By David Lynch, Group Chief Technology Officer at Bolttech
At bolttech, we are also witnessing several driving forces combining to trigger unprecedented growth in new technology-enabled business models in insurance. The global pandemic has accelerated digital transformation and there’s no going back. Against this backdrop, traditional insurance companies see little choice but to forge partnerships with insurtechs and acquire ecosystem connectivity.
Looking ahead to 2022, here are my predictions for the 8 key trends that will lead the way in insurance:
1. Digital asset protection will surge
When Coinbase CEO, Brian Armstrong said that its new Non Fungible Token (NFT) marketplace “could be as big or bigger” than its cryptocurrency business, the world took notice. Traded NFT volumes exploded in 2021, and we are only at the very beginning of the emergence of this digital asset class.
Whilst there is an ongoing debate on whether there is real underlying value for some of these digital assets, the demand for NFTs continues to surge. OpenSea, the world’s biggest marketplace for NFTs, recently surpassed US$10 billion in lifetime trade volume. Many of the world’s biggest brands such as Nike, Coca cola, and the NBA, have also joined the bandwagon and released their own NFT collections.
It is clear that consumers and businesses care about growing and protecting their digital assets, and in some cases, more so than their tangible assets. With the increased trust and activity in digital assets, protection in this new class of asset will be necessitated. Crypto exchanges and custodial services are targets for malicious attacks just as much as banks are. Digital wallets will need reinforced protection as they combine fiat, cryptocurrency and NFTs as unified asset holdings.
2. Decentralised insurance and supporting services will bloom
Decentralisation and blockchain do not grant a license to contravene laws and regulations. As regulators come to recognise the need to regulate the crypto markets, we are seeing increasingly progressive actions to embrace the innovation that decentralised finance (and specifically insurance) can deliver. It is now abundantly clear to many regulators and industry players themselves that the only sustainable business models are those that are compliant with the law.
The growth of decentralised insurance and protection can be facilitated through building these decentralised layers of trust, open exchange of risk data, eliminating inefficiencies and creating new risk pools. Most crypto exchange traded tokens have specific risks attached to them, creating unique embedded insurance opportunities and the means to create risk pools. With that, reinsurance as an asset class can be fractionalised. These are opportunities that will spawn a surge in the growth of decentralised insurance and protection and the entrance of non-traditional industry participants.
3. Insurance will enter the Metaverse
Virtual, augmented and mixed reality experiences in essence are not new despite a massive surge in the use of the recent term “metaverse”. However, the time has now come for this domain of immersive technology – thanks to the rapid coming together of cloud, VR/3D, 5G, modern game design tech, digital currency, tokenisation and e-commerce.
Global entertainment and tech giants such as Disney, Nvidia, Microsoft and Facebook (now Meta), are already making big bets in this space. For insurance especially, digital insurers, brokers and exchanges will start looking for relevance and opportunity inside of this converged digital universe. Whilst there is still some way to go before metaverse revenue volumes will be material, early movers gain the advantage of emerging as one of the core distribution channels over time. They will capture learnings, find and understand a new audience while testing new products and establishing a presence.
4. IoT will fuel the Internet of Behavior (IoB)
Cars are becoming autonomous and connected. Homes now have a myriad of IoT devices. Smartphones and wearables have become pervasive in our lives. The Internet of Behavior (IoB) relates to the data and insights that can be gathered from a myriad of sensors, IoT devices and telemetry that now surrounds us, providing valuable information about consumer behavior – how we live, play, and work.
Despite the active discourse on privacy issues and laws, these data streams are helping companies to understand, model and predict customer behavior with accuracy. There are profound implications for insurers. The richer the data, the more accurate AI and machine learning models become. Directly synthesising and correlating these IoB data streams – whether structured or unstructured – to targeting, pricing and underwriting decisions is rapidly becoming a necessity to remain competitive. Every traditional insurance product can be reimagined around these data streams.
5. Insurers and insurtechs will solve the customer engagement challenge
2022 would be the year when insurance makes a giant leap towards prevention and prediction. Ask any insurer, exchange or broker how they would define the most critical customer journey points and you will hear the words “customer onboarding”, “claims” and “renewal” or the similar.
But as an industry on the whole, we severely lack proof points that show ongoing engagement with our customers (perhaps with health, wellbeing and lifestyle as the emerging exception). Why is this so? Let’s face it. Nobody wishes to fall ill, see their home damaged or crash their car. Despite the industry having made massive strides in improving the claims experience, the best claim experience of all is not having a claim to make.
Today, however, customers in many contexts will grant permission for the use of their data if the reward outweighs what is foregone. They may allow alerts and notifications when they trust that their data is being used to help avoid adverse events in their life.
The increasing availability and sophisticated analysis of data to predict and prevent these adverse events from occurring signal that the insurance industry is now capable of creating regular and valuable interactions with customers to drive better outcomes for all.
6. Cyber protection shifts irreversibly beyond insurance
Whilst cyber- and identity-protection insurance are more likely identified as business-oriented products, consumer demand has also surged. Yet as most research suggests, there’s a lot more insurers, banks and other industry participants can do to bridge the gap of educating, advising and helping to protect customers beyond insurance itself.
Given the rising sophistication of attacks and threat vectors, cyber protection appears to be one of the most fundamental needs of businesses and consumers because almost every activity is connected to the internet.
The risks keep growing exponentially while the knowledge, advice and tools needed to prevent an attack or loss, are beyond the capability of most businesses and consumers. Cyber protection will be the new frontier for collaboration between insurers, insurtechs, tech companies, security, surveillance services, governments and regulators. 2022 will be the year we see the emergence of new products and business models in this space.
7. The hybrid insurance agent will rise
With the rolling lockdowns and restrictions imposed due to the pandemic, many insurance agents made the switch to video engagement out of sheer necessity. Whilst traditional agencies might feel that the experience of a video conversation is a lesser substitute for face-to-face interaction, video-based customer engagement is here to stay.
The new hybrid agency and agent-based distribution model will be able to leverage a full spectrum of digital services to assist and augment face-to-face interactions, video and increasing virtual / hybrid reality experiences.
Expect to see the emergence of AI-assisted recommendations, visualisations, modelling and scenario plans delivered directly into the channel of the customer’s preference.
8. APIs make it easy to “just add insurance”
Finding ways to generate additional revenue streams is a key priority for any business with a large customer base. Faster application development, application connectivity, creating developer ecosystems, B2B partnership models and monetization are some of the top API platform initiatives according to Google’s recent State of the API Economy report.
In a world where there is now just about an API for anything, insurers are fast warming up to API adoption. The rise of insurtechs, nimbler Managing General Agent (MGAs) and brokers has fast-tracked the development of carrier / product APIs. APIs are now a hygiene factor for businesses to participate in new exchanges, and for ecosystems to enable insurance to be embedded within customer journeys.
Through the power of APIs, adding insurance into the mix will become almost as easy as it is to add just about every other capability developers can enable today.