2020 was an unpredictable year as communities and industries everywhere made changes to deal with health and economic crises.
Despite these large changes, many of the insurance industry outlooks and trends predicted for 2020 were still relevant. These trends are also likely to continue in 2021.
1. More insurtech developments
Insurtech companies offer online policy quotes and applications. These companies also use underwriting algorithms that allow some applicants to purchase a policy online in one sitting.
Insurtech companies were already on the rise and partnering with well-established insurers. The events of 2020 only increased their importance.
The global pandemic encouraged people to practice physical distancing and do as many things as possible remotely. Online shopping and grocery pickup became more common. Insurtech platforms became more important as people looked for ways to buy insurance online.
Insurtech companies will continue to play an important role in 2021. In the United States, cases are still on the rise. Even with the new vaccines, an end to physical distancing guidelines likely won't be immediate. The ability to conveniently purchase insurance online or with an option to work with a licensed agent will still be important for buying insurance.
Insurers are continuing to work on improving digitization. According to Deloitte's 2021 insurance industry outlook:
"Deloitte’s survey found 79% of respondents believe the pandemic uncovered shortcomings in their company’s digital capabilities and transformation plans. That rose to 87% among respondents with operations responsibilities, who were probably the most directly impacted."
Deloitte's survey also found that most respondents (95 percent) are prioritizing digitalization and improvements. An end to pandemic caution will not be as immediate as its onset. Insurers are preparing for current cautionary trends to continue.
As we've quickly changed habits and gotten used to doing more things remotely and using technology more, some insurance shoppers will rely more on technology and convenience. Prior to the pandemic, online shopping and convenience were becoming more and more common across industries. Insurance isn't likely to be an exception.
2. More personalization
The 2019 PWC fintech survey found companies need to emphasize personalization in addition to offering convenience and efficiency. Insurers have been developing policies that are customizable, and this trend will continue.
For example, some life insurance insurtech companies have developed new policies that are far more personalized than traditional products. These innovations include policies with the ability to adjust coverage levels manually or automatically based on an algorithm.
Most auto insurers have also developed models that allow customers to get a personalized premium rate based on their actual driving habits tracked through an app.
Innovations for personalization will continue into 2021 and permeate throughout the insurance industry.
3. Changes in underwriting
Duck Creek Technologies identified key technology trends that would continue to affect underwriting, including accessing consumer data through apps and social media. These trends will continue to become commonplace in the industry.
One of the ways insurtech companies streamline insurance applications and approvals is through algorithmic underwriting and using data. These innovations in how these companies assess risk reduce the time it takes for an application to be approved and allows some applicants to apply and buy an insurance policy in one sitting.
These new underwriting approaches will continue to be refined. As these algorithms demonstrate good risk assessment and effectiveness, they'll become more common.
In addition to developing tech, how underwriters assess risk for applicants with a COVID-19 history will solidify. This underwriting would largely affect life, disability, and potentially health insurance.
However, the difference in the long-term effects of COVID-19 will make in underwriting is uncertain.
In some cases, underlying risk factors that made some people more susceptible to a bad case of COVID-19 may already be accounted for in current underwriting practices. If these risks are already accounted for, there may not be a large difference in underwriting going forward.
In other cases, life and disability insurers could consider the lingering health effects of COVID-19 a pre-existing condition.
Depending on how the Supreme Court rules on the Affordable Care Act and what new legislation is passed, health insurance applications could also be affected. Currently, pre-existing conditions are not part of how health insurers can determine premium rates and what kind of coverage to offer.
Although these effects on underwriting are uncertain, especially as our understanding of this virus continues to develop, it's important to note the potential impact on underwriting.
4. Increased demand
Life and disability insurance can be easy to discount, especially if you're in good health. However, the pandemic caused a strong reckoning with the unpredictability of life and our mortality.
This reckoning caused an increased demand for life insurance in age groups other than seniors. This change in demand has also increased competition with life insurers, causing lower prices.
Demand for life insurance post-pandemic could remain at the same levels, especially among those who were adults during the COVID-19 crisis.
However, Deloitte's 2021 outlook for the life insurance industry anticipates that premiums will recover and grow in 2021. Demand levels may return to pre-pandemic levels because perceptions of risk may change as the COVID-19 health crisis ends.
5. Increased prominence of customer reviews
In March 2020, PWC found that 70 percent of insurance CEOs had plans to prioritize the customer experience. Between underwriting and claims processes, the insurance industry is notorious for delays and red tape.
Developments in insurtech are expediting processes, so what past customers say about their experiences will influence how potential clients interact with insurance companies and make decisions.
The focus on customer experience will be especially valuable as customer reviews play an important role in how potential policyholders choose companies.
Many of today's insurers have relied on their long histories, industry experience, and financial strength ratings. These factors will continue to play an important role in identifying reliable insurers. However, customer reviews will play a larger role in how insurance applicants decide which company to work with.
Alice Stevens is the insurance expert for BestCompany.com, a customer review platform.
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