Emerging Trends in the Insurance Industry

Insurance CIO Outlook | Friday, July 29, 2022

Insurance companies are embracing new trends in order to stay competitive in the market.

FREMONT, CA: The uncertainties pertaining to the insurance industry have increased in recent years due to the onset of the pandemic. But as the pandemic is settling down, the insurance sector is also showing impressive business growth. Many insurance companies are emerging stronger than before due to the adoption of technological solutions in the insurance industry. Other factors such as consistent low-interest rates, specialization, and increased consolidation have also influenced the insurance sector in improving its business.

Accelerated digitization encourages investments

As a result of the increased use of technology by intermediaries and insurers, the capital markets are increasingly rewarding them for integrating third-party vendors to augment their internal IT capabilities. It is becoming more common for insurers to hire vendors who specialize in a specific part of the process or value chain, ranging from underwriting increasingly fine-tuned packets of risk to gathering data and adjudicating claims without the involvement of a human adjuster. There is also a growing trend among traditional brokers to employ technology to assist their growth and increase their agents' time spent on value-added activities.

As technology providers make it possible to segment consumers increasingly granularly and utilize data more effectively, there will be an increase in sales. It is increasingly evident that both digital-native insurers and traditional insurers are making great strides in identifying niche customer segments and making the best use of data and analytics to meet their needs. Data and technology are helping distributors, and insurers better understand properties, market directly to homeowners, and underwrite risks rather than trying to sell homeowner's insurance to everyone.

The power of specialty insurance

Amidst the ongoing market hardening, specialty insurance has continued to attract investor interest as it covers risks that are specific or unique to a particular situation, as well as reinsurance.

While major mergers can lead to more consolidation in the distribution sector, in the long run, they can also provide opportunities for smaller brokers to retain key talents and assets during the transition period. Thus, in the next few years, there is likely to be an increase in the number of up-and-coming specialists in the specialty brokerage industry, resulting in a more dynamic and fragmented competition landscape, with many up-and-coming brokers expected to pursue aggressive growth strategies. Investors can now look beyond the hard market for two new types of opportunities beyond investing in specialty carriers and brokers. Underwriting specialty insurance and reinsurance are increasingly based on data and insights. Investing in data and services vendors who specialize in identifying and managing complex emerging threats -such as cyber, political, renewable, and environmental- would be beneficial to unlock new forms of value.

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