One important lesson that we can take away from the COVID-19 pandemic is that it’s impossible to predict the future. Regardless, we still need to have expectations for the future so that we can plan accordingly. And, you can start by looking at the insurance outlook for 2021 and beyond.
As of May 13, 2021, over 58% of adults in the U.S. have had at least one vaccination. And, as cases continue a downward trend, it appears that we’re easing our way back to some sort of normalcy.
However, the insurance industry is likely to feel the ripple effects of the COVID-19 pandemic in the future.
The first reason is that even though policies already had language pertaining to communicable diseases, dealing with a pandemic is a new experience when writing new policies, explains Micheal Giusti for Insurance Thought Leadership. Additionally, underwriters will be paying extra close attention to potential risks forward, specifically in the following ways;
Ultimately, it may be up to lawmakers to “step in with a liability shield for businesses,” said Giusti. And, the “courts are going to have to weigh in on whether business interruption policies and event cancellation policies will be forced to pay out despite contractual pandemic exclusions.”
Strap-in, folks. It’s going to be a wild ride.
In addition to COVID-19, the industry also had to face a climate crisis. In fact, natural disasters cost $210 billion worldwide in 2020. For reference, the U.S. accounted for $95 billion of overall losses in 2020 — it was $51 billion in 2019.
“Natural catastrophe losses in 2020 were significantly higher than in the previous year,” Torsten Jeworrek, a member of Munich Re’s board of management, told Investopedia. “Record numbers for many relevant hazards are a cause for concern.”
How can the insurance industry endure this climate crisis? Well, there are three strategies to consider;
In short, the industry simply can not afford to ignore this crisis if you want to continue to endure.
No surprise here. Technology is already an integral part of the insurance industry. In particular, the Property & Casualty Industry is going digital. As a result, this has sped up the coverage process and made paper documentation a relic of the past.
As technology continues to advance and become more commonplace, here are the trends that will disrupt the industry;
“In the last two years alone, the number of successful cyber attacks has grown dramatically,” states Steven Bowcut for Cybersecurity Guide. “This exponential growth in attacks comes as insurance companies migrate toward digital channels to create sticky customer relationships, offer new products, and expand their share of their customer’s financial portfolios.” It’s even been “estimated that attackers have penetrated this sector to exfiltrate the personally identifiable information (PII) of more than 100 million Americans.”
“The US insurance industry reports net premiums totaling $1.22 trillion written in 2018. Fifty-one percent of those premiums were written by property/casualty insurers, while life/annuity insurers wrote 49 percent. There were 5,965 insurance companies in the US that year.”
Why is this so concerning? Mainly “because of the industry’s size and scope and the vast amounts of data consumed by companies in this sector,” adds Bowcut. After all, customers are required to submit sensitive information like contact, financial, and even health when purchasing a policy.
AI and machine learning, as discussed above, can “help insurance companies protect against malware, ransomware, and advanced persistent threats (APT),” adds Bowcut. However, you also need to implement policies, such as bringing your own device and training employees on security basics.
Not to end on a low note, but insurers should be prepared for hard difficult conditions that will include limited growth and higher premiums. To counter this, you should explore ways to provide value and broaden your revenue base.
One suggestion would be to offer innovative services and products. For example, cyber-threat protection or event-cancellation policies. You may also want to focus on tailored products for specific demographics, like annuities or life insurance for those investing in their retirement.
And, finally, some insurers are opting to venture beyond insurance through interesting partnerships. One example is Attain. It’s a collaboration between Aetna and Apple to provide personalized health goals.