The Most Significant Challenges the Insurance Sector Needs to Conquer
The covid-19 pandemic forced many industries to change. The insurance industry was no different. Several changes have occurred in the industry in the past two years, and it’s likely to continue in 2022 as well. Many insurance companies are now trying to adapt their strategies to these changes, but some challenges stand in the way. Here’s a summary of those challenges.
When insurance claims costs rise due to different factors, it is termed social inflation. Social inflation comes from several factors, including:
- Broader definitions of liability
- Increasing litigation
- Larger compensatory jury awards
- More plaintiff-friendly legal verdicts
If social inflation is not checked, it can leave insurers’ reserves insufficient and force them to increase premium rates.
Extreme weather-related events, including wildfires, hurricanes, floods, and others, have forced the insurance industry to watch the implications of climate-related risks and become wary of them. With losses mounting, this issue cannot be sidelined. Some consequences of climate change for the insurance industry are:
- Increase in insured property losses
- Impact on day-to-day operations
The attitude towards climate change in the insurance industry ranges from disbelief to active involvement. But sooner or later, the insurance industry will be more involved and have to find ways to get ahead of climate challenges.
Keeping pace with new technology
Modern technology has helped businesses to become more efficient, agile, and intuitive. It’s time for the insurance industry as well to change their old ways of working and embrace technology. 50% of insurance businesses are behind other industries when it comes to technology adoption. Although technology adoption is inevitable, it will be a massive undertaking for enterprises to match their steps with the ever-changing technology landscape. Some issues they need to tackle are:
- Lack of resources to upgrade business, commissioning, policy administration, underwriting, and more.
- Problems in updating their core IT systems.
- No means to quantify ROI.
Customer query overload
Heightened fear of developing illnesses, business disruptions, and changing government regulations are some of the factors that lead to anxiety and panic in customers. The pandemic exaggerated the stress, even more, causing a significant surge in queries, inquiries, and complaints. Insurance contact centers struggle to keep up and respond to these queries using the traditional systems. These inefficiencies have highlighted the urgent need for automatic information dissemination.
Leveraging vast volumes of data
The insurance sector has access to vast data from a large stream of sources. This data is a valuable resource for gaining insight into customer behaviors, insurance policy underwriting, claims, marketing, and much more. But using this data has its unique challenges:
- Managing and storing the ever-growing data.
- Generating data insights quickly.
- Keeping up with security and compliance measures.
The road ahead
By understanding the nature of these challenges, insurance firms can figure out effective measures to combat them. Also, by investing in emerging technology and modernizing legacy systems, they can pull ahead of the pack and emerge as winners despite the challenges.