2020 was hardly a banner year for most of us. The COVID-19 pandemic reminded us all that predicting the future is rarely anything other than a lost cause.
But it did also arguably shape the future in an unprecedented way as it caused a major shift in all sectors towards remote working and digitisation.
How is the insurance sector going to cope in a year that will be just as eventful? Let’s have a look at some trends we see taking shape over the next 12 months.
A hard market
Insurance has always run on hard and soft cycles, with a soft market meaning lower premiums for customers and more profitable investments and underwriting results for insurers.
However, thanks to a number of natural disasters and climate change related major losses and not helped by COVID-19 inflicting record losses on insurers across the globe, the current hardening trend in the insurance market in 2021 looks set to continue to toughen even further.
What this means for customers is that insurance will become harder to come by, and insurers will start to raise rates to reflect the major losses that have occurred in recent years.
With this potential new avenue to navigate, it’s more important than ever to connect with the right advice. A key strategy for controlling premiums is keeping claims to a minimum – which means a good regime of risk management, supported by advice and expertise from your insurance broker.
Pay as you go
With money tight across the board, there will likely be an increased demand for more flexible, usage-based insurance products.
However, these products are likely to be rather basic and designed for those who can’t afford fixed premiums.
Artificial intelligence and automation have been seeping into the insurance sector for years now but could 2021 be the year it finally starts to dominate? The consensus is that that technology will be used primarily from a customer experience perspective, personalising and simplifying the claims process.
However, it’s in the processing of data that the really exciting applications lie. This could mean more accurate premium calculation, of course, but also more accurate identification of emerging risks and faster claims. In the coming years, even the underwriting process may be completely automated.
Health and wellness cover
It’s only natural that, in the wake of a pandemic, people would start to care a little more about their health.
This means insurers will respond by bolstering their traditional medical covers with more advanced and specific products and services.
Lockdown and other pandemic-related restrictions have catalysed a greater demand for digital transactions and that includes insurance policies.
Going forward, this shift towards digital means insurers are going to have to stop being reactive and start being proactive, as the market becomes more about preventing losses than providing compensation for them.
The insurers that stand to benefit the most are the more innovative specialist insurers who have doubled down on their niche (or niches) and have a greater reserve of more specific data to work with.
With machine learning at the helm, predictive analytics is going to be the wave of the future and it is the companies willing to ride that wave that are going to reap the biggest rewards.
With the world moving online at an alarming rate, cybersecurity is becoming a more significant threat every day.
That means we’ll be seeing more businesses in 2021 investing in more specific cyber insurance and insurers will be doubling down on providing complete transparency to their customers.
Finding the niche
Overall, it seems that it’s the demand for more tailored products that will prove the foundations for insurance in 2021.
Pandemic insurance, for example, is an itch that still needs to be scratched. For those in the events industries and arts, cancellation policies are going to be a primary concern too. And as well as policy wordings being designed for particular niches, these will need to be supported with advice from an expert with specialist experience within that sector.
In all, 2021 is likely to be a year of consolidation, more than expansion for the insurance sector. It’s going to be a year that hopefully outshines its beleaguered predecessor. Here’s hoping, anyway.
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