Back in January 2020, I wrote an insurtech predictions piece entitled The 20’s: Now and Then. This looked at trends we saw in the 1920’s and how they might compare to the 2020’s. I was working with Reinsurance Group of America (RGA) at the time, regularly speaking with insurers and insurtech disruptors. Recently, I have been consulting with these types of stakeholders, helping them to team up and generate digitally powered outcomes that are greater than the sum of their parts.
While it has only been three years since January 2020 (I know, it feels like a lot longer!), some of the observations are playing out nicely. This article reflects on these trends over the past three years, offers some thoughts on what I see specifically for them in 2023, and poses some bonus predictions for the rest of this decade! As with the last article, these trends are mostly explored with a US/North American bias, though some can also be seen as global trends (I’ve aimed to decipher those below).
This list is in the same order as presented in the 2020 article and does not reflect the order of importance of these predictions. Further, the prediction titles have mostly been taken from the 2020 article, with my updated reflections provided under each section. Lastly, this article has been broken up into two parts with Trends 1-4 in this article and Trends 5-7 and Bonus in the next one.
As always, looking forward to your thoughts and feedback on any trends you see happening in the year(s) to come!
Trend #1: How insurance was/is distributed
From 2020 article:
In the 1920s – Agents and direct-to-consumer were two of the major channels for selling insurance.
In the 2020s – I believe the 2020s will see a resurgence in the agency channel. More straightforward products such as renters and term life can and will be sold direct to consumer. Some insurance products will be embedded into offerings, making it seamless to get protection by eliminating the need for an intermediary.
Three Year Reflection and 2023 Thoughts:
The pandemic brought about many things, amongst them our desire to connect with people. From an insurance buying standpoint, many of the direct-to-consumer darlings of the insurtech world (Ethos, Lemonade, NEXT, Clearcover, Bestow, etc) pivoted to working with agents in and prior to 2020, with more focused efforts during the past couple of years.
During my time at ITC this past September, it felt like there were more vendors providing solutions for the agency channel than I have seen before. Further, many of the carriers I speak with are looking at how they can continue to build their solutions with a more agent-friendly experience in mind (versus the 2017-2019 days of focusing on D2C propositions). We also saw record activity in agency M&A activity in 20211 and through Q3 2022, agency M&A was 8% above the five-year average2.
Source: https://optisins.com/wp/2022/10/q3-2022-ma-report/
While there has been a lot of movement and focus on the agency channel, the term D2C seems to have now been replaced with embedded (D2C 2.0 perhaps?). One cannot open an insurance publication, listen to a podcast and/or attend a conference without hearing something about embedded insurance. And while the concept makes sense, according to Accenture’s Insurance Consumer Study, ‘85% of consumers prefer to interact with a human when asking for advice on products or offerings and only 15% conduct their purchase solely online’3.
The stat from Accenture tells the story the best. Embedded/D2C 2.0 sounds great and will have some terrific applications in the market. However, with the inherently complex nature of insurance products and the importance of things individuals are insuring (their lives, homes, businesses, etc) – a majority of the population will always want the opinion and help from an expert. From 2023 and beyond, I expect continued focus, retooling and investment in the agency channel, while we continue to see some wins (and losers) from embedded propositions.
Trend #2 Power to the Women, and Embracing Diversity
From 2020 article:
In the 1920s – The 1920s were a great time for women’s rights and inclusion in the US. On Aug 18, 1920, women were given the right to vote. In 1924, two women became the first two female governors elected in the US and in 1928 Amelia Earhart became the first woman to fly across the Atlantic.
In the 2020s – Quesnay’s Female Founders in Tech program and Dig-in’s Women in Insurance Leadership are two examples of how leading industry and media organizations are driving more visibility, opportunity and awareness for female talent in insurtech. In addition, Quesnay’s program also provides many startups with access to capital, mentorship, and partnership opportunities. I love seeing the representation of women trending upward and look forward to it continuing in the 2020s.
Three Year Reflection and 2023 Thoughts:
Since mid-2020, there has been an increasing focus on Diversity, Equity, and Inclusion initiatives across industries, including insurance. Interestingly, ‘data from the Bureau of Labor Statistics indicates 1.6 million women were employed in the insurance industry—58.9 percent of the total 2.8 million insurance workers. In fact, women have comprised about 60 percent of the industry workforce each year since 2012’4.
According to McKinsey, ‘In insurance, two-thirds of the entry level is women, and there are between seven and 14 percentage points more women in manager and senior-manager roles compared with other industries…insurance is still three to five percentage points more gender diverse than all industries at the vice president, senior vice president, and C-suite levels’. However, ‘In terms of racial diversity in insurance, we have a long way to go at all levels, particularly at the more senior levels. In insurance, the entry level is 19 percent women of color and 8 percent men of color’5.
