Part three: What are insurance experts predicting for 2021?

By Holly Hunter, Cytora

Welcome to the third and final piece in our industry predictions series for 2021. 

In previous posts, you heard from ten experts about what the future holds for insurance in the coming year. They told us that innovation is on the horizon in commercial P&C, and that incumbents will be trying to balance recovery from COVID-19 with investment in digitalisation in 2021. 

Not only that, but the winners will be those that empower underwriters to make decisions and have the shortest feedback cycle to the rest of the firm across pricing, underwriting and claims.

So, what does our final group of experts think? In this piece, you’ll hear from: 

  • Thomas Huerlimann, Non-executive Director at Hiscox, former CEO of Zurich Global Corporate
  • Richard Hartley, CEO, Cytora 
  • John Andrews, former Head of Delegated Authority & MGA Underwriting, Dale Underwriting Partners, former Head of Property, Arch Insurance
  • Matthew Grant, Partner, Instech London
  • Kelly Lyles, former Chief Executive, Client and Country Management at AXA XL

Effective integration of data and analytics capabilities will be key to success, according to Thomas Huerlimann, Non-Executive Director at Hiscox, former CEO of Zurich Global Corporate:

“Technological transformation and macroeconomic conditions create a dynamic environment for insurers that will further widen the gap between high-performing carriers and laggards.

“Retail and SME insurers need to improve productivity and are required to offer a seamless omni-channel advisory approach, deeply embedded in automated and scalable processes. A strong strategic emphasis must be put on customer satisfaction to not only win new customers, but to also increase the share of wallet and thus time-on-book. 

“Corporate insurers on the other hand need to prove their relevance in the strategic risk dialogue with customers by offering innovative solutions, possibly including a parametric component. The differentiating competitive factor will be the effective integration of data, both internal and external, and analytics capabilities into the entire value chain. Benefits will range from improved pricing accuracy to superior customer servicing as well as new service offerings.”

Trusted transactional brands will seek to provide insurance as an additional product, according to Cytora’s CEO Richard Hartley:

“Two levels of embedding will accelerate both the integration of insurance in core products and the proliferation of its distribution. Firstly, new business models will develop which subsume traditional insurance in the sphere of risk reduction. This will involve an acceleration of the embedding of risk transfer as a component of more holistic products, characterised by risk and availability of data. Tesla is a good example of this. 

“Secondly, trusted transactional brands – starting with financial services yet extending into other areas – will increasingly seek to provide insurance as an additional product. This will require insurers to find ways to standardise portfolio steering across multiple channels, while having an indirect interface to the customer. The relationship between Apple and Goldman Sachs in the lending space prefigures what will happen in insurance”

Smart contracts will take insurance into the twenty-first century, according to John Andrews, former Head of Delegated Authority & MGA Underwriting, Dale Underwriting Partners, former Head of Property, Arch Insurance:

“Smart contracts are becoming more commonplace within the financial sector, and I see insurance being the next industry to adopt the protocol. Smart Contracts through a blockchain provide encrypted safety, total back-up of documentation, and ensure complete trust in all parties. Not only that, they enable greater accuracy and autonomy; you’re making the contract, so you’re in control of it.

“This type of approach, when combined with parametric solutions and IoT-triggered claim solutions, will help to bring our industry into the 21st century. 

“The contracts will know of losses before the insureds and instantly indemnify. Placement of contracts in this way will assist in reducing inflated loss adjustment expenses and other costs. In turn, this will allow all parties more time to analyse data and trends, leading to better, wider coverages at fairer prices – and producing justifiable profits to carriers.”

Large enterprises will realise they know more about their clients than an insurer, according to Matthew Grant, Partner, Instech London:

“We’re going to see a notable switch in focus to how global enterprises think about insurance in 2021, across four areas: 

  1. Distribution – using their clients and brand to sell insurance, often embedded in the purchase.
  2. Using their own capital as an alternative to insurance capital – large enterprises will bring analytics in-house, favouring better cost of insurance and more certainty by using their own balance sheet more. 
  3. Risk management over underwriting – companies will look to partner with insurers and brokers that engage directly with them offering tools and services that reduce their risk rather than a pure annual underwriting transaction.
  4. The power of data and analytics – companies will realise how much more they understand about their clients than insurers – and sell the data or use it directly themselves.” 

Insurers will invest more heavily in technology to improve productivity, according to Kelly Lyles, former Chief Executive, Client and Country Management at AXA XL:

“What a year 2020 was! We saw market dislocation – following almost 20 years of a soft insurance cycle – coupled with the economic and social impacts of the Covid pandemic. It may be interesting to pause and consider the inter-relationship between the two. 

“With margins compressed for such a prolonged period, the industry as a whole invested less in future infrastructure – whether that be talent, innovation or technology. Likewise, with placements relatively easily made at premium reductions, perhaps focus on the coverages that could matter (BI for pandemics?) were often not given the attention that, with hindsight, was clearly required. Product innovation is an imperative to stay relevant to our more sophisticated clients, but it is also important to bring something more than balance sheet protection. 

“Nothing brought technology to the front of mind better than having much of the global workforce working remotely. As rates improve profitability, I suspect most companies will return to thinking more strategically and invest more heavily in improving productivity by using technology and data more effectively. The time is now, or we will be left behind.”

So, if our experts are to be believed, 2021 presents a huge opportunity for insurers. And while some will embrace this dynamic environment, there’s the potential for the gap to widen between high-performing insurers and laggards.

Will 2021 be the “year of the customer”? And how far away is that soft market we’ve heard about? We’ll be checking back in twelve months time to see how things have progressed – and how possible predictions and stability really are in an industry so fundamentally grounded in risk. 

Thanks again to all of our contributors in this series! Please feel free to leave feedback on Linkedin here, or get in touch with us directly here.