Predicting Insurance Brokerage Industry Trends for 2021Insurance Explained
An unforgettable year, for better or worse, 2020 and the global pandemic that came with it turned many industries completely on their heads. Some suffered potentially irreparable damage, with the “new reality” imposed by the pandemic forcing many businesses to quickly adapt in order to simply survive.
Insurance, in general, is a lasting and deep-rooted industry that has historically managed to weather financial storms and economic turbulence throughout the decades. And while it wasn’t one of the industries to suffer grave consequences in 2020, it was undeniably thrown a bit off course.
The COVID-19 pandemic has brought with it not just economic fallout, but widespread and significant shifts in the way we behave as a society.
For businesses big and small, the needs, expectations, and habits of both their clients and employees have radically changed. These seemingly overnight changes have forced all industries, insurance included, to adapt quickly or face the consequences of being left behind.
According to a global outlook survey performed by Deloitte’s Center for Financial Services, most insurers who responded were very much aware of the fact that the process of adapting to our new circumstances is nowhere near being over, despite the fact that we have been living and working in a pandemic for the better part of a year already.
Almost half of insurance executives who responded to the survey agreed that COVID-19 showed how unprepared their businesses were to weather the ensuing economic storm. Only 25% of executives believed that their businesses “had a clear vision and action plan to maintain operation and financial resilience” during the pandemic and resulting economic crisis.
A Difficult 2020
Many insurers were hit hard by the pandemic and the economic events that followed. Insurers specializing in property-casualty lines such as workers compensation and event cancellation policies took particularly strong hits.
Small business premiums could also take some time to recover after a long year of businesses going bankrupt and closing their doors as a result of the pandemic.
Auto insurance took early hits as well as a result of rebates offered to customers to reflect the decrease in travel caused by the pandemic and various levels of lockdown that communities had to cope with, but since there was a significant drop recorded in accident frequency for these same reasons, projections are fairly optimistic in that sector.
With no clear end in sight to the pandemic despite recent vaccination rollouts, it has become increasingly evident that insurers will need to change the way they do business in order to remain competitive and profitable.
What remains to be seen is how insurance brokerages big and small will respond to these new and unfamiliar circumstances.
Will they play it safe by offering higher premiums, updating coverage limits, and introducing new terms and conditions to their policies in order to protect themselves?
Or will they look towards innovation and reinvention in order to maximize client retention and attract new clients by focusing on adding value and offering better products?
What Will 2021 Look Like?
Whenever an economic crisis occurs, businesses are forced to react quickly in order to increase their chances of not only surviving but hopefully thriving. The first phase of this process is the response:
What steps is your business taking to ensure that it can continue to function and provide its products and services to clients?
This question becomes even harder to answer when it’s both you and your clients who are experiencing disruption and unprecedented circumstances.
A quick but level-headed response to the COVID-19 crisis serves to let your customer base know that you are in control of the situation (as much as possible) and, more importantly, that you are ready to help and support them in any way that you can.
The next two phases are recovery and growth. This is what most businesses are going to be focusing on in 2021, with a year’s worth of experience operating in a global pandemic guiding them.
The goal for insurance brokerages in 2021 should be to put together plans that enlist both defensive and offensive tactics aimed at enabling them to put both long-term recovery and growth plans into action.
These are some of the insurance brokerage trends that we believe will be in focus in 2021 and beyond when it comes to not just surviving the economic pitfalls created by the pandemic but also growing your insurance business and making sure that you will be prepared if and when a similar crisis arises in the future.
Fully Embracing the Cloud
When looking at expected trends and necessary changes in the insurance space in the wake of COVID-19, there is one theme that weaves its way through all of them; a greater reliance and insistence on technology.
Cloud technology and software as a service (SaaS) have already become very relevant players in insurtech over recent years, but the current need for insurers to engage with clients online will put an increased focus on both in 2021 and beyond as the market becomes increasingly tech-driven.
Insurers will need to turn their focus more and more towards not only being able to sell digital insurance products via the Internet but also perform the many other tasks and services associated with insurance brokerages online. This means providing certificates of insurance online, handling claims virtually, and generally providing the expertise and guidance expected of an insurance broker in a setting that doesn’t permit “real-world” contact.
Moving to the cloud will work towards increasing the speed of the underwriting process and will improve the customer experience for business owners in the coming years, especially for insurers who are catering to a younger, tech-savvy crowd of clients.
Personalized and Customized Products
Millennials are now well into their 30s and have become a very important population that insurers are going to have to accommodate in order to prevent getting left behind. These younger insurance buyers expect more personalized and flexible insurance products as well as more immediate and quicker service and support.
Commercial insurers need to be aware of the fact that Millennials are now stakeholders in their companies and decision-makers that insurance agents and brokers need to attract by creating offers with the preferences and expectations of these younger professionals in mind.
It would be incorrect to say that insurance is just now becoming a data-driven industry. It’s always been that way. But thanks to new technologies, the need for insurers to “follow the data” when creating and offering their products has never been more paramount.
