8 Challenges Threatening the Insurance Industry in 2020
It is becoming increasingly challenging for insurance companies to survive in their current form. While the insurance industry was already fighting to adjust and transform itself to overcome multiple threats plaguing its growth, the pandemic has further worsened the problems for the insurers across the globe. To understand the role of process automation,cloud-computing, and other digital technologies, and how they can revolutionize the industry, it is important to identify the critical disruptions and threats the industry is facing.
#1: The increasing demand gap between the multi-generation customer bases
The world around us has drastically and dramatically changed in the past 12-15 years due to the internet and rapid digitization. For insurers whose clientele ranges from the young to the elder generations, balancing their operations and shift to technology has been extremely tricky.
There are the maturists, who prefer paper and resist ‘digital’ transactions due to their lack of understanding and usage of gadgets. The next in line are baby boomers, the committed workforce generation, with a similar preference of paper-over-digital as maturists. Then there is the GenX, the ones in the middle of their working careers, desktop-friendly, and the flexible lot trying to fit in and learn the new, ‘digital’ ways of doing things. The digital natives, millennials, and the technology-addicted GenZ are the drivers of the ‘Internet’ world.
How do insurers cover such a wide target audience with a frigid set of demands and marketing preferences? Well, the answer lies in the ability to create cohesive customer experiences across digital and traditional channels for building improved customer loyalty.
#2: The untapped gig economy
Most structured companies across the world offer group insurance. The catch here is - what about the population that is working but not employed by any company?
Various online portals and reputed workplaces like Fiverr, Amazon Mechanical Turk, and others have led to the surge in the ‘freelancer’ population who work without any formal company allegiance. While it’s a win-win for both parties in most terms, it has resulted in a significant loss for the insurance companies. Why, you wonder? Firstly, the ‘freelancer’ population mostly comprises of millennial and GenZ, who are not quite serious about insurance and think it as something that can be planned later in life. Second, due to the absence of group insurance policy discounts, it becomes all the more difficult for the insurer to reach and appease them.
The most suitable solution for reaching this unexplored but meaty market is carefully analyzing the underlying needs of the gig economy to develop customized and personalized insurance products with attractive premium discount policies.
#3: The fast-changing digital space, systems, and technologies
Insuretech being a vast opportunity also comes as a challenge for the current insurers to become agile and enable legacy system modernization at speed and scale. The digital space is a fast-moving world where every day new innovations and technologies come into the market. Adapting to change and integrating people and processes to the new technologies has already led to increased investments. Achieving improved ROI is imperative to make the transformation a success.
The same can be achieved through understanding the company’s objectives, the scale of operation, budgets, etc., and then deciding on the most suitable digital technologies and systems to adopt.
#4: The growing concern over the privacy of customer data
Big Data has become an inherent part of the sector across the globe to personalize experiences for the customer. However, the increased data sharing and usage have also given rise to cyber-risks pertaining to the data privacy of the consumers. For any insurer to achieve greater customer loyalty, levying due measures for data protection and transparent communication of the same with the customers are paramount.
Deploying secure, cloud-based systems is a challenge that can be overcome with advanced insuretech solutions. These technologies keep the data safe, create backups, ensure restricted access, and minimize risks.
#5: The added strain of COVID-19
The ongoing global crisis has led to job cuts, salary slashes, and many other issues. The broker and insurance channels have also been disrupted due the absence of face-to-face meetings with customers. Customers are demanding a reduction in premium amounts until the economy gains some sense of semblance.
In this scenario, it becomes obligatory for the insurers to bring forth exclusive ‘Stay at Home’ products and pack them with a mobile-first approach for ensuring greater reach and success.
#6: The risks associated with the ever-evolving socio-political and economic landscape
While the risks of post-pandemic recession are difficult to fully assess at this time, there are many other social, political, and economic changes that constantly pose threats to the insurers. Health benefit exchange programs by the Government and various regulatory acts and risks from political changes are inevitable challenges that the sector has to continuously face.
Here, the redeeming part is – the disguised opportunities for the insurer to bring innovation in their products and streamline their processes.
#7: The competitor threats
While collaborations with other businesses infuse new life in the organization and allow more room for innovation, it might be difficult to justify or meet ROI. The other competitors in the market may also be constantly eating up the company’s market share by achieving greater economies of scale, or the new digital-first entrants might have a better infrastructure to capture the digital audience than the recently ‘modernized’ insurer company.
All these competition-led challenges can be mitigated through effective strategic planning and creative execution via meaningful and productive partnerships.
#8: The effect of global-level changes on the insurance sector
All the major happenings around the world have a direct or indirect impact on the insurance sector operations due to its direct linkage to the financial and fiscal policies of the countries. Whether it is BREXIT, taxation changes, currency rate fluctuation risks, future harmonization between regulators like the US and Japan, or the constantly changing regulation policies across geographies, the globally-operating insurer companies are perpetually exposed to unforeseen and sudden challenges.
The only way to be prepared and cope with such issues is to have an agile team with a robust digital infrastructure and a standardized code of conduct.
The Big Question: What’s The Real Solution?
A deep understanding of the current market, careful customer analysis, and intelligent deployment of digital technologies are crucial attributes to overcome the above-discussed challenges. At the micro-level, a trusted and reliable partner like Coforge, that can develop personalized processes powered by AI and committed to integrating cognitive process automation, will truly empower the insurers and get them ready for the future.