EIS, a core and digital platform provider for leading insurers, today released their much-anticipated outlook for 2022 and the trends that will impact the insurance sector. EIS identified four key themes they believe will shape the insurance industry in the year ahead. They include, 1.) the continued rise of coretech; 2.) the convergence of Life and non-Life insurance lines; 3.) the emergence of customer-centered ecosystems; and 4.) the increasing importance of technology in the broker-insurer relationship.
COVID-19 continues to accelerate digital transformation initiatives in the insurance industry, necessitated by the mandate to meet new and increasing customer demands. In fact, according to a global survey from KPMG International over 85% of insurer CEOs have confirmed the impact digitization has had on their business, with mounting pressure to satiate ever evolving customer needs, and from digital competition, that has forced purchasing online. It is becoming increasingly clear that 2022 will be another tumultuous year of threats and opportunities for insurers as they continue to face rapidly changing, often unchartered territory.
In 2022, EIS cautions that insurers need to focus on enhancing their technology if they want to stave off competition, especially from agile insurtechs. To be best prepared for the ‘unexpected’ and to swiftly accommodate continued market changes, EIS believes that insurers need to be equipped with technology that is flexible, open, able to support rapid integrations across various lines of business, and, perhaps most importantly, customer centric.
According to EIS, the following four trends will dominate the insurance industry in 2022:
The Year Insurers Realize the Value of Insurtech via Coretech
Over the past few years, insurance companies have invested heavily in insurtech. In fact, global market research firm Technavio is predicting the insurtech market “has the potential to grow by USD 33.73 billion during 2021-2025, and the market’s growth momentum will accelerate at a CAGR of 45.28%.”
For insurers, the advantage of partnering with insurtechs is that they can supplement their existing product portfolio or simplify internal operations in a fast, low-cost way without having to build the internal expertise or applications themselves.
Insurtech to date, however, has delivered transformation on a relatively small scale via standalone projects or point solutions, and continuing to innovate in this one-off, loosely connected manner will eventually become too difficult to manage and collapse under its own weight. To capitalize on its full potential, insurers must connect insurtech to their core business. However, most insurers have legacy systems not designed to accommodate this. It requires a new breed of cloud-native microservices and API-based core systems that are customer-centric by design, called “coretech”. Insurers will quickly ramp up their adoption of these solutions in 2022 and beyond. Coretech has the ability to successfully enable the new ecosystems that bring together core operations and insurtech innovation.
“Insurance providers’ investments into insurtech, while great, landed many insurtechs in the basement; never to be used due to the lack of value they brought to the table,” said Samantha Chow, Global Market Lead for LA&H at EIS. “With coretech, insurers can successfully integrate insurtech solutions into their operating systems to garner their full potential. That’s the value coretech brings to insurtech.”
Convergence of Life and Non-Life Insurance Lines
In 2022, EIS fully expects Life and non-Life insurance lines to converge and provide the one-stop-shop experience today’s consumers are actively seeking. Insurers will make a sustained effort to broaden their product portfolios to become more “sticky” with consumers. They will place increased focus on simplified buyer journeys that make data-driven supplementary product/service offers that are attractive to customers and drive revenue growth and customer loyalty. Retention is increased with each additional product customers buy. Full-stack insurtechs, such as Lemonade, and leading incumbents are pursuing this model vigorously.
Bancassurance, for instance, which traditionally distributes both Life and non-Life products, and faces a surge in demand from an aging global population, is well-positioned to benefit from this trend as it adopts new digital strategies to improve customer access and engagement.
Insurers Get Real about Ecosystems
“Ecosystem” has become a much-overused buzzword in the insurance industry, however the ability to understand and actually orchestrate or even participate in ecosystems has been sorely lacking. However, EIS believes an understanding of the cultural shift required and the best practices of designing customer-centered ecosystems will emerge in 2022. Consumer needs have changed and no one company can meet those needs. Insurers will take an outside-in perspective to rethink their value proposition to determine how they can best fit into consumer ecosystems.
Because no single partner needs to build and orchestrate all the components, the ecosystem approach accelerates innovation — with one company’s innovation efforts furthering all others. In fact, 66% of insurers are already partnering with non-insurers to diversify their customer offerings and stand to drive much greater benefit from this innovation in 2022.
“To capitalize on their full potential, and succeed in ecosystems, incumbent insurers must fully connect insurtechs to their core business,” said Anthony Grosso, Global Head of Marketing at EIS. “To do so, insurers need to create a new breed of technology platform; one that is capable of quickly connecting, disconnecting, and reconnecting with other systems, platforms, and partners. These coretech platforms will enable continuous reformulating of ecosystems as customer needs, expectations and preferences evolve.”
The Growing Importance of Technology in the Broker/Insurer Relationship
A recent survey of workplace benefits brokers conducted by Wellfleet and EIS revealed that while brokers are increasingly embracing their roles as advocates for employer clients, they find themselves in an uphill battle with legacy technology. This is critical because according to the aforementioned survey, technology is the number one reason brokers will recommend a carrier to a client.
Brokers understand that good technology is critical to successfully meeting the needs of clients and building long-term relationships. At the same time, LIMRA reports that more Life insurer executives than ever cite technology as their companies’ number one challenge. Helping brokers support employers’ benefits managers will take on greater importance for insurers.
“The tangential effects of the pandemic continue to ignite the clarion call for digital transformation initiatives that will enable insurers to evolve today to ensure success tomorrow and for many years to come,” concludes Grosso. “Those leading insurers that successfully navigate the transition to digital ecosystems will be the ones that will thrive in this new normal. They rightfully see this as not only an investment in their own future success but, more importantly, successfully meeting the needs of their valued customers.”