In the first installment of this series, we highlighted three trends that are driving digital innovation in insurance. These trends — the shift to direct sales, the broadening of risk categories and the demand for personalized solutions — have created a number of opportunities for InsurTech providers to serve carriers, brokerages and agents. Here’s what some of the opportunities look like.

Opportunities from the shift to direct-to-consumer sales

Insurance companies have begun to meet their customers on digital channels. But a J.D. Power study of property and casualty insurers finds that basic digital competency isn’t enough to overcome dissatisfaction with a range of customer service and shopping tasks. Insurance customers are demanding more ways to engage digitally, which will require new digital products to serve their needs.

That means carriers need a customer-facing platform that makes it easier for consumers to find, evaluate and purchase insurance options. This new direct-to-customer channel also needs an internal platform to manage the back-office tasks that support it, like accounting/billing, HR and compliance. Predictive and prescriptive modeling capabilities can help insurers price risk more efficiently. Other technologies — think analytics, artificial intelligence (AI) and machine learning — make autonomous underwriting more possible with support from APIs, business process management, optical character recognition and robotic process automation.

As more insurance consumers deal directly with the carrier, the pressure is on brokerages and agents to demonstrate their value. They can do so by using technology in ways that let them offer better services or rates. Comparative rating software, for instance, eliminates hours of manual review in making sure each customer gets the best policy possible. Better technological integration can eliminate other labor-intensive account planning and business development tasks while heading off compliance issues from failure to comply with constantly evolving laws. For larger firms, technology can also eliminate duplicate processes across regional offices.

Opportunities from the broadening of risk categories

Carriers need to continue updating their cyber solutions to address the diversity of risks that customers face. That includes adding new product lines or augmenting coverage, as well as partnering with cyber-focused providers for their digital capabilities and expertise. Carriers also need to expand their coverage for cryptocurrency-related business — a process that begins with consulting technology experts, regulators, InsurTech startups, and other market participants to develop a thorough understanding of blockchain and its applications.

As customers’ risks get more complicated, it becomes harder for customers to satisfy their insurance needs with a single insurance company. This puts brokerages and agents in a position to help companies of all sizes manage their diverse risks better by connecting them to solutions from multiple insurance carriers. Brokerages and agents can further differentiate themselves through automated tools that help customers identify exposures to new risks.

Opportunities from the demand for personalized solutions 

To capitalize on personalization, carriers will look to analytics, machine learning and AI. Per Gartner® CIO Survey 2021, “The percentage of insurance processes that have been optimized through digital capabilities grew by almost 14 percentage points between 2018 and 2020. Many of those technology investments, such as artificial intelligence, require significant investments in technologies as well as human resources.”

How do these technologies enable personalization? Consider telematics, which uses analytics to track driver behaviors so auto insurers can provide usage-based insurance (UBI). UBI flips the traditional risk assessment model, replacing broad demographic and geographic data with individual usage data to set prices and policies. Then there are AI-enabled customer service chatbots, which insurers are increasingly using to improve the sales, marketing, underwriting and claims processes.

The investment landscape

The insurance market is exceptionally large. The U.S. saw $1.28 trillion in net premiums written in 2020 alone, with property and casualty insurance accounting for 51% of those premiums. In the first nine months of 2021, property and casualty insurers saw net premiums grow 9.4%.

The industry’s maturity and its potential for digitalization have attracted interest from venture capital, private equity and corporate buyers. Globally, InsurTech startups raised $10.5 billion in the first three quarters of 2021 alone. That’s on top of the $18.3 billion that investors poured into InsurTech startups during 2020. That same year, the global market was valued at nearly $3 billion, with a projected annual growth rate of 48.8% through 2028.

Investment activity among large carriers and brokers is likely to continue because it’s often easier for established firms to partner with an InsurTech than to develop technology capabilities in house. Legacy insurers are working with InsurTech startups to accelerate digital innovation through innovation labs. In addition, Liberty Mutual, Nationwide and others have formed in-house corporate venture funds to invest in InsurTechs.

Closing thoughts

Market demands and consumer needs have created ample opportunities for InsurTech solution providers. Carriers will need advanced and emerging technologies to support a shift to direct sales and more personalized insurance products. Brokerages and agents will also rely on technology to improve margins and reduce cost inefficiencies. And both groups of stakeholders will need digital solutions to support companies as they manage their broadening risk exposure.

All this reflects an evolving attitude toward digital solutions. Watch this space as the legacy insurance industry continues to explore InsurTech for its ability to improve customer service, operate more effectively and reinvent itself for a changing marketplace.

GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.

Three Trends That Are Driving Digital Innovation in Insurance
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Read the first of our two-part series on how technology is driving change in the insurance industry.

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