The world was turned upside down a year ago when the COVID-19 pandemic hit. It went into lockdown, consumers remained quarantined in their homes, and businesses were forced to adapt and change in order to remain above water. As with most other industries, insurance wasn’t immune to the impacts of COVID-19—carriers, agents, and brokers all needed to drastically change their business models in order to continue to meet customer expectations, retain current clients, and attract new ones. Here are 4 trends we have seen emerge from the pandemic that the insurance industry will continue to embrace post-pandemic.
Digitization across the business
Quarantine forced carriers to build new relationships with their customers and embrace digitization in order to continue to meet their needs. While the need to digitize was trending long before the pandemic, with the world remote, it was vital for insurance companies to provide digital solutions in order to remain competitive. The pandemic’s push towards digitization significantly changed the agent/customer relationship as well; the urgency for carriers to provide digital tools to both customers and agents increased across all areas of the value chain including customer acquisition, distribution, servicing, claims, and renewals. In a study we recently conducted, 46% of independent agents reported that their customers were already looking for digital tools pre-pandemic, and COVID-19 only accelerated those needs. What’s more, 75% of agents also reported that customer expectations regarding automated processes have increased.
Personalization and convenience reign supreme
The industry is slowly moving away from relying so heavily on insurance brands and with that, consumers are now expecting more personalized product solutions. Carriers need to meet the customers where they are, tailoring product and policy recommendations to fit their individual needs. Usage-based insurance is a perfect example of this—quarantine kept people indoors and off the roads, which led many to switch to policies that reflected this shift and matched their personal driving habits. Brands that aren’t able to meet these personalization needs risk losing consumers, who may in turn look to adjacencies. Adjacencies provide customers with a connection—a known entity that they are associated with and trust, which makes for an overall more convenient and personal experience.
Affinity is on the rise
Alternative distribution is poised to have a big year. As carriers and brokers look for new ways to compete and get preferred distribution, affinity will only continue to grow. More brands are thinking about entering the insurance space and offering insurance products to consumers in a convenient manner through point of sale or embedded insurance. Non-insurance brands have data on their customers which provides them with insight into who may be looking for insurance and what coverage they need, further monetizing that customer. Convenience is also a big piece of the affinity puzzle. Having an established relationship with a brand makes it easier for them to purchase additional products, like insurance, from that source directly.
We’ll also see a change in direction from many insurtechs that have found it very expensive to build brands and need to develop more efficient ways to distribute. Many insurtechs launched with direct-to-consumer strategies and realized quickly that the cost to acquire customers was way too high. In addition, insurtechs started out trying to go around or replace independent agents and then pivoted by embracing that channel. When you consider how much GEICO and Progressive spend on marketing annually, it is nearly impossible to directly compete in an effective and cost efficient manner. Many insurtechs are now focused on adjacencies and ecosystem partners (embedded) through APIs, as well as developing independent agent strategies.
Insurtech shows no signs of slowing down
Lastly, the insurance industry will also see significant growth and greater adoption of the leading insurtech brands. Players in the insurance industry no longer have an option—they must acquire, build, or partner with some type of insurtech solution in order to remain competitive. As a result of the pandemic, digital solutions have emerged as the new normal.