For many of us, the start of a new year entails making resolutions to improve our health and well-being. We must evaluate the possibilities that may endanger or assist our success, whether in company or in our personal lives. It’s no different in the insurance industry.
Last year at this time, the globe was waiting for COVID-19 vaccines to stop the pandemic and the necessity for physical separation and travel restrictions. While there has been some alleviation, new varieties have arisen, necessitating our continuing vigilance in containing the virus’s spread.
Despite the continuing uncertainties, the global economy is predicted to grow at a rate of 4.9 percent in 2022. This increase in GDP suggests that there will be more demand for insurance products and services in the future.
By the end of 2025, the global insurance business is estimated to generate $7.5 trillion in revenue. Here are the alternatives that insurers should consider if they want a piece of that money in 2022.
Electric vehicles are expected to become a lucrative market for insurance.
The global market for electric vehicles is predicted to increase at a CAGR of more than 27% from $171 billion in 2020 to $725 billion in 2026. Globally, we estimate that there will be 115 million electric fleet vehicles by 2030.
hese automobiles, trucks, and vans join the global insurance market at a time when the rate of increase in existing auto premiums in major economies such as the United States, the United Kingdom, Germany, and China is slowing.
This is a growth opportunity, not just a stopgap for declining traditional auto premiums! Customers who own electric vehicles will have extra requirements, such as the ability to charge their vehicles at home and having easy access to charging stations when they are away from home. Innovative, customer-centric insurers that offer these types of value-added products and services will have a competitive advantage—especially in a risk sector that is high on most sustainability and ESG agendas!
Product reinvention will be accelerated if supply chain and inventory management risks are sustained.
COVID-19’s disruption of supply networks is expected to last well into 2022. However, with the reinvention of traditional freight and cargo insurance products, the related business disruptions and frustrations may be alleviated.
The proliferation of sensors and other IoT and linked technologies across supply chains, as well as the digitization of cross-border trade, allows for real-time access to risk data. Insurers can now offer risk reduction and management solutions, as well as automate claim payment when appropriate, thanks to advanced analytics and AI.
As precious batches of COVID-19 vaccines made their way around the world in 2021, such insurance options accelerated. Expect to see more insurers use these innovations to help their customers address core operating risk in 2022, going beyond indemnification.
A reckoning on property pricing and profitability is on the way.
Inflationary pressures have now added to the more systemic issues of thrown-off risk models and rising capital requirements, which were already driving up property insurance premiums. In November, the annual inflation rate in the United States reached 6.8%, the highest level in four decades.
In the next two decades, catastrophic catastrophes linked to climate change and increased urbanization in emerging economies are predicted to result in rapid increases in both premiums and risk concentration. The property’s pricing and profitability will be determined in 2022.
Operating paradigms in the insurance industry will adapt to seismic shifts.
COVID-19 and the Great Resignation are two tectonic plates on which the insurance business presently functions. Insurers will be forced to disrupt long-standing apprenticeship models that the industry has relied on for skilling in core tasks like claims and underwriting by 2022 as a result of the pressures and shifts they bring. They also compound continuing challenges in attracting and retaining talent in areas such as technology, analytics, and actuarial, which are crucial to insurance workforce transformation.
Humans will always be required by insurers. However, as the workforce shrinks, they will increasingly rely on humans assisted by robots to revolutionize how work is done, regardless of who is doing it or where it is done.
The underwriting process is being reset.
Insurers are eager to see their two-year investments in digital transformation and cloud platforms pay out in the shape of cost savings and new business. In 2022, we’ll witness underwriting transformation projects focused at lowering expenditure ratios and increasing profitability by improving process efficiency and decision effectiveness.
While efficient and effective underwriting processes and choices are essential, most underwriting platforms are incapable of handling the volume and complexity of data required.
The same old “new risks” will continue to drive insurance reforms.
At this time, “new hazards” like global pandemics, large cyber-attacks, and climate-change-related mega natural disasters may seem old news. In terms of insurance, they are still relatively new.
The huge changes we’ve all experienced over the past three to five years are ones that the insurance sector is still grappling with how to respond.
In 2022, insurance companies must figure out how to provide products that their customers want and need while being profitable and viable enough to respond to claims. The industry has been battling with the effects of these “new risks” for some time, and that will not change in 2022.
In 2022, build durability.
With optimism, we look forward to the coming year. However, hoping is not a strategy.
The risk environment is shifting. Insurers’ specific implications will vary depending on their book of business and market position. But, in 2022 and beyond, scenario-based planning is critical for making your business strategy resilient in the face of volatility.