The insurance industry is undergoing significant transformation. The competitive pressure and increasing market and customer demands in the industry, as well as new players and business models threatening the established core business, are driving consistent innovation. However, modernising and digitalising remain the top challenges for insurance companies. With all this in mind, which new trends and developments will shape the insurance landscape in 2023? Drawing on over three decades of experience, long-established insurance software solutions provider, Fadata, has identified five developments or trends in particular:
1. Modernising the IT landscape
The modernisation of legacy systems is one of the central tasks of many insurers. Mainframe systems are very stable and secure, but they do not offer flexibility. They also hinder the rapid fulfilment of new business requirements. Only a modernised system promises long-term security. Modernisation often focuses on technical issues, but procedural realignment is just as important: rigid and manual processes are replaced by flexible and automated processes. This also requires a departure from proven ways of working and thereby a change of mindset. If there is no shift in mindset, there is a risk that an insurer will only make partial use of the opportunities offered by a modernised environment.
2. Using the cloud
Cloud platforms are widely becoming a standard. Not least for the insurance industry but for most current modernisation initiatives, many of which adopt the public cloud. A cloud infrastructure with a containerised insurance platform and cloud-native development environment offers numerous advantages, such as agility, flexibility, performance, cost efficiency, and above all, scalability. After all, the business of insurance companies develops dynamically with regular peak loads. An example of this are the cut-off dates on which insurance policies, such as car insurance, can be cancelled or newly concluded. Here, especially, the cloud offers the necessary demand-oriented scalability.
3. Focusing on the customer experience
Customer loyalty is declining in almost all industries, including the insurance industry. Measures must be taken to strengthen customer satisfaction as well as customer loyalty, which is why customers are dictating the current evolution of the insurance industry. In the digital age, consumers expect a digital offer from their insurance company, for example, a customer-oriented online access with a highly individualised user interface. Legacy processes no longer meet the expectations of today’s customers, so insurers will need to increasingly utilise digital channels for different tasks, from sales to processing claims. A big focus of 2023 will be the development of a fully automated or data-driven program that accelerates the underwriting approval process. Insurance customer satisfaction only really becomes relevant via the claims process, so to encourage ongoing loyalty it is paramount that customers have a rewarding, seamless claim handling experience.
4. Using digital ecosystems
The importance of digital ecosystems is increasing across the board, and insurers are set to benefit. Ecosystems provide insurers the opportunity to link their own insurance offers with the products, services and benefits of other service providers – including third-party providers or insurtechs, for example. With the cloud as a basis, with which insurers can flexibly access data together with partners via open interfaces, service extensions can be implemented relatively easily and quickly. In the area of motor vehicle insurance, for example, cooperation with repair shops, towing services, or rental car companies is conceivable.
5. Embedded insurance offers
With an estimated 3 trillion-dollar market potential , hardly any insurance company can ignore the trend topic of embedded insurance. Customers at large are becoming accustomed to packaged deals, which are convenient, easy and quick, and are therefore the main driving force for the establishment of embedded insurance offers. Alongside other new approaches to customer engagement, embedded insurance will help redefine insurance and the role it plays in people’s lives. Of course, a prerequisite for the establishment of such embedded insurance models on the part of the insurer is a modernised system landscape with digital process chains.
Sam Knott, UK Sales Director, Fadata comments: “Throughout 2023, innovation and experimentation will manifest around customer experiences in order to catch up with the precedents set by consumer finance organisations. Throughout 2023, I expect to see a shift from technology promises and innovations to implementations and delivery. Through the utilisation of cloud platforms and digital ecosystems, insurers will enable their price points to move away from a customer cost to a true value proposition, putting a blend of product relevance and customer focus at the centre of their ideologies. Insurers that implement core technology, position themselves at the forefront of the market, giving them the ability to enter new markets and products at a rate of scalability that their competitors will struggle to keep up with. Across the next 5 years this will increase and open new revenue streams, ultimately leading to improved profitability.”