While 2020 turned out to be a year that changed the way we live and work, our predictions still proved to be remarkably accurate. As we predicted, life insurance companies that modernized their core new business and policy management systems accelerated their digital transformations. Their new digital features, including cloud, analytics, automation and ecosystems, enabled these insurance companies to run profitable new businesses.
A LIMRA survey in April 2020 showed that 24 percent of US companies that accept online / mobile applications experienced an increase and more than a quarter have expanded their automated warranty practices. Similarly, the MIB Life Index in November shows a total of 4.1 percent life-applying activity (YTD November 2020) compared with 0.7 percent in 2019 (annually) – an upward trend that began after the pandemic and is largely driven by younger applicants under 45 years.
Even with the economic downturn from COVID-19, these insurance companies were better equipped to adopt a fully digital experience of insurance purchases, which proved to be a huge benefit to customers who were confined to their homes during the pandemic. They were also better positioned to grow their business beyond the pandemic, as online shopping is likely to remain a real life – and life insurance – for the foreseeable future.
For 2021, our insurance forecasts focus on accelerating digital insurance. They assume continued low US interest rates and an expected reduction in premiums that will lead to increased margin pressure. Insurers who have not already modernized their core systems need to do so quickly and need to reinvest their older maintenance savings in digital warranty technologies. Companies that do this will be nicely positioned to capture new opportunities. For example:
1. Technology investments that change the cost curve make it possible for insurers to invest in innovation guarantees and unlock greater value
Operating efficiency will dominate in the short term. In the long run, however, insurance executives are preparing for the post-pandemic world and are using cloud, automation and AI to streamline the insurance function to enable faster and more accurate underwriting decisions.
More than 25 percent of US life insurance companies have extended the automatic guarantee according to the LIMRA study "How Covid-19 Affecting Life Insurance in the US and Canada" (April 2020). COVID-19 taught us an important lesson in the importance of contactless transactions, and insurance was no exception. If possible, insurers adapted their risk models to include alternative sources of evidence to reduce or eliminate fluids and / or paramedical examinations and their associated costs. Expect an extended use of contactless warranty in the near future and beyond as additional alternative sources of evidence, such as health and health data, become increasingly available.
2. End-to-end digital customer experiences will dominate the life insurance purchasing process and drive innovation on insurance guarantee
Insurers may differ from the experiences they offer their customers and insurance can be a powerful difference. Technologies such as AI, analytics and alternative risk engines, connected via well-developed APIs, can provide consumers with seamless, fully digital experiences that make fast and accurate insurance decisions while communicating application status throughout the process.
The same technologies will help insurers to provide the right products, competitive prices and offered through optimized distribution channels, to reach the more than 60 million uninsured and underinsured consumers that LIMRA estimates live in the United States.
Accenture research showed that more than three quarters of consumers surveyed are willing to share personal data for benefits such as personalized offers, more efficient and intuitive services, and more competitive pricing. The concept of "pay as you live" is becoming increasingly relevant for insurance companies as consumers increasingly carry out their important life transactions online and on mobile devices.
3. Increasingly fierce competition will increase the importance of brand loyalty and trust.
Brand loyalty and trust will become even more important in attracting and retaining policyholders. New technology will help insurance companies focus their organizations on the customer and give their employees the opportunity to innovate products and processes that attract and cultivate customer loyalty.
Warranty plays a role here. It's not just about building confidence in the carrier's solvency. It is about guarantee that supports personal and relevant experiences – a living system – for providing new products and services, driven by real-time data, predictable models and ongoing risk assessment.
Warranty will break out of a back office function into a strategic role affecting front office functions, such as marketing, sales and distribution. Insurers will be able to anticipate customers' needs with tailor-made products for which the consumer is already pre-qualified and ready to buy. This will be the end result of intelligently prepared data and insights that enable insurers to make consistent, accurate decisions.
The insurance industry has transitioned to a digital business model for the immediate future. In addition to the COVID-19 pandemic, however, living companies that integrate physical and digital worlds will emerge. Insurance companies can prepare for that future now by implementing a flexible platform for nuclear insurance technology. This will enable them to innovate and grow sustainably by using the subscription as the basis for a digital customer experience that will generate profitable revenue. circumstances and may not reflect recent developments. Accenture disclaims, to the extent permitted by applicable law, all responsibility for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, auditing or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed personnel.