureTech firms are focused on making life insurance accessible to customers who cannot afford long term or traditional policies by offering more granular and on-demand products. 

Return on life

A major trend in 2018 was that long term insurers (particularly those in the investment space) started to move away from offering products that focused on return on investment to return on life. 

The Capgemini report points out that a proactive offering on a client’s life event is more likely to generate a sale because clients are receptive to coverage modification based on their new, emerging requirements. 

Further, Big Data analytics and artificial intelligence (AI) allows insurers to make informed decisions based on client data feeds from third party data sources such as social media feeds, websites (blogs) and connected devices. 

The report suggests that one of the major drivers of this change is that profitability in the life insurance industry is under pressure and acquisition of new clients is costly; therefore, it is necessary to retain and enhance exciting client relationships. 

The report adds that combined with innovative and simplified product offerings, advancements in mobile technology, data collection, and analytical capabilities are enabling insurers to reach out to customers in an efficient, strategic and targeted manner. 

A defining challenge

Arguably one of the most defining challenges that South African insurers face today is the fact that they need to integrate new distribution models into their existing business models. 

The Capgemini report points out that the need to reach out to more customers in an efficient and cost-effective manner is one of the key drivers of this trend. 

The report adds that advancements in technologies such as cloud, microservers and application programming interfaces that allow seamless collaboration of insurers with their distributors as part of an insurance ecosystem is something that insurers need to be aware of. 

The final driver is the evolving channel preference of customers who now expect an omnichannel presence from insurers. 

Accelerated underwriting

If one was to describe the effects that technology has had on society in two words, it would be: instant gratification. Patience is currently not a virtue and clients have no time to sit around and wait for a claim to progress at the pace it progressed in 2016.  

Insurers are constantly encouraged by clients to get with the programme and speed up their processes. 

According to Capgemini, 2019 will be the year of accelerated underwriting processes. According to the report, the key drivers of this will include: 

-           advancements in technologies such as robotic process automation and artificial intelligence which automates processes; and

-           the emergence of InsureTechs which are using technology to streamline underwriting. 

So how will the underwriting process be simplified? According to the report, actions include reducing the number of questions asked to a customer, reducing or skipping medical test requirements and collaborating with data providers to generate a faster and more accurate customer risk profile. 

The accuracy of these tools is likely to improve in the future due to digital advancements and the availability of more data. A broader set of data points will also be a contributing factor. 

Editor’s Thoughts:
It is becoming clear that technology adoption will no longer be something that insurers can aspire towards, it will be the future ticket to the game. However, there is a caveat here; this adoption does not come cheap. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.