Five Key Factors Shaping Insurance in 2020
While 2019 is ending faster than any of us anticipated, it is time to start looking towards the trends that will affect the future of many insurance companies into 2020 and beyond. Numerous factors are causing a shift in the insurance sector including new business, investment and regulatory environments, demographic shifts, new markets and changing customer behaviors – just to name a few. While adaptability and agility will be crucial for many insurer’s moving forward, some will fall behind after only focusing on short term goals. In this blog, we’ll discuss the trends that are driving the decisions that affect insurance companies and the solutions they offer.
Factor One: Social Sharing
The balance of power has been shifting towards the customers for the past few years. This is nothing new. What continues to change are the customer’s expectations. With the advance of new technology, customers demand simplicity, transparency and speed in their transactions with their insurers. The constant demand for mobility and speed of services will mean the continued investments into mobile and interactive technologies by insurance companies. Additionally, the heavy reliance of social networks in our day-to-day lives will continue to empower the consumer, while offering complete transparency of insurance policies (good or bad) to their friends and families.
Factor Two: Technology
Data and analytics continue to change the scope of all aspects of life, and the insurance sector is not immune. ‘Big data’ is regularly being used for actionable insights to help increase revenue, enhance operational efficiencies and improve the customer experience. The availability of real-time data allows insurers to offer better pricing, underwriting and loss control. Advances in Artificial Intelligence and Machine Learning are helping insurance companies with the decision-making process, oftentimes changing reactive business models into preventative ones.
Factor Three: Economics
Emerging markets, uncertain growth and new regulatory guidelines are shaping the insurance sector every day. Numerous factors contribute to such changes including average population age, the uncertain nature of the middle class, government investments and more. Insurance companies must re-evaluate their goals and offerings to take into account these ever-changing economic factors.
Factor Four: Environmental
Turn on the news today and there seems to be a new catastrophic weather event making the headlines. Whether it be a fire, hurricane or record-setting blizzard, the severity and frequency of these disasters are increasing year by year. For insurance companies, managing these types of risks will be no small task. Risk modeling, risk sharing and risk transferring will need to become more specific while relying heavily on technology in high-risk geographies.
Factor Five: Political
Everyone’s favorite topic. Certain factors in politics will completely change the insurance sector. Insurance companies in the U.S. must factor in the rising dependency ratio and the pressure it is putting on the Social Security Trust Fund. Secondly, terrorism continues to impact product lines that are generally modeled independently, causing extreme risk factors. Lastly, geopolitical instability is on the rise as resource scarcity continues to affect the sector, calling for a reassessment of energy policies.
While it is always hard to predict the future, these factors will continue to affect the insurance sector for years to come. The volatile nature of all five factors may pull insurers one way and then the other, depending on the day. Regardless, Colony West will have our fingers on the pulse to make sure we continue to offer the best solutions for our customers.