Climate change and vicious storms. Data theft. Driverless cars. And to top it all off, marijuana: these are some of the top issues affecting insurance services business last year. But what about 2019? What’s in store for insurance services companies?
It’s the time of year when business prognosticators try to look forward to see what the coming months will bring. And while we don’t have a crystal ball, these are some of the things that could disrupt the insurance services business in 2019.
The gig economy and the sharing economy, also called peer-to-peer (P2P) businesses, pose some special challenges for insurance services: many of those working in these sectors operate outside of traditional business models, and often in a regulatory grey zone. One response has been to exclude activities like driving for a ride-sharing service from personal liability policies and replacing them with riders or specific add-on coverage. Of course, this adds complexity for the insurance agency.
Even within more traditional employment structures, there is a lot of change. Younger people expect to work at a series of short-term or part-time positions, and are ready to change. Combine volatility with high employment numbers, and insurance agents as well as the insurance services industry will need to be flexible.
Increasing frequency of catastrophic weather events and other natural disasters, the opioid epidemic and other hazards are having widespread impacts, according to Willis Towers Watson. That respected consulting firm predicts broad increases in rates in commercial insurance, as much as 4 percent in casualty.
Changes in federal and state legislatures, changes in standards for certifying class actions, uncertainty over the direction of rules governing sales of U.S. annuity products and other factors add a level of unpredictability. Again, insurance agencies will need to be flexible and ready to move.
Last year, the European Union brought in the General Data Protection Regulation (GDPR), restricting the way that businesses can collect, store and use personal data. While it is a European regulation, it applies to any enterprise that operates in or does business with a resident of the EU. California and Vermont have enacted similar legislation, and other states are expected as well.
For insurance services, this raises the bar for protecting client information. Insurance services businesses will have to audit their practices in data analysis and sharing customer information to make sure they comply with the law. And don’t forget, part of the new laws included the “right to be forgotten.” In some cases, a person can demand that all information a company has about them must be deleted.
In addition, all 50 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands have brought in laws that require businesses to notify customers if their personal information is hacked or compromised.
Of course, the biggest cloud on the regulatory horizon is marijuana legalization. Ten states and the District of Columbia have legalized adult recreational use of marijuana. In December, New York Governor Andrew Cuomo announced support for legalizing marijuana there, as well.
This will have profound impacts on workplaces, health and of course, driving laws, and the ripple effects will be felt in many areas of insurance services.
The ultimate disruptor for insurance services: technology
Once again, rapid development and deployment of new technologies could disrupt wide swathes of the economy, not just in insurance.
- Blockchain — the technology underlying cryptocurrencies like Bitcoin decentralizes the storage of data records, making it almost impossible to hack. This makes it great for data security, but it also enables the cyrptocurrencies to bypass regulation.
- Self-driving cars — Truly autonomous cars will shift the insurance burden from the driver to the manufacturer.
- Artificial intelligence — The underpinning technology in self-driving cars, IA is being adopted in the insurance industry, through such things as chatbots that interact with online customers, and empower better data analysis.
- Big data — This refers to the huge amounts of information created, and stored, as a result of all our online interactions. There are two main types: structured, which is entered into defined fields and tables — like an insurance policy — and unstructured, such as social media posts. Insurers have tended to use structured consumer information to help calculate risk and learn more about consumer behavior. The practice of data mining employs powerful computing models to seek patterns in both types of information.
- Cyber insurance — Policies that protect against the new kinds of risk posed by disruptive new technologies, including hacking, data breaches and technology-related fraud.
- Insurtech has emerged as a term to describe a range of technologies that are embracing new and disruptive technologies to find greater efficiency and profits. It could apply to using blockchain, IA and data mining.
These are just a few of the major trends that we see affecting the insurance services business in the U.S. in 2019. But as always, the best strategy for any insurance business is to remain alert and ready to change to take advantage of the opportunities, and focus on delivering what you do best for your customers.