2021 was a big year for insurtech, and 2022 looks just as promising. According to Crunchbase, investors put at least $6 billion into U.S. insurance and insurtech-focused startups in 2021, an increase of 32% over the previous year – and those numbers come from mid-November, before 2021 was even over. Insurance technology is taking off. Here are five insurtech trends to keep an eye on in 2022.
1. DIGITAL CHANNELS WILL KEEP GROWING
Digital channels are growing, and the pandemic has supercharged this change. According to a report from Luge Capital, acceleration of digital channels for product distribution and e-commerce in the U.S. and Canada grew 129% between April 2019 and April 2020. However, there is still progress to be made, and claims handling has been one of the slowest areas to see change.
Insurers that fail to embrace digital channels could lose business. According to Accenture, as the industry shifts to digital channels and third-party platforms, insurers that don’t innovate could see revenue declines of nearly 5%.
2. INSURERS ARE MOVING TO THE CLOUDS
Another key takeaway from the Luge Capital report is that carriers are ditching their legacy, on-premise core systems in favor of cloud-based systems.
Aite Novarica says that 76% of insurers plan to expand cloud adoption in 2021 to 2022, and 6% plan to pilot it for the first time. Insurers are primarily motivated by agility and capabilities, and security is considered another benefit.
3. DATA IS EVERYWHERE
The Internet of Things is growing. According to IoT Analytics, there will likely be more than 27 billion IoT connections by 2025.
All of these IoT devices are creating a wealth of data. The NAIC says that big data can be used in a number of ways, from enriching customer experiencing and improving underwriting to fighting fraud and improving solvency. McKinsey & Company says that external data domains are unlocking the value of artificial intelligence. In 2022, we can expect to see insurers look for new ways to leverage the power of their data.
4. THERE’S STRENGTH IN ECOSYSTEMS
It can be hard to keep up with all of the technological innovation that’s happening right now. To avoid falling behind, some insurers are turning to ecosystems. In this model, organizations work together to provide a variety of services that improve the customer service. Ecosystems can also open up new revenue streams for insurance companies.
PwC says that the pandemic has speed up the adoption of ecosystems. Customer expectations have changed, and by leveraging ecosystems, insurers can meet these expectations now instead of years from now. One survey found that 79% of insurance executives believe that “insurers will increasingly engage in ecosystems that serve broad needs of customers, where insurance is only part of the customer value chain.”
5. TRUST WILL BE ESSENTIAL
The current state of technological progress is promising, but trust is the elephant in the room.
Some consumers are comfortable sharing their data with insurers, while others are not, and the divide is often generational. According to The Zebra, 45% of Gen Zers says they feel uncomfortable sharing driving data, while only 31% of young Millennials say the same. Overall, 62% of drivers think it’s fair to base insurance pricing on how they drive.
But consumers aren’t the only ones who may question whether insurers are handling data responsibly. State regulators also need to be convinced. According to The National Law Review, at least 13 states have adopted the NAIC’s data security model law, which requires organization to have a comprehensive information security program, an incident response plan, oversight by the board of directors and employee training. The National Conference of State Legislatures says that California, Colorado and Virginia have passed comprehensive consumer data privacy laws.
Several new laws go into effect on January 1, 2023, so companies will have to focus on compliance in 2022 to get ready. This is a time for insurance companies to prove that they’re trustworthy.
MOVING FORWARD IN 2022
There’s opportunity in these insurtech trends. Are you ready to bring your claims handling capabilities to the next level in 2022? Request a VCA Software demo.