Nine predictions for the insurance industry in 2022

This article was first published in Finance Digest

If 2021 has been a year of recovery and adjustment for the insurance industry from the impact of the pandemic, 2022 will be the year for major step change and transformation. Leading insurers will deliver major product innovations responding to sustainability and climate change, and demand for financial well-being, health and protection solutions will rise. There will be a renewed focus on customer experience and personalisation, integration with the broader ecosystem, investments into digital, data analytics and talent will intensify. We will see more insurers adopt an agile way of delivering transformation and operating at pace in a fast-changing post-pandemic world. 

Here are nine predictions for 2022 for the insurance industry: 

1.Customer experience and personalisation will accelerate 

Customers will demand better customer experience and personalisation from their insurance providers. Experience inflation from other sectors, transition to digital and hybrid working and adopting services remotely during the pandemic have permanently enhanced customer expectations. Significantly improved omni-channel experience will become a necessity. Use of dashboards for insights and to get a complete view of their financial products, including savings, pensions and protection products, will also grow, partly driven by the ongoing development and testing of the UK Pensions Dashboard programme. Market leaders will invest in capabilities to deliver better customer experiences and personalisation to differentiate themselves. 

2.Insurers will demonstrate irrefutable progress in sustainability and climate change

2021 has been the year where climate change, culminating in COP26 in Glasgow, has truly become mainstream. COP26 saw the largest private sector participation with more businesses than ever setting their own sustainability targets. PA’s recent research found 86 per cent of customers care about sustainability and consumers expect their financial services provider to embrace sustainability as ‘business as usual’, innovate and help them in their sustainability goals. 2022 will see sustainability and climate change dominate the board agenda of insurance companies as they incorporate ESG policies and practices by demonstrating transparency, reporting progress, and developing products and solutions to help manage ESG risks and enable new, low carbon technologies. 

Financial services can change the world by empowering the conscious consumer

Download our latest report

3.Integration into a broader ecosystem will accelerate

As insurers innovate their products and propositions, the ability to offer value added services, offerings from adjacent and other sectors and providing total end-to-end solutions for engagement, prevention, risk management and after service management, will be critical. Insurers realise that the fastest way to scale and develop capabilities, in addition to M&A, is to integrate with the wider market. In 2022, we will see continued investments into partnerships and integration with various ecosystems such as health, agriculture, mobility, and in some cases, M&As, to support overall financial well-being of individuals, provide solutions for large commercial risks or drive better experience for clients and customers. The insurance industry, particularly the Life and Pensions industry, will also make forays into open finance.

4.The insurance industry will see major product innovations

New risks due to climate change, technology advances, supply chain disruption, availability of data and changing customer demands will drive product innovations in the market. Embedded Insurance will grow as product and service providers across various sectors incorporate insurance into their offerings.  Parametric and index-based insurance for climate and weather-based risks and commercial operations will expand significantly. We will also see more ecosystem-based offerings across different insurance sectors. The cyber-insurance market will expand as more organisations secure their data, systems, and networks to counter the threat of hacking and ransomware. Growth of non-fungible tokens (NFTs) and the emerging metaverse ecosystem will also provide innovation opportunities to insurers.  

5.Digitalisation and data analytics will remain a priority

Innovation will be a top agenda point. Demand for personalisation, better customer experience and innovation will drive investments into cloud, digital solutions, automation and artificial intelligence and machine learning. For instance, the industry will see significant advances in the use of AI and machine learning powered underwriting, fraud detection in claims management and operations, growth of automation in digital portals and dashboards, and use of analytics in new product development and customer management.  

6.Financial wellbeing will be a key focus area

The pandemic has put significant strain on the finances of individuals and households, and consumers are more aware of the importance of financial wellbeing, including long term savings, protection, and access to immediate financial resources. In 2022, Life and Pension companies will develop new products, services, and partnerships addressing the financial well-being of their customers throughout the financial lifecycle of an individual or household. Life and Pensions companies will also work more closely with employers to align and incorporate their offerings with their employee wellbeing strategy. The advice market, which according to Legal & General1 estimates that less than 20% of those approaching retirement take financial advice, will see innovation in tools and mechanisms of customer engagement and product delivery.  

7.Health and protection markets will further grow

The pandemic has also amplified the importance of health insurance and protection in the lives of customers. The large protection gap, ageing population, strain on social care and increasing out-of-pocket health expenses in the UK will increase demand for health and protection products. Leading insurers will further invest into developing relevant products, providing digital tools such as virtual GPs, and integrating capabilities from the wider health and well-being ecosystem to capture this emerging demand.  

8.The insurance industry will increase adoption of agile transformation

To respond to the changing market conditions due to COVID-19, customer needs and digital advancements, to manage costs and to adapt to hybrid ways of working, the insurance sector will need to transform. According to PA’s research, 72 per cent of business leaders across different sectors, including financial services, say improving organisational agility is a strategic priority. Agile delivery is being increasingly used by the insurance industry for its proven benefits of increasing quality and productivity, driving customer centricity and time to market. We will see growth in penetration of agile transformation and methodologies into the insurance industry in 2022 as they seek to become more agile organisations.  

9.Competition for talent will intensify

Insurers are looking to assess, restart and accelerate strategic delivery and are seeking highly skilled and experienced individuals.  Established organisations recognise that they are competing with FinTechs and other financial services players for talent. In 2022, we expect the insurance industry to have a renewed focus on attracting and retaining top talent. For instance, insurers will further adopt and communicate values such as sustainability and diversity and inclusion within their organisation, revamp incentives to align to the expectations of the more digitally focused talent, further enable hybrid ways of working and reskill existing employees.  

The insurance industry, having responded well to the pandemic, is currently at the cusp of significant growth and transformation opportunities. Winners in the market will be those willing to be bold and forward thinking and adapt their strategies and business models to the ever-changing market landscape.