FIVE major trends for insurers to watch out for in 2023

Roi Amir, CEO of insurtech Sprout.ai, predicts five major trends that will transform the insurtech space in 2023

As we end 2022 with a series of unfortunate events that have resulted in industry losses, it's important to consider the future opportunities that will abound for businesses in 2023. While it's hard to be optimistic following a year that has led to energy shortages, crisis weather events, international conflict, and the cost-of-living crisis - all of which have seen customer protection gaps widen and prices rise. 

Roi Amir, CEO of insurtech Sprout.ai tells us his predictions for the year ahead, and why insurtechs will have better opportunities to grow in 2023. 

#1 Flows of funding into insurtech companies reflects wider market trends. Demand amongst investors particularly at the early stage remains for now

"2022 has seen tech funding drop across the board, and the insurtech sector is no different. As we’ve seen in the rest of the market, early-stage funding continued to remain strong, but companies saw a decline in later-stage growth funding and drops in valuations. Investors are tightening the purse strings and focusing more rigidly on growth metrics.  

This creates risk for insurtechs that require cash to fuel their growth. On the flip side, it creates opportunities for well-financed companies with deep pockets. However, new insurtech entrants may struggle to secure funding. As a result, some traditional insurers will be able to take back market share or drive consolidation in the market, as new and traditional insurance companies join forces. No one knows yet when the tide will shift and, for now, VC and PE funds still have funds that they need to deploy and insurtech remains a ‘hot’ area to invest. 

The insurance industry is undergoing a transformation, similar to what we saw in the banking sector five -10 years ago. Customer expectations are rising rapidly and this is pushing the competition, requiring both insurtechs and traditional players to provide great service at reasonable prices."

#2 AI is now automating complex tasks for insurers, while IoT and wearables will help insurers to identify and mitigate risks

"Artificial intelligence (AI) is driving significant changes in what is possible today, versus what was possible with traditional software development. Deep learning and other AI techniques allow the automation of processes that were once considered too complicated. With the good use of AI, many decision-making processes in insurance can be automated or assisted by software. Understanding the circumstances that led to a customer’s insurance claim and cross-referencing this with the terms of the current insurance policy is a complex task that can now be automated. We are seeing more and more insurers leverage this type of technology.

In 2023 and beyond, we will also see more and more insurers use IoT and wearable devices to better track customers’ behaviour to identify and mitigate the risk of claiming on insurance. For example, technology can be helpful in tracking driving patterns and behaviours, or to monitor health and activity levels for health insurance customers."

#3 Inflation is driving up costs for insurers, which will impact premiums for customers and may see traditional insurers taking back market share

"Inflation is driving up costs for insurers' claims payouts as prices of goods, repairs, and services go up. Premiums take time to catch up with rising costs, resulting in lower profits and sometimes losses for insurers. 

Suppliers to insurers, such as car garages or medical providers (hospitals, clinics, etc) may be locked into contracts that don’t allow them to increase prices, prompting suppliers to try to renegotiate prices. Insurers will have to choose how to support their suppliers, so they don’t go out of business in these turbulent times. However, this is an opportunity to strengthen relationships with suppliers and make sure that their customers get better service.

Insurers will need to look closely at overheads and find new ways to optimise operations. It’s a balance, as they’ll need to be careful with increases in premium prices, which could have an adverse effect by increasing customer churn when customers are under financial pressure. As a result, customers may decide to switch to a cheaper alternative or not renew some of their insurance policies at all.

For insurers, this may be an opportunity to segment the market and offer insurance products that provide more choice or target niche verticals, allowing customers to choose policies tailored to their needs and budgets."

#4 Traditional insurers that leverage brand and technology will be the winners in 2023 and beyond

"Going into 2023, traditional insurers have the brand advantage. In times of uncertainty, customers may want to choose traditional insurers that are well-established, while new entrants may seem riskier. On the other hand, traditional insurers may have a higher cost of operations compared to technology-first insurance carriers. Traditional insurers will leverage this brand advantage and financial depth in the next year and will invest in technology that will allow them to provide better service at a lower cost. The ones that will do it quickly and smartly, will be the winners in this competitive market. Our recent report, responding to the expectations of today’s insurance customers explores this in more detail."

#5 Cost-of-living pressures will force insurers to deliver more flexible, price competitive products and provide add-on services that help customers avoid making a claim

"Insurers should continue to invest in product innovation, and deliver insurance products that provide higher flexibility and choice. In 2023, customers will opt for policies that are built around their exact needs, and at lower cost (premium). For example, customers might look for more tailored home contents insurance that covers specific items in the property. 

Many insurance companies will provide additional services to their customers that will help prevent or mitigate potential losses or risks. This will help insurers to support customers to reduce risk, reduce overall claims volumes, and improve profitability by providing ‘add-on’ services. For example, offering health insurance customers periodic health checks, or Gym memberships improves customers’ health and wellbeing, reducing the likelihood of making a claim while generating revenues if the right partnerships are created."


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