12 Insurance Industry Trends for 2023

Insurers have been navigating digital transformation alongside economic, political, and environmental disruption. These factors will continue to play a major role in the insurance industry in 2023. While most changes are positive, insurance companies must be agile and ready to adapt to evolving conditions. Be ready for these 12 trends in 2023.

1. Customer Centricity
   Customer centricity continues to be a priority in 2023. As echoed at the ITC and Connected Claims conferences, it is critical for insurers to ‘know their customer’. As EY¹ explains, policyholders want interactions that are relevant to them. The good news is that advances in data-based technology are paving the way for these hyper-personalized offerings, enabling insurers to shift from a product-centered approach to one that is data-driven and customer-centric.

2. Data Strategy Maturation
   Insurers are already embracing data, although according to Deloitte², they have often treated data as a short-term expense for individual functions or projects. It’s becoming increasingly clear that a long-term data strategy is needed that leverages the full potential of data to drive innovation and growth. Per Reuters³, carriers are now placing greater focus on robust data governance because they recognize that data is the key to realizing the value of advanced technologies like AI.

3. AI Advancements
   Artificial intelligence and machine learning capabilities are also maturing, resulting in many possible applications for the insurance industry. By leveraging AI/ML, predictive analytics can support better underwriting, more efficient claims handling, and improved fraud detection. And according to Graham Bartholomew⁴, Guidewire’s Director of Pricing Solutions, predictive analytics could give way to prescriptive analytics, which can help insurance leaders make better data-backed decisions and improve customer interactions.

4. Embedded Insurance and Digital Disruption
   Embedded insurance is on the rise. According to Lightyear Capital, the U.S. market value for embedded insurance was $5 billion in 2020 and is projected to rise to $70.7 billion in 2025.⁵ Described as a ‘red-hot topic’ by Accenture⁶, embedded insurance and the disruption to distribution was reported by Celent⁷ to be heavily discussed at 2022’s Insuretech Connect conference (ITC). To thrive, insurers must rethink distribution channels to better align with customer needs and purchasing expectations.

5. Climate Risk Impact
   Per SwissRe⁸, natural catastrophes caused an estimated USD 115 billion of insured losses in 2022. A report by Capgemini⁹ shows that 73% of policyholders consider climate change a top concern. This increased concern about climate change has led to greater insurer interest in environmental, social, and governance (ESG) investing. Per McKinsey & Company¹⁰, insurers are preparing for a decarbonized and net-zero future which will mean a new risk landscape and the need for a new strategic skill set.

6. Parametric Insurance
   As natural disaster losses mount, parametric insurance – which pays claims based on the event itself rather than actual losses – is garnering more attention. Swiss Re¹¹ says the parametric market is growing, with product sales increasing 40% year over year as of August 2022. According to Risk & Insurance¹², parametric insurance will continue to rise in popularity, with applications reaching beyond catastrophe related weather events to other lines of business.

7. IoT and Loss Prevention
   According to Statista¹³, Internet of Things (IoT) devices worldwide are forecast to amount to more than 29 billion in 2030. The potential for the insurance industry is immense. In the property sector, IoT technology like smart leak detectors are helping homeowners and businesses actively prevent losses. And NerdWallet¹⁴ found that most insurers will now offer price reductions for certain smart home devices with discounts as large as 13%, with some insurers even offering programs to make the devices themselves more affordable.

8. Telematics and UBI
   Telematics and usage-based insurance (UBI) have been options for drivers for years, although adoption has been slow. But according to TransUnion¹⁵, inflation prompted a 33% increase in auto telematics adoption in the first quarter of 2022. Per Digital Insurance¹⁶, the global UBI market is expected to grow from $43.31 billion in 2021 to $132.02 billion in 2026. And in addition, telematics technology is increasingly being used to detect crashes and proactively help drivers with emergency response and other supportive action.

9. Ecosystems
   To meet rising consumer expectations, insurers need to adopt cutting-edge data, payment, and communication technologies, but many lack the in-house resources to do so. Ecosystems are the solution. EY¹⁷ says they are already producing significant value. Donald Light, Director at Celent’s North America Property and Casualty Practice¹⁸, notes that vendor-driven ‘ecosystems are increasingly seen as a must-have enabler to extend and diversify a solution’s value propositions.’ This means insurers that are failing to leverage ecosystems will fall behind.

