2023 Insurance Outlook – Insurers need to shift gears.
Deloitte has released its global 2023 Insurance Outlook Report on the driving forces for profitability and growth. It comes as the insurance industry has made some improvements after the last few years’ challenges. However, new challenges are on the horizon, and the industry now needs to take yet another leap forward to stay competitive. We have summarized our key takeaways from the report.
During the pandemic, insurers had to pivot and turn digitalization plans into their top priority. The transition appeared almost overnight with completely remote workforces and virtual engagement with customers. These events have pushed the insurance industry to make some improvements, but as the global economy is set to have a great downturn in 2023 and 2024, the Deloitte report urges insurers to make digital development a top priority.
Data and analytics for value realization.
Many insurers have prioritized technological investments to improve customer experience. However, as the market is becoming increasingly commoditized and competitive, legacy insurers must adopt an even stronger customer-first approach to keep up. The Deloitte report concludes that advancing data management and analytics maturity is vital for insurers. Data that has been managed as an infrastructure expense now needs to be operated and seen as a strategic asset. This is crucial to value realization. When insurers implement strategic systems to extract data, it will mark a fundamental change, providing the means to understand customer needs and preferences better. This, in turn, enables personalized experiences and tailored offerings, fostering sustainable growth and stronger customer relationships.
Adapting for sustainable growth.
Rising inflation, interest rates, loss costs, geopolitical upheaval, and the looming threat of recession mean insurers need to adapt and capitalize on emerging market trends and opportunities. Group insurance represents a significant growth avenue. The report suggests addressing the increasing demand for comprehensive employee benefits packages. However, to serve a diverse and multigenerational workforce with evolving expectations, insurers must move forward from one-size-fits-all plans to holistic lifestyle experiences covering health, wealth, and wellness comprehensively rather than through separate policies. To expand their portfolios, many insurers are forming partnerships with other providers and third-party vendors, such as fintechs. By leveraging data, insurers can create personalized offerings, increase sales and nurture long-term customer loyalty.
Additionally, there is mounting pressure from distribution channels for increased innovation. Brokers now expect carriers to enhance their technological capabilities for digitalization and virtualization across all operations. By sharing more data with brokers and employers, insurers can collaborate to design meaningful benefit options, ultimately helping employees lead healthier lives and potentially reducing claim costs.
InsurTech is becoming the industry norm.
Investments in InsurTech reached a record high in 2021, drawing a record US$17.2 billion in funding—just slightly below the prior four years combined and fell just short of the second-highest-full-year total during 2022, according to the Deloitte report. Insurers will continue turning to InsurTech for data aggregation, platforms, and digital support- and sales features in the race for profitability and growth. This trend will increase the competition, and those missing out are at risk of decreasing their market share.
In conclusion, Deloitte's 2023 Insurance Outlook Report highlights the need for insurers to shift their focus towards value realization in a digitally maturing landscape. This includes advancing data management and analytics maturity to understand customer needs and fostering consumer-centricity to develop their services. Insurers must adapt swiftly to stay competitive amid new challenges and economic uncertainties as they navigate a rapidly evolving industry landscape.
It’s already possible for insurers to understand customer needs and fostering customer-centricity to develop their service. With Insurely’s open finance solutions, we at Insurely are on a mission to democratize consumer insurance information and help our partners understand their customers to increase conversion and satisfaction. Do you want to know more about how you can leverage data to understand your customers' needs? Let us know; we’re always here to help.