It’s safe to say that 2020 has been a year like no other. You probably think I’m referring to the pandemic, and you’re right. But those of us in the insurance industry know that 2020 was shaping up to be pivotal long before COVID-19 appeared. The industry faced low rates, rising mortality, sluggish economies, and increased losses in multiple business lines — even before the virus jumped the species barrier.
We can now peer over our masks and see the societal effects and economic implications of COVID-19 playing out for years. Digital transformation was important before the virus hit, but the pandemic has accelerated the need for digital solutions, both within the customer’s buying journey and for the insurer to deliver value through new distribution mechanisms and product innovation.
We see 2021 promising more of the same. Insurers will need to contend with an unpredictable virus and its economic consequences, dramatic climate events, and the aftermath of a polarizing US presidential election. But in chaos, there is opportunity. We predict that in 2021, increasing appetite for usage-based insurance (UBI) in personal auto will drive insurers to rethink how they help customers discover and use auto insurance. Adoption of UBI has been modest, but COVID-19 has ushered in a new paradigm where consumers are more conscious about price transparency. That will result in strong new business growth across the sector. US life insurers, recognizing a structural shift where employers replace employees with contractors, will get serious about digital individual disability sales. The gig economy has transformed how the world works — literally — and gig workers need injury protection, too. Startups are exploiting this need. Expect incumbents to jump on the bandwagon.
I think you will agree that product and services innovation bodes well for the sector, as it creates value and differentiation in the marketplace. But the mechanism for prosperity in the new year isn’t singular. Containing claim leakage will also become a top priority for property and casualty carriers as they deal with exorbitant claim losses from the economic fallout of COVID-19 and global natural disasters. And let’s not forget about insurtech, which, following a rough start in 2020, has recovered strongly as investors have rewarded the digital mindset that startups bring to the market. The new year holds great promise for established insurtechs — you know, the ones with the cool drink and animal names. Unfortunately, smaller, less known insurtechs will find the funding environment challenging as investors take a flight to quality (in the form of “safer” investments).
With 2021, we open a new chapter in which one thing is certain: Change and uncertainty will remain constants in customers’ lives. Insurers must therefore remain vigilant in investing in the digital products, services, and capabilities that customers expect.
Read our full report to learn what else we’re predicting for 2021, and look out for our insurance predictions webinar on January 13, 2021.