The aftereffects of COVID-19 will continue to shake up the insurance industry. Customers will not only favor flexible service providers, but “modular” services - meaning those that they can pick and choose features from based on their needs or even their current financial standing. For auto insurers, this could translate into policies based on the actual mileage driven as opposed to the number of drivers, or even discounts for drivers that participate in ridesharing programs.
Personalization will become the new normal for insurance. Relatively, the insurance industry is pretty far behind the pack in terms of the scope of applications to intelligently process or integrate real-time data. One of the reasons that real-time data is a hurdle for insurers is that they have difficulty visualizing how it can become a revenue-generating engine for them, such as in the case of personalized services that meet customers’ immediate needs. However, examples set by platform economy companies – Netflix, Facebook, Amazon – have made the application of data to generate personalized insights and recommendations a must-have for auto insurers. That’s probably why we are seeing more pay-as-you-go insurance models (also spurred by COVID-19), and 2021 is likely to herald in new contextual data-driven customer experience models with a focus on these personalized services. This could include gaining real-time insights into customer usage patterns, policy purchasing trends, presenting insurers with a unique opportunity to expand their business models into affiliated networks, a trend that is already taking over other industries, like ecommerce, for example.
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Insurers will finally see the AI pie in the sky. 2021 is likely to see a huge uptake of AI technologies in the insurance industry in order to process all of the data they are collecting and to make their processes more efficient. We’ve already seen machine learning make strides in the customer experience and price categories for auto insurers, so we’ll probably continue to see AI applied in other contexts, such as smart accident detection and analysis, assessing damages and better understanding customer expectations based on their current or past scenarios. In addition, insurers will be able to generate smart insights to help them transform their offerings and meet Millennials and Gen Z’s high expectations for excellent and tailored customer service from all of their service providers - including their auto insurer.
Consumer trends in insurance - keeping it closer to home. In addition to the fact that in 2021 we will all be staying closer to home (due to COVID-19 restrictions), insurers will be adjusting their products and policies to be more focused and specific for our needs. For instance, Tesla and GM are just two OEMs that have launched exclusive insurance programs for their vehicles, so I think that more of these OEMs will start engaging directly with auto customers to provide them with insurance policies that are tailored to their personal needs or vehicle specifications. As a result, it’s likely that in 2021, more auto insurance brands will be making efforts to improve customer experience in order to keep their customers closer to home.
Insurers will bring claims closer to the Point of Care to save on costs. As claim costs for car damages continue to rise – a whopping 57% in the past decade according to a recent study– claims professionals are looking for smart ways to save on costs in 2021 and beyond because if anything will remain constant, it’s the importance of managing LAE. A lot of the solutions for reducing claim costs will aim to move the claims management closer to the "data origin" stream to ensure that the data flowing into their systems is accurate and standardized (even for bodily injuries), and has been objectively approved at the Point Of Care, such as at the moment of an accident. This is enabled with AI technologies that will eventually be able to predict claims events as well as automate claims estimation and fraud detection. With these capabilities, claims departments can become more proactive and save on their claim costs the minute an incident occurs - without having to wait for the policyholder to initiate the engagement. Even with apps and smart imaging solutions, the majority of policyholders don’t feel the urgency of reporting damage to their vehicle immediately following an accident and AI technologies can help with that by providing insurers tools to automatically respond to and predict the claims.
InsurTech growth will continue unabated. InsurTech is only just beginning to take hold and more pieces of the industry will be disrupted in the coming year. If past years saw new business models take hold of the insurance industry and disrupt the course of business, in 2021, there will continue to be a surge of new InsurTech companies that are putting data, AI and machine learning to good use. However, in general, and due to the current economic climate and insurgency of new InsurTech companies, insurance carriers are likely to be wary of taking risks on technologies that don’t increase efficiency, lower risk and generate higher profits. The majority of InsurTech uptake will likely be in P&C insurance. Other trends will include reducing the risk for reinsurers through creative methods and data analysis, while also reimagining the roles of MGAs to reduce friction with the policyholder, with the ultimate goal of maximizing its product usability.
If our experience in 2020 has taught us anything, it’s probably best to set expectations low and adaptability high. However, the auto insurance industry may be a different story – based on its surprising success amidst a challenging financial climate – making it possible that we will see at least some, if not all, of these predictions come to fruition in 2021.
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