Tuesday, September 27, 2022

Deloitte polled 100 financial executives of U.S. insurance companies on what the future holds for insurers. The survey showed that most of them are positively disposed and are now directing their main resources to increase their profits.

Nearly half of the respondents represented the market of insurance against accidents, 39% took out private life insurance, 32% – corporate insurance, 36% of reinsurance services (the amount of figures exceeded 100%, since the participating companies often deal with several areas).

Earnings expectations were inconsistent: 59% of the respondents expect it to increase, and only 16% predicted a decline; 28% of the respondents predicted a slight increase in the range of 1-5%. 31% expect even stronger growth and 12% expect a decrease by more than 15%.

The general trend continues for net income: 56% expect more revenue in 2021 and only 23% of respondents expect net income to decline; 28% of respondents expect net income to grow by more than 5% and 16% expect growth of more than 10%.

However, 77% of the respondents are concerned about possible fundamental changes both in the economy and consumer behavior. This partly explains why optimistic expectations of revenues and profits are generally high. Many insurers observe and analyze changes carefully before undertaking any additional financial obligations.

Despite the persistent position of the majority of insurers on the increase in costs, 69% said that their company is beginning to develop or has already entered a growth-oriented mode.

The key points of the survey results:

Most U.S. insurers have already switched to a post-pandemic growth strategy and have begun to invest in technology that allows them to interact effectively with customers in a distant format;

40% of respondents have already increased their budgets and 31% expect to spend even more by the end of the year.

Since the restrictions imposed by the pandemic have already been lifted, the companies were faced with the question of how to safely transfer their remote employees to the office format of work or switch to a mixed system, since many of them are used to and continue to work at home.

Many people are positive about profits from investing in high technology

Considering the necessity of moving services online, it is not surprising that 96% of respondents accelerated the implementation of digital technologies in their companies in order to increase efficiency and improve customer service quality.

This high indicator is conducive to aggressive investments in technology: 68% of respondents plan to increase spending on data analytics (as compared to 49% in the outlook conducted by Deloitte in the summer of last year); 66% see more upgrades in the programs they use to work with clients; 59% see increasing spending on piecemeal inquiries (as compared with 40% in the previous Deloitte survey).

Remote work or office: what will happen to the work format?

The issue of choosing a workplace format after the pandemic has become one of the main issues in 2022 for almost all companies in the world. As for insurance companies, the Deloitte survey showed that only one in four is willing to return to the “traditional” office model. Almost half of those surveyed plan to adopt the progressive “hybrid” model, which combines remote and office formats. The one-quarter that remains is exclusively remote. For example, Nationwide Insurance expects close to 50% of their employees to work either in the office or for the hybrid model.

Non-traditional models should allow insurers to expand the pool of employees, because employees no longer have to live without a job. These changes are already showing results, as nearly 51% of respondents now hire employees regardless of their location. In addition, these innovations will help to reduce the cost of real estate, because there will be much less need to rent office space. According to the survey, 87% stated that they were able to maintain a favorable and productive interaction with co-workers during the pandemic. In the near future, it will be difficult for insurers to determine which employees should return to the office and which can stay away. Most importantly, it depends on the individual needs and functions of each company.

Environmental, Social and Corporate Governance (ESG)

Insurers will be called to account when regulators review whether the claims of consumers have been fairly and adequately addressed, since the main interaction with consumers during the pandemic has become virtual.

In addition, increased attention will be paid to environmental, social and corporate governance (ESG). At the very least, insurers are expected to encounter new regulations on climate risk imposed by the New York City Department of Financial Services, which has prioritized climate risk. U.S. senators have requested a report from the heads of insurance companies on how changes in the climate can affect companies (impact on premiums and claims, stress tests, insurance coverage of natural gasoline and the relationship with investment policy).

The social aspect of ESG is also committed regulatory authorities to the composition of the cooperative, since the survey showed that 69% of respondents allocated additional resources to support the diversity of the company. The issue of affordability and fair payments in the sphere of motor and liability insurance will more likely than not be a priority for regulators, since the underwriting criteria (services, by insurance companies that guarantee payments in case of financial losses) are challenged (e.g., use of credit ratings or whether candidates have been previously infected with COVID-19). We study whether the algorithms in the systems of piece intelligence may have a different impact on the underserved communities.

You can insure your life online

Proceeds from life insurance premiums fell by 8% in 2021, while total income fell by 4%, doubling the net income. But the pandemic has increased awareness of the need to cover mortality. The emergence of online life insurance premiums helped to resume sales in 2022.

During several years, life insurance increased by 4%. Since June, online life insurance sales increased from 30% to 50%, and sales through agents dropped by as much as 50%. The pandemic has already sparked online competition at the side of digital startups, and if consumers continue in this vein, such competition, presumably, will increase in 2022.

However, despite all the shocks caused by COVID-19, the number of people in the U.S. who have gaps in life insurance continues to grow. According to the LIMRA survey, only 52% of Americans said they have life insurance in 2022. That is, close to 102 million uninsured or underinsured Americans believe they need to either buy a policy or expand their coverage.

As the pandemic in the United States progresses, both consumers and insurers will notice how their needs and benefits have changed. Insurers must capitalize on the innovations brought about by the pandemic to accelerate the transition to user-friendly rules, platforms and processes.

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