The insurance industry is struggling to maintain profitability in precarious economic conditions and is restructuring products, operations, and business models to appease rising consumer expectations and to integrate with new technologies. Look for spending to turn toward more analytics, artificial intelligence, and other advanced practices to ensure flexibility, customization of products, and improved customer experience.

Expect insurers to improve their technology systems, operating models, talent capabilities and office policies to compensate for the retirement of baby boomers and an expanding gap in digital skills.

Regulatory changes are expected to result in substantial investments and fundamental changes in sales standards, accounting, tax policy, cybersecurity, and privacy protection. Still, there may also be new rules that will increase sales opportunities in such markets as annuities and flood coverage.

More insurers will utilize robotic process automation, outsourcing/offshoring of noncore workers and shifting data and software to the cloud to achieve cost efficiencies. Also look for more insurers to rely on artificial intelligence, digitalization, new sales platforms, alternative product development and other innovations to add capabilities and enhance customer experience.  Many insurers are
shifting from supporting business as usual with investments to financing innovations to expedite changes in fundamental business models.

Look for annuity providers to simplify and rebrand retirement products, improve sales process, and enhance public perception in investment alternatives. For example, there may be repackaging of annuity products with more flexibility and liquidity to give customers better control of their investment.  Integrating annuity features within managed accounts and creating glide paths within the products to slowly shift to annuities may increase.

Some life, health, and retirement insurance providers may shift from resources of consumer data to more cost-effective targeting of underserved low- and middle-income segments. Look for the accelerated lifeunderwriting and application process, commonly more accessible to young and healthy consumers, to become more available to a broader population. The process may use additional data sources including aligning with healthcare providers to integrate electronic health records, a standard requirement in most high-value life insurance applications.

With the threat of flooding increasing worldwide due to climate change, look for private insurance carriers to offer more affordable flood insurance to homeowners who reside in flood zones. Some countries like Germany and Italy have required insurers to offer flood insurance for an additional, risk-adjusted cost.  Other countries including the UK, Spain, and Japan, allow a bundling program where flood damages is combined with other catastrophes and spread the risk through a wider geographic area. If overall losses exceed premiums, insurers are paid by market share.

In the United States, private insurers were not as involved in selling flood insurance because of the involvement of the National Flood Insurance Program (NFIP). Expect that to change. Due to regulatory reforms and improvements in modeling technology, private carriers are getting involved.

Private insurers have taken on $1.32 billion of the NFIP’s obligation in 2019.

Still, only about 3 percent of homeowners in the United States have flood coverage. So there is a vast market potential for insurers who may want to service this market. In addition, regulatory changes have occurred that allow lenders to accept qualified private insurance policies instead of obligating NFIP to cover it.  However, to take advantage of their opportunity, insurers will be required to improve their modeling capabilities so that they can reasonably asses risks.

Greyson Global, Inc. has the staff that understands the regulations that influence insurance activities worldwide.  We’ll keep you well informed so that your decisions involving this market will be wise ones.