4 min read
Once upon a time, the insurance industry moved at a small pace. Change knocked on its doors, but it took time to give it a seat at the table. Now, however, things are changing. The insurance industry cannot keep itself isolated. Millennials, digitalism, people's changing preferences, and technology are all working together to spell a redefinition of what the insurance industry is and what it focuses on.
Let’s look at the trends driving these changes.
What happened elsewhere in the insurance market
Trends and patterns from years bygone continue to affect the actions taken in the present and future. The happenings of 2017 were no different.
In most countries, gross premiums continued to rise in both the life and non-life insurance sectors. Surprisingly, many of the largest increases occurred in countries where the insurance industry is still in its developing stage. According to Gartner’s ‘5 Trends Appear on the Gartner Hype Cycle for Emerging Technologies, 2019’, “in addition to catching fraud, this technology can improve customer experience by tracking happiness, more accurately directing callers, enabling better diagnostics for dementia, detecting distracted drivers, and even adapting education to a student’s current emotional state.”
In some countries, the shift was from guaranteed life insurance products towards unit-linked products. These transferred risks from insurers to policyholders. In others, interest in insurance products increased to get higher returns than bank saving products.
New market due to microinsurance
Did you know? Less than 5% of low-income people, around the world, have access to insurance and even less access to products and items they need to sustain their businesses and livelihoods.
These people aren’t like the ones in the insurance industry’s established market. They are vulnerable to higher risks and the insurance culture around them is weak or non-existent. It’s a price-sensitive market where the cash flow of the clients is volatile and irregular.
This scenario might be an insurer’s nightmare. But, in reality, it is an untapped market with huge reserves of potential. Traditional insurance, which is aimed at affluent urban people, exists in a market that is often saturated. For developing or low-income countries, this market size is notably smaller.
They do not understand insurance’s role in risk mitigation and life management. They are continuously threatened by health concerns or the death of the breadwinner of the family.
Thus, insurance companies can look to expand with microinsurance which is insurance designed specifically for low-income markets. The one to establish themselves early and clearly will definitely benefit since the number of potential clients is between 1.5 to 3 billion policies.
Increased efficiency needed in claims payment
Claims payment also increased in 2017, especially those where natural catastrophes of some form occurred. 2017 was also the largest record year for insured losses from natural disasters. These were due to the earthquakes in Mexico, floods in Peru, cyclone Debbie in Australia, and hurricanes in both the Caribbean and the US.
Gross claims payments increased. The highest recorded was in Peru where the number touched 85.7%. In Mexico, they increased by 6.4% and by 2.8% in the United States.
The non-life insurance sector was bumped up due to these and also led to losses in the insurance industry. The non-life insurers of this category in different countries generally experienced a deterioration of their combined ratio in 2017.
As a result, operations got under pressure and the need to seek efficiency in them increased as well. There simply could not be any more deterioration in the loss ratio.
Thus, the need for performance enhancement was admitted and has now translated into the adoption of new technologies that minimise the causes for an imbalanced ratio. Spixii solutions are one such technology.
A fluctuating life insurance market
Increase:
Drilling into one of the facts mentioned in the introduction of this section- life insurance is quickly expanding into markets that have the lowest penetration. Examples include Russia, Bolivia, and Turkey. Using Spixii solutions with multi-lingual digital capabilities, one can truly place a solid foot in these territories and supply the demand that is forming in a truly efficient, progressive, and cost-effective manner.
Decrease:
On the opposite end of the spectrum, life insurance is losing prominence in some markets like the Czech Republic and the Netherlands. The trend had been ongoing for several years as customers opt for investment alternatives at competitive prices. In the Netherlands, the reason is attributed to the loss of consumer trust as a result of the sale of usury policies.
Greater transparency is needed in the system where the consumer is in the know at every step. Using Spixii solutions will help to cultivate an honest process that can help to chart an upward trajectory for the life insurance industry there.
InsurTech investments broke the ceiling in Q1 of 2019
Called ‘the threat that inspires’, InsurTech has been setting new records that speak of its rise and potential:
- As compared to Q4 of 2018, the total InsurTech deal count increased by 35%.
- Almost 54% of these deals were made outside the United States.
- In the UK alone, deal counts have increased by 50%.
- Owing to the continued maturity of the InsurTech industry, investments in Series B and C investments have increased.
- 85 deals, worth a total of $1.42 billion, were announced in the 1st quarter of 2019.
- Q1 has been the 3rd consecutive quarter to draw in more than $1 billion in funding.
The above numbers clearly demonstrate the growing use of InsurTech technologies and how companies are globally partnering and collaborating through it. Partnerships are flourishing and becoming commonplace.
These trends are a testament to the changing dynamics of the insurance and InsurTech industry. They clearly spell how the industry doesn’t exist in isolation and hence, needs to move with the changing trends and the world. Spixii solutions are an easy way to do this because quality, transparency, and seamless customer experience are evergreen. The medium for exercising these today is a personal and scalable technology that has inbuilt insurance expertise.
Data from OECD, Gartner insights from here
Images from Pexels
