2021 will surely deliver plenty of surprises but 10 trends—including ‘growth of the giants’, a race to green, the switch to usage-based cover, and Bitcoin as a new asset class—look set to have a big impact on the insurance industry in the year ahead.
The COVID-19 pandemic has reminded us of the folly of trying to predict the future. But it’s also helped us imagine what that future might look like.
Few people at the start of 2020 foresaw the havoc that the COVID-19 pandemic has triggered around the world. It overshadowed everything else that happened last year. All the predictions of economic analysts, market researchers, and investment gurus were overtaken by a global event almost no one saw coming.
As we look ahead to what 2021 might hold, it’s good to remember just how unpredictable our world really is. If it wasn’t, we wouldn’t need insurance. Our livelihoods depend on uncertainty.
What big events are going to send shudders across the globe in the next 12 months? Swings in geo-politics, economic surprises, technology breakthroughs, another pandemic? We don’t know. However, we can identify key trends that are emerging in the wake of the COVID-19 pandemic.
Unforeseen global or regional events may yet affect the progress of these developing trends but they’re already starting to gather momentum. Many of them have been accelerated by the pandemic. Spotting them early will enable insurers to align their businesses to the changing needs of their customers and deliver new, potentially lucrative, products and services.
Here are 10 trends I see making a big impact on the insurance industry in 2021.
Trend 1: Surge in health and wellness services
The COVID-19 pandemic has pushed health and wellness to the forefront of customers’ concerns. Insurers have responded by bolstering their traditional medical and life cover with an array of digital health and wellness products and services. Carriers that quickly establish a strong presence across the health ecosystem will gain a big advantage over competitors.
Trend 2: Phygital becomes the standard
Digital service and distribution channels will oust carriers’ traditional channels as the primary point of customer engagement, but the inputs of physical channels and experts will remain sought after for advice on complex decisions and offerings. Consumers have flocked to using the digital services during the pandemic and few will return to their previous habits. Digital services that are seamlessly combined with phygital experiences, particularly on mobile platforms, will emerge as the key differentiator when consumers buy insurance. Those carriers that are slow to roll-out enticing digital offerings will lose customers.
Trend 3: More insurers venture beyond insurance
Advances in digital technology are opening a host of opportunities for insurers eager to expand beyond their traditional markets. The flat premium revenues and low investment returns predicted for 2021 will accelerate this trend. Expect carriers to announce some surprising partnerships as they look to broaden their revenue base.
Trend 4: Niche products shine
Insurers launched an array of innovative risk-management offerings in the wake of the COVID-19 pandemic. Demand for tailored products, such as business-continuity cover for small enterprises, cyber-threat protection, pandemic insurance, and event-cancellation policies, will soar. Interest in insurance products aimed at specific demographic groups, such as young adults or retirees, will be especially strong, presenting partnership opportunities between incumbents and insurtechs.
Trend 5: The giants will grow
Innovative new insurers have enjoyed the limelight in the past few years, attracting substantial funding. However, traditional carriers will come to the fore this year. Their asset strength and extensive in-house resources will enable them to weather possible adverse economic conditions and secure new revenue opportunities. The insurance industry is likely to see some significant mergers and acquisitions in 2021.
Trend 6: Trust becomes non-negotiable
Consumer trust will become a critical feature of business in 2021. Consumers will not only expect their providers to give them good service and value for money, they’ll also require them to protect their personal information. What’s more, they’ll expect their providers to behave ethically in all facets of their businesses. Insurers that are perceived to have breached the trust of their customers risk substantial reputational damage.
Trend 7: Sustainability is the future
Insurers will come under growing pressure this year to demonstrate their support for sustainability initiatives that address climate change, environmental pollution, and social injustice. Carriers that are proactive and make visible changes across their organizations to address these issues and become truly “sustainable insurers” will outshine competitors. They’ll strengthen their brand and avoid having to catch up with regulatory requirements that may be mandated later.
Trend 8: Race to ‘green’ quickens
As fossil fuels continue to lose favor among regulators, shareholders and consumers, insurers will step up their commitments to green energy. Expect some carriers to cut ties with fossil fuel companies. Auto insurers are likely to introduce more incentives for their customers to switch to electric cars. Some may advertise their intention to stop providing cover for petrol and diesel vehicles.
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Trend 9: Fixed premiums lapse
Demand for pay-as-you-go insurance services will surge as more and more consumers enjoy the flexibility and cost-savings offered by these new offerings. Expect at least one major auto insurer to drop fixed premiums and switch completely to usage-based fees. Other carriers will quickly follow.
Trend 10: Cryptocurrencies gain luster
As low interest rates continue to dampen insurers’ investment returns, carriers will increasingly look at the possibility of adding new asset classes to their portfolios. Cryptocurrencies, particularly Bitcoin, are being endorsed by a growing number of financial services companies. MassMutual recently invested US$100 million in Bitcoin for its general investment fund. Expect plenty of other carriers to start adding cryptocurrencies to their investment portfolios.
Whatever the year ahead holds, I am sure it will deliver plenty of surprises. Let me know if you think I’m off the mark with any of the trends I’ve identified. Send me a message. I’m keen to hear your views.
Until then, I’d like to wish you prosperous and rewarding 2021.