The insurance industry has been around for over 300 years. The secret to its longevity is its ability to adapt to changes. However, the COVID-19 pandemic was one of the industry's greatest disruptions. It wrought changes that made selling insurance more complex.
The insurance industry has seen dramatic changes through the years, and with 2023 approaching, this industry must battle some of the following challenges to make the most of the new year.
5 challenges and opportunities in the insurance industry
Distribution is increasingly becoming a digital affair. With good reasons, too. It is faster, more convenient, and more accessible than in-person interactions. This transition makes the job of insurance agents more difficult.
Insurance agents are grappling with the changes while attempting to ease the transition. Insurance firms must devise innovative incentive and commission packages to make the transition worth the agents’ while. Nothing inspires like a hefty commission!
A sound recompense model will inspire them to devise new methods to clinch the elusive deals. They will attempt to work around the skill gap and find what clicks while handling online communication. This newfound zeal will bring more revenue.
Digital channels are triggering a change in the industry. Digitalization enables customers to collate and compare products to make informed purchasing decisions. All these activities take mere minutes.
Insurers must adapt to changing customer preferences to stay relevant. Here are a few pointers:
- Develop an omnichannel strategy that integrates all customer-facing channels (including social media) into one user experience across desktop computers, laptops/tablets/phones.
- Create easy-to-use self-service functionality for clients who prefer not to use agents or brokers but still require assistance.
- Ensure agents and intermediaries always have a role to play in the buying process.
3. Intermediaries will play a key role
As we've seen, the insurance industry is entering a new era. Just as consumers are becoming increasingly empowered and self-sufficient, they're also becoming more aware of their options.
It's no longer enough for insurers to offer products; they now need to deliver experiences that provide unique value in the eyes of customers.
That's where intermediaries come in. They play a crucial role in helping consumers find the right products and understand how they work. Intermediaries will help educate users on risk management and loss prevention.
4. The whole retail experience
The insurance industry is old, with a long history of complicated policies. The way it was sold and bought in the past is not geared toward the modern consumer, who is used to getting what they want, when they want it, and at the best price.
Now, people demand attention from their providers. They seek better experiences than just dealing with impersonal call centers or faceless agents. The customers are likely to get pickier in the future.
5. New technology
As new technologies arrive, customer behavior and demands change. Insurance companies must make technological investments to tap into the opportunities these changes bring.
The lack of digital infrastructure to reduce risk exposure, drive better sales, and streamline operations will affect growth prospects.
AI is an excellent tool for optimizing operations and deriving actionable insights. AI can help agents make better decisions about handling customer claims. For example, it can suggest which policyholders should be prioritized based on their claim’s history or other factors such as age.
As more customers turn to agents for help, we will see agents embracing AI to streamline their day-to-day operations. It will make both the agent and customer experience better.
As suggested by a McKinsey report, the insurance industry will face persistent challenges in the upcoming years, as well as uncertainty, such as high inflation and volatile macroeconomic environments.
Ultimately, a changing industry landscape can allow insurers to overcome current performance challenges by transforming both where and how they generate value.
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