Top Insurance Trends in 2022
March 08, 2022
By Kenneth Croarkin
As 2022 is underway, and restrictions related to COVID-19 appear to be lightening up, this is a good time to consider some anticipated trends for the upcoming year and beyond in the insurance industry. Here are the top ten we are eyeing.
ESG, an acronym for environmental, social, and governance factors, has become more prominent across various industries -- not only to operate sustainably, but also because both investors and consumers are driving this demand. The insurance industry is in the early stages of adopting ESG considerations, but due to activity by ratings agencies, investors and likely the regulators, we are likely to see more movement this year.
- Special Purpose Acquisition Companies (SPACs)
SPACs (public shell companies listed for the purpose of acquiring a private company) continue to grow in importance both in the broader market and the insurance industry, with significant SPAC activity in 2021. According to S&P Global, SPACs with insurance as one of their target sectors raised about $3.6 billion in 2021 from 20 IPOs; this is likely to grow in 2022.
Insurance around cryptocurrencies is beginning to take off and is likely to continue to grow in the future as the value of crypto continues to escalate. The National Association of Insurance Commissioners (NAIC) has also started a working group around the treatment of cryptocurrencies in statutory accounting, which is at an early stage.
- Alternative Investments
The regulatory environment around alternative investments continues to evolve. Even with the prospect of rising interest rates, alternative investments offer insurance companies higher returns and a way to better manage risk through portfolio diversification. The NAIC continues to monitor and explore changes to the accounting for these types of investments, including their treatment for risk-based capital (RBC) purposes.
- Data Analytics
Insurance companies are expected to continue leveraging data analytics for underwriting, processing claims, fraud prevention/identification and managing risk. Insurance companies have huge repositories of historical and current data and data analytics capabilities can unlock that data and allow for business optimization and fraud prevention.
- Predictive Analytics
As online insurance underwriting continues to grow, predictive analytics are becoming increasingly important in quoting based on the likelihood of future events. According to a study by Willis Towers Watson, for those already using predictive data analytics, over 66% said that it has helped reduce issue/underwriting expenses with 60% crediting it for increases in sales and profitability.
As technology continues to disrupt the insurance industry, private equity money is being put into both insurance underwriters as well as brokers. As a result, the InsureTech market is estimated to grow by $33.73 billion from 2020 to 2025, according to global market research company Technavio, driven by the need to improve business efficiency.
- Hybrid Working Environment
The COVID-19 pandemic promoted a remote working environment for the insurance industry and, though people have returned to the office, the industry will likely continue to see a hybrid workplace as the new normal. This is expected to be an important factor in retaining talent, particularly in the insurance industry which has adapted well to a hybrid working environment.
- Robotics Process Automation (RPA)
The nature of the integration of acquisitions within the insurance industry and the resulting mix of systems result in a lot of repetitive, manual processes, which lends itself to being assisted by RPA for increased efficiency and regular reporting. Due to robust M&A activity in the insurance industry, many companies realized they needed to streamline their manual processes into automated ones for greater efficiency and timeliness of reporting.
- War for Talent and Attracting Young People to Enter the Industry
In a recent study by the Jacobson Group, an executive search firm for insurance professionals, 56% of insurance companies are planning to increase staff in 2022. The insurance industry has been impacted by the Great Resignation and is expected to face challenges recruiting younger talent.