Insurance Leaders Predict Economic Recovery Still Far On The Horizon

Insurers that are readying their future plans are doing so with the expectation that full economic recovery is months away and might not even come until early 2023, according to recent surveys.

Meanwhile, smaller insurance companies worry that the pressure to embrace digital interactive technology will burden them with costly capital expenses.

Those were a few of the findings from a new survey from Digital Insurance, which probed industry trends and predictions for 2022 and beyond.

More than 65% of insurance leaders believed economic recovery is still far on the horizon, said Janet King, vice president of research for Digital Insurance. The most pessimistic among them believe a return to normal won’t come until next year.

That outlook muddies future planning, King said, but the economy was only one of a handful of threats industry leaders said they face this year.

The threats to industry growth vary among carriers of different sizes, according to survey results. Large companies split their vote between the lingering effects of the pandemic and the competition for talent, with expectations around digital interactions. Mid-size carriers saw new entrants and competition as their top threat, while smaller firms chose their high cost of conversion to digital systems as their biggest challenge.

'Broad Themes'

The survey was conducted in the last quarter of 2021 and about 100 managers from a mix of insurers, carriers, agencies, brokers and tech firms responded.

“The survey itself focused on a number of broad themes,” King said. “We really tried to structure it to get the perspective of these industry stakeholders on macroeconomic events, the competitive landscape, tech and innovation, and customer expectations."

Insurance is a constant product, even during stressful times, the survey’s authors noted. In that respect, crisis could provide the industry with opportunity as more consumers use this time to reassess their coverage in life, home and health insurance, along with savings instruments.

“Our last study showed 26% of consumers are considering switching their home insurance carrier in the next year and 29% on the life side,” said Karen Imbrogno, senior insurance industry analyst for property/casualty and life at Acxiom “For carriers, that means about a quarter of their book is out there shopping. So although companies might have acquisition strategies, they also need retention strategies. Because growth going forward is going to come from stealing customers away from other brands.”

Moreover, Imbrogno said, COVID-19 exposed a many of the traditional players’ weaknesses and opened up the door to a lot of new entrants.

“The bottom line is that consumers are always going to need insurance,” she said. “We need to be ready with a well-thought-out acquisition strategy and retention strategy. When recovery happens, we need to be in front of the consumers with a message that we can help them save.”

Digital Interactivity

At the same time, though, consumers are looking for a new and different experience in buying insurance, one that provides seamless digital interactivity.

“Through the pandemic, more consumers have been forced into the online world, where they might not have felt as comfortable in the past,” Imbrogno said. “As a result, many are expecting that Amazon experience when they buy insurance.”

She said studies have shown consumers want to have their policies in hand within days of making a transaction.

Yet in conversations with industry leaders, some pushed back on the notion, saying that buying insurance can’t be compared with purchasing products from Amazon.

“I would say: ‘Let me tell you why you should be more like Amazon,’” she said. “Consumers want to buy 24/7. They want transparency. They want to know the status of their policies at all times, and they' expect carriers to make recommendations on what they should look at next. And finally, it's about a seamless experience, whether it's through their websites or other communication channels.”

Other findings from the crystal ball survey:

• Despite digital innovations, agents will continue to play an important role, particularly if they can integrate into the online experience.
• Increasing reliance on analytics and intelligence around fraud prevention. About 80% of insurers are using predictive modeling to fight fraud, compared with 55% only four years ago.
• The competition for talent will continue to increase, with all companies fishing in the same talent pool.
• The biggest job openings in the industry are in data analytics. (“So recent college grads, take notice, go into data analytics,” King said. “If you have kids in college, push them in that direction.)
• Customer service is a top priority but it comes with a high infrastructure price tag, particularly for small and mid-size carriers.
• Large carriers listed data and analytics as a top priority while smaller carriers are more focused on cloud-based integration.
• Three out of four respondents predicted a moderate to significant increase in technology investment at their organization over previous years.
• About 60% of respondents expect competitors such as Amazon, Tesla, Apple and Facebook to become major competitors within the next three years.

“Tesla's already out there offering auto insurance,” Imbrogno said. ”Right now, it’s for the single driver, single car because they aren’t able to handle the multi-car, multi-owner situation on one policy. But they’ll figure it out.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].