5 Minutes Read By Johanna von Geyr

Top 5 Insurance Industry Trends for 2024

#Artificial Intelligence#Digital Transformation#Industry Trends#Insurance Services

In this article, Johanna von Geyr shares her forecasts of the top 5 insurance trends valid across all lines of business in 2024.

Johanna is a seasoned executive in the insurance and financial services sector, co-CEO and founder of ALAIKA Advisory, and a member of the OMMAX Advisor & Expert Network. Her career is highlighted by significant contributions to Fortune 500 companies, where she led digital transformation initiatives. Johanna's client work includes collaborations with Top 50 Global Fortune 500 Insurers and major European Banks. Her expertise encompasses Insurance, Financial Services, Digital Transformation, Operations & Technology, and Private Equity.

Johanna's top 5 trends for the insurance industry in 2024 are:

  1. Personalized insurance and service-oriented consumption paired with omnichannel interactions
  2. Development of new insurance products to cover evolving risks
  3. Evolving risk models
  4. Interacting with the industry’s ecosystem and finding the right partnerships
  5. Implementing new business models to open new revenue streams

In Johanna's expert view, 2024 will largely focus on operationalizing these trends based on digital transformation initiatives. A clear example is streamlining existing system landscapes by reducing legacy systems or embracing APIs to build the basis for collaboration and data exchange.

Dive into Johanna's detailed insights and forecasts for the insurance industry in 2024 below!

How could digital transformation improve the interaction between insurers and their customers? What benefits could this bring for the companies themselves?

These days, policyholders expect user-friendly and personalized experiences with insurers that can be accessed anywhere, anytime. In addition, buying behaviors are shifting towards service instead of product-oriented consumption. Digital transformation is enabling insurers to respond to these changing customer expectations. This transformation leads to more frequent, automated, and seamless interaction across all channels (including online agencies, mobile phones, and non-insurance distributors). This, in turn, allows for a more customer-focused experience, providing services at the right time and via the proper channels, such as with embedded insurance products or initial digital purchasing advice via customer analysis or intelligent chatbot, like Chatbot Clara of Helvetia.

This digital transformation increases customer satisfaction and helps insurance companies increase operational efficiency, data utilization, and risk management to stay competitive in an evolving market. Larger incumbents can more than double profits over five years by digitalizing their business, with automation reducing the costs of a claims journey by as much as 30%.

How can digitalization help expand growth opportunities or develop new business models in the insurance industry?

Digitalization allows for better integration between platforms (such as with different data sources and systems), APIs that enable real-time pricing, seamless claims processing or fast underwriting, and value-added services for customers in addition to the core insurance product. This integration capability is one of the reasons for the rise of embedded insurance. The service-oriented buying experience is expected to grow in revenues from today’s 10 billion to 200 billion in Europe (according to Swiss Re and others) by 2030.

With this model, insurers can meet potential customers at the point of sale of a product or service. Add-on services such as telemedicine support (an example being AIA’s health app), chat groups, and virtual claims handling are bringing even more potential revenue streams into the picture. Not only does this digitalization enable insurers to offer access to purely digital products, but it also meets the expectations of the younger, digitally savvy generation of consumers. Similarly, these new digital offerings help insurers extend the reach of their products, especially in remote regions or developing countries.

To what extent does digitalization enable in-depth personalization of insurance products and services?

From an insurance company's perspective, digitalization enables the insurer to offer customized policies that consider each customer’s phase in life, health status, place of residence, correlating weather conditions, and driving behavior. Beyond that, digitalization empowers insurers to identify potential protection gaps and precisely place respective offers.

Open architecture platforms allow for integration with many partners or ecosystems. This is beneficial from a customer’s perspective, as client preferences lean towards a highly customized stack of insurances (including motor, homeowner, and personal liability) across platforms and providers. A digitalized offering that can provide an omnichannel experience provides ease of use for the client despite the complexity of their insurance packages and added services. One example would be the insurance broker app CLARK, which offers digital document management across insurance policies.

What are your expectations regarding using AI and how could this impact the insurance industry?

In the future, AI will revolutionize interactions between insurers and customers, making them more efficient, predictive, and customer-focused. For insurers, AI-driven underwriting and risk assessments will enhance productivity (features already used by ClaimSource’s predictive denials component), offer new insights, and anticipate customer needs, thereby mitigating risks more effectively. On the customer side, AI will facilitate personalized insurance recommendations, streamline claims processing, and elevate the overall quality of customer service, creating a more intuitive insurance experience. This however is only the operations part, as mentioned in the introduction of the article AI will also pose new risks in the market. In response to that nearly 80% of the re. insurance and direct insurance career currently evaluating the first AI insurance products upon previous learnings from Cyber insurance and its launch to the market.

How do insurance companies overcome the challenges of data protection and cyber security in the context of increasing digitalization?

In response to data protection and cybersecurity challenges, Moody’s 2023 report showed that cybersecurity spending between 2019 and 2020 increased 70% across companies. Despite recent budget pressures, cyber security remains a top priority for insurers as the risk of cybercrime increases. The Allianz Risk Barometer reported cyber-attacks as the top risk for 2024, both in Germany and worldwide. 36% of respondents identified data breaches and increased attacks on their organizations and that cyber threats are the business interruption they fear most.

Insurance companies can combat rising cyber security threats while still driving digital transformation by setting up strategic security programs for regular and continuous implementation of new/required measures, participating in regular industry expert exchanges like CSSA (Cyber Security Sharing & Analytics), as well as investing in employee training and IT awareness. The latter is particularly important to establish an effective human firewall: according to Verizon’s data breach investigation report, 74% of all breaches include human elements, highlighting the need for well-defined best practices.