10. Cybersecurity and Risk Management
    The rise in ransomware is causing headaches for the insurance industry. Cyber insurance premiums have skyrocketed, but this is not just impacting cyber insurers. While insurers urge policyholders to improve their cybersecurity measures, they themselves are falling victim to attacks. Property Casualty 360¹⁹ says that small insurers, in particular, became a favorite target for a ransomware gang in early 2022. In 2023, cybersecurity will continue to be a priority.

11. Cloud Technology Transformation and Adoption
    Per McKinsey²⁰, leading carriers are using cloud technology to bolster digital capabilities and better service their customers. Deloitte¹⁷ finds that cloud platforms could be the most significant technology initiative the insurance industry has experienced in recent years. But despite tremendous cloud investment, many insurers end up creating hybrid operating systems with remaining pieces of legacy technology that prevent realization of the full potential of cloud technology.

12. Instant Payments
    Since payments are a critical part of insurance transactions, enabling instant payments will become integral to a seamless, digital insurance experience. As Accenture²¹ points out, instant payments are the key to unlocking innovation. Instant insurance payments have already gained traction as policyholders demand fast claims payouts and convenient premium payments. This is a trend that will continue to grow in 2023. Expanding concerns around both data privacy and fraud prevention, however, mean security will be a priority for instant payments. 

Are You Ready for 2023?

The upcoming year promises to be both busy and challenging. It will be important for insurers to not only build upon momentum achieved but continue to innovate and grow. The road ahead has obstacles to navigate and If you don’t have strong digital payments capabilities, you’re not ready for 2023. We’re here to help. One Inc is the leading digital payments network for the insurance industry. Get in touch.

Sources:

1. https://www.ey.com/en_us/insurance/how-hyper-personalization-can-drive-customer-growth-post-pandemic
2. https://www2.deloitte.com/us/en/insights/industry/financial-services/insurance-data-as-a-strategic-asset.html
3. Reuters Events, Navigate Your Path to a Digital and Data-Led Insurance Future, Reuters Insurance AI and Innovative Tech USA, 2022.
4. https://www.propertycasualty360.com/2022/04/01/a-shift-from-predictive-to-prescriptive-insurance-analytics/
5. https://www.dig-in.com/list/5-perspectives-on-the-rising-popularity-of-embedded-insurance
6. https://insuranceblog.accenture.com/embedded-insurance-brief-overview
7. https://www.celent.com/insights/854118220
8. https://www.swissre.com/press-release/Hurricane-Ian-drives-natural-catastrophe-year-to-date-insured-losses-to-USD-115-billion-Swiss-Re-Institute-estimates/2ab3a681-6817-4862-8411-94f4b8385cee
9. https://www.capgemini.com/us-en/news/press-releases/insurers-need-to-fundamentally-change-business-models-to-achieve-climate-resiliency/
10. https://www.mckinsey.com/industries/financial-services/our-insights/climate-and-insurance-how-carriers-are-preparing-for-a-net-zero-future
11. https://corporatesolutions.swissre.com/insights/knowledge/evolution-of-parametric-insurance.html
12. https://riskandinsurance.com/parametric-covers-are-finally-gaining-traction-heres-how-companies-can-benefit/
13. https://www.statista.com/statistics/1183457/iot-connected-devices-worldwide/
14. https://www.nerdwallet.com/article/insurance/smart-home-insurance-discount
15. https://newsroom.transunion.com/inflation-drives-33-surge-in-auto-telematics-adoption-in-first-quarter-of-2022/
16. https://www.dig-in.com/opinion/how-auto-insurers-can-use-ubi-to-connect-with-drivers
17. https://www.ey.com/en_gl/financial-services-emeia/ecosystems-in-insurance-what-winners-do-differently
18. https://www.celent.com/insights/854118220
19. https://www.propertycasualty360.com/2022/05/20/most-industries-seeing-relief-from-ransomware-but-insurance-isnt-one/
20. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/what-every-insurance-leader-should-know-about-cloud
21. https://www2.deloitte.com/content/dam/insights/articles/us175368_cfs_fsi-outlook-insurance/DI_US175368_CFS_FSI-Outlook-Insurance.pdf
22. https://bankingblog.accenture.com/instant-payments-are-key-to-unlock-innovation