Welcome back to the latest in our series on what the future holds for insurance in 2021.
In our previous post, five industry pros shared their views with us on the trends shaping the insurance landscape in the months ahead. Despite the tumultuous year just gone, we heard that insurtech businesses will continue to scale, that 2021 is the “year of the customer”, and that a potential soft market is on the horizon.
In this second part of the series, we hear from five more experts about what’s to come this year in insurance and technology, with contributions from:
“I am very excited about the prospects for the global insurtech movement in 2021. In commercial lines in particular, we are seeing new players trying to solve some very complex problems and this will continue to gain momentum. Those start-ups that have shown strong early growth and have a defined pathway to profit will be able to access more capital and we expect to see a number of high profile raisings/IPOs in 2021.
“We will see incumbents try to balance the recovery from the global pandemic with continued investment in digitalisation – not an easy task. I think that we will see the current trends in partnering between insurtechs and traditional carriers continue to strengthen, and this may well lead to heightened M&A activity in the sector”.
“I expect 2021 to be a positive turning point for insurtech, for incumbents as well as new entrants. This means a significant increase in investment from the listed insurers in digital propositions and insurtech partnerships. We should see greater focus on innovation in commercial P&C, particularly for SMEs, which I believe is one product area most in need of disruption.
“What are the catalysts driving all of this? Covid-19 has increased the need to digitalise, address new types of risk and underwrite more efficiently. Technology is changing the nature of risks, e.g. the rise of electric and connected cars means that old datasets and insurance underwriting philosophy will become redundant. Incumbents are also making bigger strategic investments in disruption as the need to address ESG means they need to find better ways of delivering their product. Finally the valuations of listed insurtechs in the US gives further impetus for listed insurers to give this area more attention.”
“2021 will see business continue on the path of more workplace flexibility; less rigid working hours, less time in the office – remote working is here to stay. Mirroring this will be a change in hiring practices and the skills sought. With so many companies revisiting their long term strategies we may see restructuring and a demand for new leadership skills encompassing empathy, agility, adaptability and resilience.
“The right talent and structure will be needed to accelerate long term recovery from 2020. This may mean an increased focus on diversity in hiring, HR teams looking at new onboarding practises driven by more remote working, and an increase in companies taking on freelancers until they have fully recovered from the financial impact of 2020.”
“We think the incumbent business model of both life and non-life insurance faces an existential challenge from changes in society, technology and capital markets. Many insurance groups have deflected investor attention from this over the past decade by focusing communication on cash-orientated metrics and dividends. Meanwhile, technological disruption has accelerated as a side-effect of the COVID tragedy and we have seen a step-change in regulatory intrusiveness.
“Insurance groups still have huge potential for operational efficiency, with three quarters of profits consumed by administration expenses. The pressure to manage their capital structure is also likely to build. This could include a shift of priorities from repatriation to reinvestment and consolidation”
“The problem for pricing and underwriting in 2021 and beyond is how to create a mathematical model, following an event that has never been seen before and almost certainly would have changed the way businesses, their suppliers and customers operate. All my past data is no longer representative of the future. In response to this challenge, I’ve seen some insurers double down on the available data they have. Some have tried to extrapolate from the global financial crises (2008) or even from the 1980s recession, playing out a variety of simulated scenarios. This should help to give comfort to leadership and prepare them to have a multitude of responses if certain conditions emerge.
“However, the ‘winners’ in my opinion, will be those that understand their pricing model, not just as an algorithm that produces a number, but they really understand the assumptions and limitations that lie behind the models. The winners are those that empower their underwriters to make decisions and have the shortest feedback cycle to the rest of the firm across pricing, underwriting and claims.”
A big thank you to everyone who took time to contribute to this piece. In the third and final part of the series, we’ll hear from more industry experts on the world of insurance in 2021.
In the meantime, leave a comment with your thoughts on Linkedin here, or get in touch with us directly.