Insurers today need to lean on technology and data in order to create products that are more customized than ever to their clients’ needs; products that both minimize risk and provide more detailed and accurate premium calculations through the underwriting process based on personalized data and metrics.
Using data benefits both the insurer and their clients, allowing lower-risk clients to obtain lower premiums and enabling insurers to sell more policies by being able to address the coverage needs of their clients more accurately and succinctly.
Increased Focus on Compliance
While technology has been able to make data readily available and has sped up the rate at which information travels and is adopted by insurers, compliance still represents a very serious challenge.
The regulatory landscape and compliance requirements for brokers are changing constantly and have been especially dynamic in recent years. Some of the areas in which insurers need to continue to be vigilant when it comes to staying compliant include data and privacy laws, market conduct, third-party risk management, and sales standards.
The insurance brokerages that invest time and effort into compliance risk management programs have the opportunity to stand out and differentiate themselves in today’s market; one in which clients are increasingly concerned with staying compliant.
Cybersecurity as a Top Priority
As reliance on technology increases in insurance and brokerages start to shift more towards digital products and offering their services digitally, it’s a given that insurers are going to have to invest more in protecting themselves from cybercrime.
In the earlier mentioned Deloitte survey of insurance professionals on the state of the industry, two-thirds of respondents said that they were looking to increase spending on cybersecurity in 2021.
With many insurance employees now working remotely, data and privacy security have never been more important. Insurers need to not only invest in security experts and systems to keep their data and portals safe, but serious investments are also needed in the realm of employee education.
According to a recent study, 47% of employees who fell for phishing scams claimed that they were distracted. Add this statistic to another that says 57% of remote workers believe they are more distracted working from home and it’s easy to understand why remote employees need awareness and response training when it comes to the many types of social engineering attacks they could face.
Evolving Work Models
The insurance industry has had to adapt to widespread office closures and restricted movement policies by taking as much of its work as is possible into the virtual realm. It’s no surprise that it took many insurers some time to get used to these new ways of working, especially the more traditional insurance brokerages with somewhat older employees who might not be as technology-proficient as younger generations of workers.
Workers needed to become acquainted with new technologies and methods of communication and collaboration in order to maintain productivity and find ways in which to continue serving their clients without actually being able to speak with them in person.
The necessary fast-tracking of the digitization of processes such as claims management certainly presented itself as a burden for more traditional brokerages who still hadn’t taken the leap towards technology that they had no choice but to take since the pandemic hit.
And while most insurers eventually want to get their employees back into the office once conditions allow, there is no doubt that they are going to have to retain some of the work-from-home and remote work policies for employees who will continue to be wary of the health and safety risks associated with going to work even once a majority of the population has been vaccinated.
Insurers are also more likely to embrace remote work in their talent strategies once the post-COVID-19 rehiring process begins, in an effort to find and hire the best possible candidates and collaborate with them effectively regardless of location.
Reevaluating Risk Management
Another change that will be ushered in by the state of the industry in 2020 is an undeniable need to change the way in which insurance brokerages approach their roles as risk management advisors.
Technology is providing a way for brokers to offer increasingly personalized solutions and accurate coverage recommendations. On top of that, the digital revolution in insurance is bringing automation into the forefront of most insurance processes, which is reducing the need for intermediaries, which in turn is helping to get rid of many of the commissions and fees that were earlier associated with the process of obtaining coverage.
However, this certainly does not mean that brokers are well on their way to becoming an endangered species that is no longer needed by clients. What it does mean is that in order to thrive in 2021 and beyond, brokers need to embrace and leverage technology in order to evolve their roles as trusted experts and advisors in the process of obtaining the best possible coverage for businesses while minimizing their risks.
Brokers that are adamant about remaining a crucial part of this new, hybrid insurance experience in which human advisors and digital processes work in a complementary fashion must focus on using technology to offer their customers a thus far unprecedented combination of accuracy, convenience, and speed in the process of obtaining coverage.
Embroker in 2021 and Beyond
While there’s certainly no denying that the COVID-19 pandemic ushered in changes at Embroker as well, it’s also undeniable that the work that our team has been putting in towards becoming leaders in the digital transformation of insurance brokering has helped us to acclimate to the new state of the insurance industry more easily.
Embroker was one of the first brokerages to offer fully digital and highly customized insurance policies that can be bought online and in minutes. In 2020, we accelerated these efforts and currently offer insurance packages custom-built for venture-funded startups, legal practices, and private companies. We also launched Embroker Access, a platform that invites outside brokers to join our mission and offer our custom digital policies to their clients.
If you’re a business looking to secure the right coverage for your company online and in a matter of minutes, don’t hesitate to reach out to one of our expert brokers at any time.
And if you’re a broker interested in offering our industry-leading digital policies and insurance packages to your clients, head over to our Embroker Access page to learn how to get started.
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