10 developments that may form insurance coverage in 2021
2021 is sure to bring many surprises, but 10 trends – including “growth of the giants”, a race for green, the move to usage-based coverage, and bitcoin as a new asset class – are likely to have a big impact on the insurance industry in the coming year.
The COVID-19 pandemic has reminded us of the folly of predicting the future. But it also helped us imagine what that future might look like.
At the beginning of 2020, few people foresaw the chaos that the COVID-19 pandemic has created around the world. It overshadowed everything else that happened last year. All predictions by economic analysts, market researchers and investment gurus were overtaken by a global event that almost no one saw coming.
As we look forward to 2021, it is good to remember how unpredictable our world really is. If it weren’t for it, we wouldn’t need insurance. Our livelihoods depend on insecurity.
What major events will shudder worldwide in the next 12 months? Fluctuations in geopolitics, economic surprises, technological breakthroughs, another pandemic? We do not know it. However, we can identify key trends emerging in the wake of the COVID-19 pandemic.
Unexpected global or regional events may still affect the progress of these evolving trends, but they are already starting to gain momentum. Many of them have been accelerated by the pandemic. With early detection, insurers can gear their business to the changing needs of their customers and offer new, potentially lucrative products and services.
Here are 10 trends that I think will have a huge impact on the insurance industry in 2021.
Trend 1: Increase in health and wellness services
The COVID-19 pandemic has put health and wellbeing at the fore of customer concerns. Insurers have responded by strengthening their traditional health and life insurance with a range of digital health and wellness products and services. Carriers that quickly establish a strong presence across the healthcare ecosystem will gain a huge advantage over competitors.
Trend 2: Phygital becomes the standard
Digital service and sales channels will displace the traditional network operator channels as the main point of customer loyalty, but the input of physical channels and experts will continue to be sought for advice on complex decisions and offers. During the pandemic, consumers have taken advantage of digital services and few will return to their previous habits. Digital services that are seamlessly combined with phygital experiences, especially on mobile platforms, will turn out to be the main differentiator when buying insurance. Those carriers that are slow to introduce enticing digital offerings are losing customers.
Trend 3: More insurers are venturing beyond insurance
Advances in digital technology are opening up a multitude of opportunities for insurers to expand beyond their traditional markets. The flat premium income and low investment returns forecast for 2021 will accelerate this trend. Expect carriers to announce some surprising partnerships to expand their revenue base.
Trend 4: niche products shine
After the COVID-19 pandemic, insurers launched a range of innovative risk management offerings. Demand for bespoke products such as small business continuity coverage, cyber threat protection, pandemic insurance and event cancellation will increase. The interest in insurance products for certain groups of the population such as young adults or retirees will be particularly high and offer partnership opportunities between established companies and insured persons.
Trend 5: The giants will grow
Innovative new insurers have been in the spotlight in recent years and have received significant funding. However, this year traditional airlines will come to the fore. Their financial strength and extensive internal resources will enable them to weather potential adverse economic conditions and secure new revenue opportunities. The insurance industry is expected to see some significant mergers and acquisitions in 2021.
Trend 6: Trust is no longer negotiable
Consumer confidence will become a defining trait of business in 2021. Not only do consumers expect good service and value from their suppliers, they also need to protect their personal information. In addition, they expect their vendors to behave ethically in all facets of their business. Insurers believed to have breached their customers’ trust risk significant reputational damage.
Trend 7: Sustainability is the future
Insurers will come under increasing pressure this year to show their support for sustainability initiatives that address climate change, pollution and social injustice. Carriers that are proactive and make cross-organizational changes to address these issues and become truly “sustainable insurers” will outperform the competition. They strengthen their brand and do not have to meet the legal requirements that may be made later.
Trend 8: The race for “green” accelerates
As fossil fuels continue to decline in popularity with regulators, shareholders and consumers, insurers will step up their commitment to green energy. Expect some airlines to sever ties with fossil fuel companies. Auto insurers are likely to create more incentives for their customers to switch to electric cars. Some may announce their intention to end coverage for gasoline and diesel vehicles.
Trend 9: Fixed premiums expire
Demand for pay-as-you-go insurance services will increase as more consumers enjoy the flexibility and cost savings offered by these new offerings. Expect at least one major auto insurer to cut fixed premiums and switch to usage-based fees entirely. Other carriers will soon follow suit.
Trend 10: cryptocurrencies are gaining shine
As low interest rates continue to dampen insurers’ investment returns, airlines will increasingly consider the possibility of adding new asset classes to their portfolios. Cryptocurrencies, particularly Bitcoin, are supported by a growing number of financial services companies. MassMutual recently invested $ 100 million in Bitcoin for its general mutual fund. Expect many other carriers to add cryptocurrencies to their investment portfolios.
Whatever the year ahead, I’m sure it will bring many surprises. Let me know if you think I am not on the right track with any of the trends I have identified. Send me a message. I look forward to your views.
Until then, I would like to wish you a successful and rewarding year 2021.