While our industry seems to be one of the leaders in gender diversity and we continue to see promotion of female leaders through events like Dig-In’s Women in Insurance Leadership, it seems we have more work to do with respect to racial diversity too. Through my decade and a half in insurance, I have always found our industry to be an inclusive one and expect to see positive trends in the D, E & I space.
Trend #3 Prohibition and Cannabis
From 2020 article:
In the 1920s – 1920s became the era of prohibition: alcohol was illegal until prohibition was repealed in 1933 by the 21st amendment.
In the 2020s – Individuals are switching from alcohol to marijuana, and finding “zero enjoyment out of drinking”…While cannabis is currently only legal for recreational purposes in Canada, Georgia, South Africa, and 11 American states, I expect the trend of legalization to increase. And that means massive opportunities for insurance.
Three Year Reflection and 2023 Thoughts:
Cannabis has now been legalized in 39 states and the District of Columbia for medical use and 21 states for recreational use (and is currently being considered to be decriminalized at a Federal level).
Life and health insurers have incorporated cannabis use into their underwriting models6. Additionally, from a property and casualty perspective, the increase of cannabis legalization has created more businesses that operate in the industry that will need associated coverage for manufacturing, agricultural, workplace-related, and other general liabilities.
Further, in October 2020 and November this year, Oregon and Colorado (respectively) decriminalized the use of psychedelics including psilocybin (mushrooms), primarily for healing/medical use. If these become more mainstream/legal with doctors prescribing them, this will again change how insurers need to underwrite and/or create products for these types of businesses.
Just like in the 1920s, where alcohol was seen as something bad and then in the 30s having wider acceptance of it, we are seeing the same with substances that used to be viewed as ‘drugs’ becoming more socially acceptable and, importantly from an insurance perspective, being successfully integrated into medical treatments.
Trend #4: Automobiles
From 2020 article:
In the 1920s – The automobile industry in the 1920s became more mainstream because cars became more affordable for the general public… Moreover, automobile insurance began becoming mandatory in the 1920s.
In the 2020s Our reliance on automobiles as a means of transportation has grown exponentially. Accordingly, the way we use and insure automobiles is changing and will continue to do so….telematics…rideshare economy…autonomous cars…scooters, helicopters, hyperloops.
Three Year Reflection and 2023 Thoughts:
The pandemic has put the spotlight on transportation insurance in several ways. On a personal lines front, many individuals were not driving as much in 2020 when the pandemic first started due to lockdowns. Many P&C insurers enjoyed low loss ratios that year only to see them shoot up in 2021. Not only were claims frequencies higher due to more people driving again, but claims severity was also higher due to labor and parts being more expensive.7 It doesn’t seem to be getting any better in 2023.8
For commercial trucking, we’ve seen wider use of electronic logging devices (ELDs) and cameras since the ELD mandate in 2016 in the US and many emerging entrants gaining traction in the early 2020s with new trucking insurance products (HDVI, Cover Whale, Nirvana, Koffie Labs, Zego (UK)). This line of business has historically been a tougher business to underwrite with high losses, and these players are doing what they can to bring some stability to this market.
I’d be remised to not mention the impact of supply chain issues and how this can affect us globally. One of the most interesting events of the past 3 years was the Ever Given ship being stuck in the Suez Canal, causing billions of dollars of losses in the global trade industry.
Massive events like this create opportunities to improve a process and protect from future events…no doubt something the insurance industry will focus on. Telematics has massive benefits for all three of these areas and wider acceptance and value is being demonstrated.
Stay tuned for Part 2 and reflections on the last three trends I focused on in the 2020 article as well as some refreshed Bonus predictions!
Resources:
3 https://insuranceblog.accenture.com/embedded-insurance-brief-overview
4 https://www.iii.org/fact-statistic/facts-statistics-careers-and-employment
6 https://www.rgare.com/knowledge-center/media/articles/underwriting-marijuana-risk-a-new-era
Quesnay’s Female Founder in Insurtech Program – https://www.quesnays.com/ff-insurtech-2020
DigIn Women In Insurance Leadership – https://conference.dig-in.com/women-in-insurance-leadership
Image Sources:
https://www.historyextra.com/period/20th-century/impact-prohibition-ban-alcohol-consequences-american-society-usa/
About Stephen Goldstein
Stephen Goldstein is a multi-disciplined, global insurance executive with experience working on three continents and eight countries. He has held roles in direct sales, sales management, market entry, risk management, advising and investing in startups and reinsurance. Stephen currently serves as an Advisor for two insurtechs, ProNavigator and Finaeo, and consults with insurance carriers and insurtechs on growing revenue, launching go to market initiatives and accelerating innovation adoption.
Stephen Goldstein is a multi-disciplined, global insurance executive with experience working on three continents and eight countries. He has held roles in direct sales, sales management, market entry, risk management, advising and investing in startups and reinsurance. Stephen currently serves as an Advisor for two insurtechs, ProNavigator and Finaeo, and consults with insurance carriers and insurtechs on growing revenue, launching go to market initiatives and accelerating innovation adoption.
