2022 insurance industry trends: How carriers and brokerages navigate challenges and capture opportunities

As the world settles into its “new normal” post-pandemic, insurance industry trends are expected to touch carriers and brokerages alike. Each moment in time presents its own challenges and opportunities, and 2022 is no different. Consider the most pressing trends expected in upcoming months – and how to navigate difficulties while taking advantage of new opportunities.

Difficult Economics

Many industries took an economic roller coaster ride in the last two years as the early days of the pandemic pushed many markets to record lows. Government assistance and ongoing stimulus programs helped spur a quick recovery a year later for several industries.

According to a McKinsey report, the impact on the insurance industry was noticeable. In 2020, premium growth slowed to about 1.2 percent with profits falling by about 15 percent from the previous year. Preliminary data suggested that premium growth and profits rebounded somewhat in 2021.

The report goes on to discuss several structural factors that have been challenging insurance industry growth including, “persistent low interest rates … pressure spread-based businesses such as life insurance; pricing pressures driven by fee transparency, digital attackers, and lower-cost options; and organic demand that is growing only slowly in mature markets.”

Although lower premiums are always appreciated by customers, agencies and brokerages face increasingly high revenue pressures. This scenario means that cost can no longer be a competitive differentiator.

Tech-Savvy Competition

While major household-name insurers may have brand recognition and a trusted reputation, they often have more difficulty innovating as quickly as tech-savvy newcomers.

Cited as one of the four major trends to watch by Insurance Innovation Reporter, new digital carriers are successfully grabbing market share. The article states that “Consumers are clearly more comfortable buying policies from new carriers, and agents are open to offering their products. Not only do many offer coverage similar to established insurers, but digital first approaches offer stellar customer service.”

The digitally driven customer service experience is expected to be a key differentiator for carriers and brokerages alike moving forward.

Costly Service Options

Many existing carriers and brokerages are exploring one of three options to boost customer service levels.

Some major carriers are offering a dedicated customer service line. Agents can choose to give up a significant percentage of their commission to direct customers to this service, which can manage endorsements, make policy updates, and even write new policies. This is helpful in allowing agents to rely more on the carrier’s support rather than hiring a customer service representative. This also mitigates potential errors and omissions (E&O) liability risks. However, as carriers compete on premium costs and agents face increased payroll and decreased interest in brick and mortar services, even a small percentage of each policy’s commission is sorely missed.

Other carriers and brokerages are hiring dedicated customer service representatives to manage these tasks. While this encourages customer service that is up to par with the company’s standards, this is also the most costly option. In addition to payroll and benefits, these customer service representatives typically require a specific license to advise on policies, recognize potential fraud and discuss claims. The result is a cost incursion for training, licensing, state taxes and fees as well as continuing education requirements.

Finally, some organizations are choosing to outsource these responsibilities to a third-party solution provider to file claims, answer questions and manage other details. However, even third party administrators and business process outsources are facing challenges around high employment costs, high attrition and difficulty meeting existing SLAs. The challenges facing the insurance industry aren’t limited to only carriers and brokerages!

Automation Alternative

All existing options can successfully take some of the servicing burden off carriers and agents, but they can be a costly and ongoing investment. Additionally, none of the above options are exempt from the current state of employment (or lack thereof) within the insurance industry.

Automation alternatives driven by artificial intelligence and machine learning technologies can help address some aspects of the workflow by reducing the time and cost of manual processing as well as allowing carriers and brokerages to scale the quantity of policies more affordably and effectively.

For example, the Digital Coworker from Roots Automation doesn’t just complete a recurring task like robotic process automation, it also learns from the process, variables, and contextual cues just like a human. Automating complex problems can be a cost-effective way to retain more revenue for today’s carriers and brokerages.

For more information about Digital Coworkers, contact the Roots Automation team today!