TransUnion published Insurance Trends and Outlook 2023 Report, which provides information and forecasts of digital trends and transformations in personal insurance, life insurance and commercial insurance. While job shortages and rising inflation have led to profitability problems for some insurers, digitalization and new emerging technologies have continued to transform the insurance industry throughout 2022, according to the report.
In early 2022, the personal vehicle industry saw an increase in the use of telematics, with 60% of those offered a telematics program agreeing. However, the report says that later in the year, those numbers did not change. Mark McElroy, executive vice president of insurance at TransUnion, notes that both the growth and stagnation in telematics use could be due to rising rates due to inflation.
“When you think about the numbers, the percentage of people who accepted an offer actually depends a lot on the number of people who were offered it,” says McElroy. “Perhaps the telematics components were built on discount and it’s cheaper or saves you money. [customers] pass, and new policy rates are just as receptive in terms of telematics as they are in terms of automation. And so maybe it’s changed a bit in that.”
For all personal lines, the report suggests to insurers that optimizing marketing with data and new channels can help marketers better reach potential customers. McElroy says that for insurers, this means they may want to explore channels that will optimize their marketing spend with digital data sources.
“…from TransUnion’s point of view, it’s bringing additional data and analytics into the process so that you have a propensity to buy, so [that] there is information about the consumer, how they shop, when they shop, where they go, and puts those pieces of information together,” he states. “It does several things. First, it allows you to meet the consumer where and when they want to be met. And secondly, you can also understand what is the propensity of this person to actually make a transaction… It is this data that allows you to target more precisely, rather than providing information to several different people. who are not even going to buy.
The report notes that while the life insurance industry has traditionally been slow to adopt new technologies (more than 90% of life insurance policies were purchased through agents), there is a growing trend towards digitalization in 2022. TransUnion’s October 2022 Annual Insurance Outlook Survey reports that last year in a lifetime, there was an increase in the number of respondents shopping for coverage through digital means, with 40% of respondents shopping through an app or online.
“When we think about the times of Covid, people thought differently about mortality. She was kind of in the spotlight… So you saw a significant increase in applications,” explains McElroy. “And you also had an environment where people didn’t want strangers to come into their house and take blood from them, make statements from the attending physician and things like that.”
The industry has also seen more insurance companies digitize their underwriting processes with trusted data sources such as medical records that allow insurers to access information for potential clients. This timely digitization of a once again invasive process has been especially beneficial during peak Covid seasons as it eliminates the need for a home visit or medical check-up. Concerns about mortality during Covid have also led to an increase in sales of life insurance policies, according to the report.
McElroy adds: “There are two key points. First, more and more data is becoming available that allows this life insurance quota to be digitized, so you can actually get an estimate and use the data for that… The second thing that’s really important from this is that there’s still a lot of education out there. for people who need to understand the value of insurance-related relationships in general… This gap of people who are not insured for this is something that the industry I think is very concentrating on.”
The TransUnion report says: “Life insurance sales rose at the highest level in more than 10 years with a 3.9% increase in 2020,” and similar growth occurred in 2021. Despite this growth seen in recent years, life insurance sales “are back to historic, pre-pandemic levels; sales in 2022 decreased by 5.6% compared to the previous period…,” the report says.
Artificial intelligence and data sources continued to be a major trend in the digital commercial insurance space in 2022. For-profit insurance companies of all sizes face fewer barriers to digital sources such as credit scores to set rates, according to TransUnion. This has led to an increase in the collection and use of data, for example from telematics for commercial vehicles.
The report explains: “Insurers who stand out from the crowd in this area will be able to maximize the value of the information generated from these data lakes. data about the business itself (and those associated with it) is readily available.”
AI and data enable insurers to streamline the underwriting process with more accurate pricing and decision making for their clients, and can help detect and protect against fraud during a claim.
As with personal insurance, commercial insurers have seen a change in how customers buy and acquire coverage. TransUnion’s annual insurance survey reports that while 91% of respondents showed a willingness to shop and receive offers online, only 28% ended up using the digital channel. The gap points to “a huge opportunity for companies looking to go beyond sites that just collect contact information and put you in touch with an agent,” the report says.
We can probably expect the looming recession, low employment and rising premiums to continue to weigh on insurance in 2023, says Transunion. But the report finds a somewhat positive outlook in some aspects of the industry.
“If there is one positive for insurers, it is that the economy and consumer sentiment have not given way to total gloom. Many customers, including younger ones, are still determined to buy new cars and houses. For example, 16% of insurance survey respondents said they plan to buy a home in 2023, according to the TransUnion Annual Insurance Outlook Survey.
“The digital experience is really important if [insurers] considering the environment in which [they] it is necessary to ensure the expected level of participation or the expected opportunities from this digital process,” says McElroy. Looking ahead to 2023, he adds: “Many people almost universally face higher loss costs. This will continue to drive buying activity going forward.”