How do current and future regulations influence the digital strategy of insurance companies? Which regulations will become particularly important for the German insurance industry?

From my perspective, the European-wide Digital Operational Resilience Act (DORA) drives the activities in this area. Threats posed by increasingly widespread digital information and communication technologies are omnipresent, constantly evolving, and even more critical due to the interconnectedness of the financial services sector and its ecosystem. Currently, IT-related regulations are scattered across various regulatory documents at the European and national levels and are partially implemented to varying degrees. As a milestone in the EU’s digital financial package, DORA intends to strengthen financial service providers’ information and communication technology resilience. This requires multifold adoptions and measures within a company to be implemented by January 2025, from technical implementations, stringent testing requirements, and strengthened risk management to an expanded and more stringent third-party management paired with enhanced reporting requirements and board-level governance. In addition, as the EU AI Act becomes more transparent, it will continue to exert influence over the widespread introduction of GenAI technology across the whole value chain of an insurer. Insurers should consider this regulation in their ‘proof of concepts’ and pilots to avoid surprises.

What is your vision of the insurance industry's future in terms of digital innovations in the next 5 to 10 years?

Taking a general outlook,when considering the macroeconomic influences, the increasing frequency and severity of global risks caused by cybercrime and climate change, I would like to see the insurance industry stepping out towards a “financial safety net” and take bold moves, AI insurance as an early adopter would be an example. Nevertheless, it will be interesting to see how the industry balances the increasing cost base with affordable premiums to avoid a further increase in the protection gap. Due to increasing cost pressures and the need for digitalization and innovation, I expect to see further mergers between local and regional-focused insurers (like we have seen between Gothaer and Barmenia in Germany). These mergers will enable synergies in portfolio and customer reach and address cost efficiencies.

When considering digital innovation, I expect a more customer-focused digital strategy from leaders and niche providers in the insurance industry. This will include omnichannel capabilities for customers, fully automated claims processes, embedded insurance offerings, highly skilled risk assessment models, and advanced fraud prevention technologies, all powered by AI. Given that the insurance industry has been historically cautious around change, I anticipate an incremental rather than a rapid digital transformation over the next few years.

Could certain consumer trends have an impact on the insurance industry, and if so, in what way?

Absolutely. 3 major consumer trends come to my mind, the first of them already visible today:

  • Service-oriented buying behavior: As mentioned above, a trend we are already seeing is service-oriented buying behavior, pushing towards embedded insurance and value-added services on top of insurance products.
  • Sustainability and prevention: In a traditional insurance world, insurance comes into play when damage or disease occurs. This is valid for the likes of P&C, but also in the health space. The current consumer trend to prefer reselling or repairing damaged items rather than directly replacing them pushes back at the throwaway society attitude in favor of a more sustainable and circular ecosystem. Car insurers are pioneering this trend by increasingly repairing damages with refurbished or used spare parts. In the healthcare industry, insurers already support more and more preventive care and treatment initiatives against developing diseases.
  • Personalised, omnichannel interaction and subscription models: The trend in the consumer retail space of having a seamless, transparent, omnichannel customer journey has already affected the insurance world. The next step beyond personalization will be toward subscription models. Subscription models offer increased flexibility, control, and transparency for customers, and is a preference that is impacting many industries today. In particular, in the field of mobility, we will see new offerings not bound to a specific car model, but for a variety of mobility options. I expect mobility-based insurance, independent of whether I use my car, a rental car, a shared car, a bike, or a scooter. In insurance, this can mean improved digital capabilities through IoT-connected devices to enable pay-as-you-go insurance, where pricing can be personalized to the driver, with the ability to adjust pricing based on driving behavior.

Which future (digital) developments could lead to controversies in the insurance industry and are already dominating the discussion within the industry?

The development of personalized pricing in insurance policies comes to mind. Initially driven by the customer’s demand for fairness and first realized within the car insurance world, personalized pricing has still not turned out as a new standard. Although tech companies and insurers have found solutions for seamless integrations (such as telematics in the car insurance space), consumers are only willing to use those policies in the case of a cheaper premium.

Personalized policies could lead to some unintended consequences, biases, and controversies. At its core, the insurance industry is based on the principle of collective risk assumption, where an individual’s risk is covered by a group of individuals who pool funds to insure those in the group (potentially including themselves) who may need financial assistance in the event of an incident. If digital developments such as telematics create a fairer, more personalized insurance pricing model for the individual, this might not be beneficial for the community or the insurer itself.

What are currently the biggest problems (“pain points”) that affect almost all potential insurer customers of OMMAX in the insurance sector in the DACH region?

Insurers in the DACH region face three major pain points:

  • Legacy architecture: Historically grown legacy IT environments require huge investments and long-time transformation projects to modernize. Insurers need to act now to ensure that they remain competitive in the near future.
  • Demographic change: The industry faces a considerable risk through the disappearance of the baby boomer generation. This generation takes with them knowledge and expertise of old legacy systems and insurance know-how. In addition, not enough junior skilled people are willing to work at insurance companies that traditionally have dated IT environments, such as mainframes.
  • Increasing regulatory requirements: The necessary compliance with extended regulatory requirements (e.g., DORA) within a limited timeline (~less than ten months) puts enormous pressure on organizations across all affected areas.

With these challenges in knowledge, architecture, compliance, and the financial investment required to overcome them, many insurers are turning to partners such as OMMAX and ALAIKA to execute the necessary organizational changes to overcome these challenges. Want to learn more about our experience in insurance? Get in touch with our experts in the contact form below!

By Johanna von Geyr

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