Cogitate Technology Solutions explores how socio-economic, global and even environmental factors that will reshape P&C insurance in the coming years in addition to the technological shifts.
The future, though unpredictable, can yet be prepared for. In a previous blog post, we looked at how the face of property and casualty insurance has changed. In this post, Cogitate Technology Solutions takes a look at the mega-trends that will shape the metamorphosis of the property & casualty insurance industry in the next decade:
Social buying: Traditionally, there have always been intermediaries between insurance providers and their customers. It was the role of these agents to understand consumer and business needs, followed by matching and personalizing insurance solutions to these needs.
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However, with the increased reach of the internet, mobility and the onset of social trends, supplementary direct sales channels have emerged as customers begin to show a definite preference for buying directly from their insurance providers. The speed, convenience and accessibility that is offered by direct sales offers wider geographical reach and an opportunity to sell to new customers – especially the elusive millennials. The biggest advantage, however, is the opportunity for insurance providers is to offer their services wherever customers demand.
Although. insurance companies will continue to depend on the agents as advisors and as a sales channel. the social trend will subsequently also give this role to their customers’ as network of ‘social advisors’. Insurance companies are predicted to face challenges from self-insuring online communities and influential social networks as group insurance channels. Insurance providers that tailor offerings across all their lines to address such scenarios and build capabilities across multiple digital platforms will find themselves rising to the challenge.
Climate change: The insurance industry has historically handled low frequency natural disaster such as earthquakes and tsunamis well. However, as the frequency and severity of calamities like unseasonal cyclones, hurricanes, floods and fires increase each passing year, the property-casualty insurance domain is struggling with underwriting these risks, largely due to unavailability of data for assessing risks.
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P&C insurers need to arm themselves with new monitoring and sensing technology, hyperlocal weather data and new mechanisms for transferring risks. Solutions such as more investment in renewable energy resources will also affect insurance houses as they are pressed to come up with innovative offerings to share risks. Protected by sophisticated risk modelling and innovative ways of risk transfer or sharing, insurance companies will have a chance at combating the twin challenge of sky-rocketing prices and reduced capacity.
Emerging Markets: The inter dependency of world economies continues to increase, and the trend is here to stay. The attention shift towards prolific wealth creation in emergent markets coupled with the effects on developed economies of the 2008 financial crisis will play a key role in all domains. Emerging economies continue to witness increased consumption fueled by the rise of the middle class in developing nations. Add to this the greying population of mature economies while the growth of ‘earning’ population continues to rise vs the ‘dependent’ population in developing nations.
The momentum shift from the dominant developed nations to the productive growth of emerging economies is a reality that property-casualty as well as other insurance providers will do well to prepare for. Especially for business lines, as customers look at newer markets, any inability to stay in step with their needs will put current relationships at risk.
Globalization: Thus, emerging markets are becoming an area of increased interest for insurance companies, as businesses shift their focus to lucrative new markets that have come to the fore. There is also unexpected manna in the form of the main insurance provider in many of these economies being the government, which neither markets aggressively nor offers diverse offerings. The rising middle class demands, and is ready to pay, for more sophisticated offerings, especially innovative P&C business lines. However, serving new customers in these markets or old customers expanding to new markets will pose a challenge before it becomes an opportunity.
Insurance companies will need to reinvent processes and practices for markets that may not follow global standards. They will need to design standardized products and policies to serve customers with presence across economies. Also, insurers will need to understand, leverage and maybe even modernize the extant traditional distribution networks in these nations. Insurance houses must be geared for increased regulatory scrutiny and oversight aimed at fraud and money laundering. Strategic alliances with local insurance providers will need to be established to manage financial and reputation risks in these untested waters.
There exist no authoritative solutions to meet these future scenarios. Insurers must rely on strategy, talent, organizational strength and their core competencies to turn challenges into opportunities. While some of these factors are built into the DNA of an organization, others can be acquired with strategic partnerships. To learn how Cogitate Technology Solutions can help, visit www.cogitate.us.
