10 Trends That Will Shape Insurance Industry In 2023

Over the past few years, the insurance industry has proven to be incredibly resilient and adaptable. Carriers have tapped into new capacities and follow new insurance trends to promote operational efficiency and transformation due to the maturation of digital technology.

The insurance industry observed many things that stood out in 2022, including the rising premiums in both the personal and commercial lines of business. It had difficulties because of crises and natural calamities. It also observed new market entrants’ difficulty in “reimagining” insurance when the rubber met the road. And in this blog, we talk about how insurance trends will shape the insurance industry in 2023.

Experts’ View on the Insurance Trends

Research by Swiss Re showed that the expense of claims would present the biggest obstacle for the insurance sector in 2023. A survey conducted by Allianz Life Insurance Company of North America further revealed that 66% of Americans now think a recession is coming, up from 48% a year earlier. Both studies indicate significant challenges for insurance-related businesses and the overall insurance market in the U.S.

The global insurance sector will see a seismic change in 2023 as technology and the financial markets continue to advance but remain unstable. According to research done by EIS, a global core technology provider for the insurance business, several variables changing the market will impact established and emerging insurtechs.

As stated by Rory Yates, SVP of Corporate Strategy, Global at EIS, the coming year will see the growth of digital transformation. He further predicts that only ambitious insurers who will continue to prioritize digital transformation in 2023 can endure the industry’s numerous challenges. Innovation and growth will continue to be driven by sustainability, equity, and transparency. By enabling employee-centric transformation, automation will free up human resources to concentrate on the customer.
Now, although 2023 awaits the challenges for the insurance industry, here are some trends you might want to see to future-proof your insurance business.

10 Trends Predicted for 2023 Insurers Should Consider

1. Consumer expectations for flexibility from insurance providers will increase.

Authorities are addressing the need for insurers to behave more reasonably. As a result, they require insurers to make their clients more educated, clearer on their coverage, and able to choose their provider with fewer barriers. According to Yates, this move “may create CX pioneers win” paradigm, especially for individuals who see this as an opportunity rather than an obligation.

2. ESG will be more prominent for insurance leaders

As the second-largest asset owner behind pension funds, insurance companies are anticipated to be a key player in the shift to a greener economy. They can influence change through ethical operations and asset management. Additionally, they can incentivize other businesses and individuals by taking environmental, social, and governmental (ESG) aspects into account when underwriting.

The insurance sector will concentrate its investment efforts on the battle to cut carbon emissions and attain net-zero targets. The expansion of data-driven sustainability and risk exposure will contribute to this. With the emergence of ESG, the concerned parties can form new rules to combat “greenwashing,” address the issue, and create a clear route toward a more sustainable industry.

3. Embedded Insurance will promote growth for the industry

The market potential for new products like embedded insurance will likely increase by an estimated US$3.7 trillion. These products will help reinvent insurance and its position in the lives of individuals. The product will also bring new methods of customer engagement and risk mitigation.

Expanding the channels via which you can provide insurance to customers is what embedded insurance is all about. To integrate their products, P&C insurers will intensify their collaborations with insurtechs and other ecosystem suppliers. They will further invest in marketplaces with API connections to increase the acceptance of embedded insurance.

4. Tough Competition within the insurers’ ecosystem

The more “tech-enabled” insurers are outperforming others thanks to the growth of the digital ecosystem. The adoption of fundamental technologies will change, allowing more adaptable competitors to create new business models to outperform the opposition.

5. The evolution in the underwriting industry

Within the insurance industry, underwriting already went through the most significant change. We can expect this trend to continue through 2023 and beyond. New technologies are driving fully-automated or data-driven programs that streamline the process. Life insurance providers are unable to offer a quick and self-service agent/customer experience due to lengthy underwriting procedures.

Currently, the underwriting discipline is taking significant steps to automate the workflow. Also, they are working to change the way underwriting is carried out, for example, by granting access to more data sources to gain new insights into risk analysis while significantly improving the experiences of agents, brokers, and customers.

6. Marketplace disruption by Insurtechs

As more insurtech enters the market, the other existing insurers will be under pressure to forge partnerships within the digital ecosystem. Doing so will allow them to provide scaling opportunities for innovative newcomers while addressing their own technology and innovation challenges.

In the past, carriers relied on complex legacy architecture. Today, the same ones are simplifying and developing a new, cutting-edge technology stack for running their businesses. Meanwhile, other technologically advanced insurtech companies have already started the modernization process. And they are implementing cutting-edge insurtech capabilities and technology into their solution portfolios.

7. Insurtech data sources will continue to increase in 2023 and beyond

As the IoT expands and urban regions increase utilizing more innovative ways to enhance current infrastructure, the potential for data sources and better risk assessments will continue.

Specifically in the health and life insurance sectors, wearable technologies and incentivized programs will likely increase health and lower premiums. Further, they will continue streamlining as real-time data hones the cost of coverage and provides sharper insights.

8. The proliferation of insurtech distribution

Rory Yates further predicted that underequipped insurers would either lose market share or adopt expensive point solutions to access in 2023. Then they would resume managing new channels as the insurtech sector and continue its maturation cycle. As a result, the industry will grow significantly as fewer technological competitors withdraw from the race or adopt new commercial strategies.

The proliferation of new technologies has been increasing gradually, including AI, cloud computing, and analytics—and new data streams from the IoT, third-party databases, social media, and other sources. So, the insurers now have a range of strategic options for the products they offer, their distribution networks, and even their overall operating models. Here, the ability to invest at multiple speeds, strengthening core distribution while developing new models and approaches, is becoming a critical imperative for insurance management teams.

9. Automation of insurance processes shall continue

Automation technologies (RPA, ML, low/no code), analytics technologies (AI, predictive analytics), and connected insurance (IoT, usage-based) will lead to increasingly targeted insurance products and better services. The automation will further increase customer loyalty as they develop throughout 2023 and reach a peak in 2024.

Currently, insurance carriers are positioning themselves to respond to the changing business landscape as AI becomes more integrated into the industry. For example, insurance carriers are leveraging the technology shift driven by insurtechs to build a business model that uses AI at its core.

Data processing capabilities, new data channels, and improvements in AI algorithms will fuel AI and Robotic Process Automation (RPA) in insurance. Leveraging the efficiencies generated by RPA, AI, analytics, big data, and low- and no-code technologies can help streamline processes, provide exceptional customer experiences, and enhance data security.
In 2023, AI and RPA will have a tremendous impact on all elements of the insurance industry, including distribution to underwriting and pricing to claims. The massive adoption and integration of automation, deep learning, and AI will drive the industry’s evolution. Players who will use modern technologies, create innovative products, and streamline processes through AI will be able to thrive.

10. Insurtechs won’t really affect the economic stability

Despite the cost-of-living crisis, insurance will continue to be considered an essential product. While consumers may cut back on other expense areas, insurance for home, car, and health, amongst others, shall remain crucial and a steady source of income for investors, as stated in a survey report by Deloitte.

Conclusion

Overall predictions on insurance trends show that the insurance industry is under pressure to keep up with the pace of change in this rapidly evolving market. New entrants to the market are offering new products and services much faster than the incumbent insurers. So, the incumbents need to move faster to stay relevant. They need to be able to develop and launch new products quickly, enter new markets, and scale quickly.

Therefore, a digital transformation is no longer an option for insurers; it is necessary. In order to compete in this new world, insurers need to embrace digital and use it to their advantage.