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In a recent webinar, leaders from Cipher spoke to leaders from American Family Insurance about the many ways the industry is experiencing disruption. While some of these are related to COVID-19, there are many additional sources, some of which may surprise you. When looking out at the industry landscape over the next five years, the following elements will play a role.

Using the STEEPI approach, these points of potential friction or disruption were identified.

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1. Social Disruptors

In a social, digital environment, insurance companies are having to activate agile strategies to stay competitive. The reality is, social proof goes a long way, even for something as serious and essential as insurance. Consumers vet companies online.

Additionally, due to the uptick in customized/personalized marketing tactics, consumers increasingly expect personalized products. This has required macro-shifts of enormous magnitude for traditional insurance offerings. 

There are proactive, innovative competitors both inside and outside the insurance industry that are setting new precedents for business as usual. This requires out-of-the-box thinking and an overall willingness to change to meet new demands in the market.

2. Technological Disruptors

Everything from EHSs to blood pressure stats have gone digital. As patients and consumers have increased access to medical information, their attitude toward insurance has shifted. Priorities like app-based communication and digital records are enormously important.

Even the way insurance claims, filings, reports and more are generated or shared has shifted. Any insurance company that hasn’t already adapted to this sees the clear gap in their revenue. To be the obvious, or acceptable, choice for younger consumers, technology has to be front and center.

Here are some examples of new technology in insurance and responses from some of the power players in the industry:

  • InsurTech: A startup that has already received massive funding and is partnering with legacy insurers for tech advancements.
  • State Farm is activating in-house tech (called Red Labs) that uses blockchain technology to compile and facilitate payments.
  • 360Globalnet: A “nextgen” digital claims and risk assessment system. The interface is customer-led and lets users report and manage their own claims.
  • Say Insurance: A mobile app that is revolutionizing the way consumers buy auto insurance by focusing on customer service expectations. By allowing customers to apply for auto coverage online through a self-service portal and giving them full access to the formulas they use to determine insurance rates and claims consideration they are making the buying process more transparent, simple and convenient.
  • Spire Insurance: Another digital insurance platform that is changing the way consumer's buy auto insurance. On top of being an easy and convenient way to get coverage, the app also connects to your GPS and learns about your driving behavior and shares insights back with you. 

These are just a few illustrations of the disruption out there and how technology is changing the way insurance is managed.

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3. Environmental Disruptors

The environment itself is a vital factor for the environmental insurance market and related markets. For instance, environmental insurance carriers set rates by class and exposure. As a paradigmatic shift occurs for things like risk assessments, major rate changes could be on the horizon.

Some of this is the result of more sophisticated monitoring devices. For instance, as indoor air quality or the presence of mold is easier to spot and measure, claims increase. Some geographic concentrations of natural disasters, such as multiple hurricanes along the southern U.S., has caused an uptick in claims, which may subsequently impact rates.

4. Political Disruptors

2021 will be a volatile year for many sectors of the insurance industry. After the November presidential election, a lot could change. Whichever way the election or party control goes, changes in the insurance industry will occur.

Here are the changes many insurance analysts are predicting based on the latest HHS Notice:

  • Slight increase in premiums
  • State by state coverage negotiations
  • New regulations from the HHS
  • Changes to Medicare
  • Changes to Medicaid

Far more changes, or far more extreme versions of any of these, could be shaped by whoever steps into the Oval Office.

5. Economic Disruptors

With unemployment highs and stock market fluctuations, 2020 has taken its toll on the economy of healthcare. 2020 healthcare insurance trends have shown a higher use of health savings accounts and a reduction in federal financial support for insurance exchanges. There has also been a reduction in Medicaid spending.

The automobile insurance industry is being disrupted by the increase of the remote workforce. The two-adult, two-car family system may be less common than ever, which dramatically changes the landscape of car insurance.

Many of these disruptors coalesce and will require related solutions. For instance, one survey found that 67% of consumers would consent to have a sensor attached to their home or car if it would lower their insurance premiums. This would take economic and technology factors into account. The overall reality is that insurance in the next decade will look very different than it did in the last.

While these key industry disruptors from outside sources will play a role, there are also points of disruption occurring within the insurance industry.

6. Industry Disruptors

Here are the potential impacts to consider of dynamics occurring within the insurance industry:

Great acceptance of remote work: more companies are activating virtual teams and letting employees work remotely. This transforms business as usual and also directly affects operating budgets and workflow. The work from home paradigm is directly relevant to the auto insurance industry.

Business closures and bankruptcies: both the pandemic and political trajectories are impacting the profitability of insurance businesses. Some are unable to handle the added strain and are closing or declaring bankruptcy.

Investment challenges: continued low-interest rates pose a challenge to investments.

Regulations/Regulators: insurers are, more and more, being demanded to pay non-covered losses. This is being mandated on state and federal levels.

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