Trends in the insurance industry for 2023

How innovative IT technologies drive (digital) transformation, new business and sustainability

‘We have to reinvent Germany. And insurers could play a leading role there – as “godfathers of transformation”.’ That was the statement Dr Norbert Rollinger made at the German Insurance Association’s (Gesamtverband der Deutschen Versicherungswirtschaft, GDV) annual conference 2022.

And what a perfectly understandable statement it is. As risk managers and investors, insurance companies play a key role in maintaining the stability of our economic system. That is why that in a time of multiple crises, new and nearly impossible to manage risks as well as enormous social changes, they are under particularly strong pressure to adapt.

Challenges for the insurance industry

In 2023, the aftermath of the pandemic, the war in Ukraine, the climate crisis and its consequences, inflation and interest rate developments, the increased number of cyber-attacks on companies and demographic change are having a huge impact on the insurance industry. Its challenges include:

• Adapting internal risk management to cover uncertainties
• Aligning business processes to make them climate-neutral
• Strengthening prevention against climate risks
• Responding to changing customer expectations (such as sustainable investments)
• Offering an attractive private and company pension scheme

One tool for overcoming these challenges, as well as for exploiting their potential, is innovative IT technologies and methods. adesso’s Insurance Team has identified eight (in some cases ongoing) trends or focus topics that might have a particular impact on the (digital) transformation, new business and sustainability of insurance providers.

8 current trends in the insurance industry

• Trend/focus 1: Data-driven insurance
• Trend/focus 2: Insurance process automation
• Trend/focus 3: Cloud-native insurance
• Trend/focus 4: Green insurance
• Trend/focus 5: Customer-centric insurance
• Trend/focus 6: New work and agile insurance
• Trend/focus 7: Digital transformation of company pension schemes and OHI
• Trend/focus 8: Digital health services

Trend/focus 1: Data-driven insurance

Insurance providers have a huge amount of data at their disposal and thus also enormous potential for new business. Data-driven insurance is the key for business models and services that can react to external influences and changes. This also increases the companies’ resilience.

Merging all the existing data and making it available for big data analyses and AI processes enables providers to create insurance products that are tailored to individual needs. These personalised products can be seamlessly integrated into the digital lives of customers (embedded insurance), thus creating a completely new user experience.

This requires central data platforms, evolving existing data warehouses into machine-learning data hubs and having the right mindset throughout the company.

Trend/focus 2: Insurance process automation

Automated processes will play an increasingly pivotal role in the success of insurance providers in 2023. These processes include internal ones as well as overarching interfaces with customers and partner companies in sales ecosystems (open data).

Thanks to the low-code and robotic process automation (RPA) software development paradigms, insurance providers can implement end-to-end, efficient and powerful solutions that reduce process costs, among other things. Process mining can make another valuable contribution, as it will enable additional costs related to inflation to be absorbed at least somewhat.

Another advantage of low code and RPA is the fact they have shorter development cycles, making them more responsive. It is crucial that departments and IT departments prepare and agree on process models, as well as who is responsible for what in terms of quality assurance and integration.

Trend/focus 3: Cloud-native insurance

The advantages of a cloud operating model – namely resilience and scalability with low infrastructure costs – have arrived in the insurance industry. The technology is considered key to digital transformation. A cloud strategy usually defines the next set of milestones with regard to further implementation.

In 2023, insurance companies need will need to go one step further – towards cloud native. This means establishing architectures, processes and tools to develop and operate applications that run flexibly and optimally on elastic infrastructures. Cloud native also means taking advantage of developments in the market and other ecosystems to complement the internal IT landscape through systems and technologies as Software as a Service.

A successful implementation requires establishing an agile mindset and training employees to use the appropriate tools and technologies.

Trend/focus 4: Green insurance

Climate change entails long-term structural changes and generates new (elementary) risks that need to be hedged. This has an impact on opportunities for revenue and growth, risk management and compliance, meaning this issue will occupy the industry even more in the future than it has in the past.

Successfully implementing sustainability in business operations requires a sustainability strategy that defines sustainability goals, rules and processes and maps them in systems. The increasing regulatory requirements for the integration of ESG criteria and for ESG reporting also create a need for action in this regard.

Examples of IT-supported tools to reduce a company’s carbon footprint include:

• Designing end-to-end digital customer journeys
• Using modern infrastructure solutions such as the cloud
• Solutions for sustainable claims management
• Solutions for companies’ internal carbon management

Trend/focus 5: Customer-centric insurance

With their ‘new’ customer journeys that feature a high level of user experience and convenience, tech companies have created a buying experience that customers today now also want to see from every other company. They expect around-the-clock availability, simple, understandable and flexible products and services as well as different ways of obtaining information and concluding a purchase (online, offline or hybrid).

New technologies such as AI and data analytics, agile working methods, a changed mindset and embedded insurance approaches are helping insurance companies to become customer centric. This must then be reflected in customer portals, policy calculators and application processes, among other things.

Trend/focus 6: New work and agile insurance

The Covid-19 pandemic has had a lasting impact on the way we work together. The number of people working remotely has risen sharply in recent years and teams often work in different locations. These types of flexible working models require collaboration tools and a digital workplace solution. This ensures efficient work processes by avoiding media disruptions and providing all the necessary information in a central location.

In addition to the technical requirements, it is important to establish an agile mindset as well as new roles and organisational structures in the company. The flexibility needed to achieve this can also be created through agile process and collaboration models. Models such as Scrum on a small scale, as well as scaling models such as Safe on a large scale, allow products to be successfully implemented in short cycles and with feedback from all stakeholders.

However, more agility does not only give insurance providers a competitive advantage thanks to a faster time-to-market, they also increase their attractiveness as an employer, too.

Trend/focus 7: Digital transformation of company pension schemes and OHI

Company pension schemes and occupational health insurance have become increasingly popular among employees in recent years. The underlying processes are complex due to the different parties involved – the employer, the employee and the insurance provider. That is why many employers are still reluctant to take on what they see as a large amount of administrative work.

Given the current shortage of skilled workers, however, company pension schemes and occupational health insurance are an absolute must for employers to attract and retain employees, and they also help them to stand out from the crowd. Contract management and communication with stakeholders can also be easily handled via a customer portal. They enable processes to be automated using black-box processing, thus reducing process costs.

For insurance providers and pension funds, the customer portal is an important sales channel that also facilitates cross and up-selling, which in turn contributes to the company’s success.

Trend/focus 8: Digital health services

Digitalisation in the healthcare system in Germany still leaves a lot to be desired – the pandemic in particular has brought a number of deficits to light. The networking between doctors, hospitals, pharmacies, health insurance providers and other stakeholders is still not in place or is only in place to a very basic extent in 2023.

Private health insurance providers can also realise a lot of untapped process potential through networking and sharing data. One example is the electronic medical device provision process. The basis for this is formed by end-to-end digital processes for policyholders, the digital connection of as many care providers as possible (medical supply companies) as well as the insurance providers themselves in an ecosystem.

In conjunction with the German electronic prescription (elektronische Verordnung, eVO) and an policyholder app, this would not only ensure fewer manual processing steps and thus faster turnaround times, but also simple and transparent communication with customers.

Conclusion

The to-do list for IT managers in insurance companies might get quite long in 2023. However, management, sales and specialist departments will appreciate the commitment shown by the IT managers. After all, their projects contribute directly to the value chain and to solving challenges facing society as a whole. It is certainly important to assess which of these trends or focus topics offer the greatest potential for your own company. This will be different from one company to the next. Get it done!

Would you like to learn more about exciting topics from the world of adesso? Then check out our latest blog posts.

To find out more about the insurance industry here.