Technology and natural disasters should reshape the insurance industry in the coming year.
As 2018 unfolds, the insurance industry will continue its technological revolution as agents and carriers further digitize their operations. Fortunately for agents, these tools are well within their financial reach. “Barriers that once prevented agents from implementing digital technologies have been removed,” says Jason Walker, Managing Partner of Smart Harbor, a technology solutions provider for the insurance industry.
Technology won’t be the only area in which the industry will undergo some radical shifts in 2018. After a year of staggering insured losses from hurricanes and wildfires, insurers are expected to overhaul their underwriting standards to better price risk in certain areas.
Several experts have offered predictions on what’s ahead for insurance agents and carriers in 2018. Here are five of the most important trends to monitor this year.
Increased Digital Adoption
Smart Harbor focused on technology in its 2018 forecast, predicting that more agencies will integrate artificial-intelligence powered platforms into their operations. Smart Harbor also expects that interactive websites that enable prospects to get online quotes or speak with chatbots that can process claims and answer basic questions will become the norm. Many agencies already employ AI in some form through automatic fill-in forms and machine learning programs that push prospects through the system. This technological shift will grow as agents work to satisfy clients who expect ‘round-the-clock customer service.
Relationship Between Agents, Carriers Evolves
The relationship between agent and carrier will advance beyond the traditional provider-seller model. Once again, technology is at the heart of this transformation. As Smart Harbor points out, agents collect valuable market information about clients’ and prospects’ behaviors and product preferences that can be used by carriers to carry out targeted sales and marketing campaigns. In turn, carriers have the knowledge and technological infrastructure needed to help agents upgrade their digital capabilities.
Insurers Assess Risk After Massive Losses
Maxime Rieman, Value Penguin’s Senior Insurance Analyst, says that insurers may reassess their risk tolerance in certain regions after insured losses resulting from natural disasters reached record levels in 2017. In California, where wildfires generated $10 billion in claims, insurers could either raise premiums or decline to renew or offer policies in portions of the state. Similarly, the record $370 billion in losses produced by major hurricanes in Florida, Texas, Louisiana, and Puerto Rico may force the National Flood Insurance Program (NFIP) to bump up rates or restrict coverage to certain areas. While that might open up the flood insurance market to private players, Rieman believes that private insurers could set premiums higher than the NFIP’s or simply not underwrite policies in high-risk regions. Regardless, the insurance industry will need to re-evaluate its risk-models after 2017’s record-smashing year.
Auto Insurance Encounters More Changes
Much has been discussed about the possible changes brought by driverless cars to auto insurance, but according to Ted Gramer, the CEO of mobile telematics company TrueMotion, autonomous vehicles are at least 15 years away from significantly penetrating the marketplace. He argues that auto insurers should instead concentrate on improving the client experience and optimizing the claims process in a hyper competitive auto insurance market. As for his product, Gramer claims that while telematics collects vast amounts of predictive data that can be used to price high-value segments, its benefits are not limited to setting rates. Telematics data, Gramer stresses, enables insurers to personalize their services to drive customer engagement and loyalty. The next generation of User Based Insurance (UBI) will allow “carriers to create [great customer] experiences by leveraging data in unprecedented ways and a new data-driven claims experience will begin to evolve.”
Quicker P&C Claim Payouts, Life Underwriting
Like Smart Harbor, the Aite Group foresees technology propelling change throughout the industry in 2018. In particular, technology will encourage rapid claim payouts by property and casualty insurers. “In an increasingly customer-centric environment, more carriers will strengthen policyholder engagement and relationships by using available technology to pay claims quickly,” says Aite Group Co-founder and Research Director Gwenn Bézard. In other industry segments, life insurers will continue to expedite the underwriting process with advanced algorithms and third-party data as they ditch legacy systems in favor of automated alternatives.
Despite the rise of various technologies in insurance, clients and prospects still want a personal relationship with agents and carriers. The challenge for agents and carriers will be merging technology with a human touch. “Incorporating these technological advancements is mandatory for agents to compete in the market, but going digital will never remove the human element from the insurance transaction,” says Smart Harbor’s Walker. “Customer service is the foundation for agents and they will need to navigate how to implement these solutions while still providing the personal interaction clients demand.”