What fundamental trends will mark the insurance digital transformation agenda in 2021?
At the beginning of 2021, I wished to take a step back and consider what should be expected regarding the insurance sector’s digital transformation in the coming months.
In recent years, driven by several legislative and private initiatives[i], the quality of the workforce and the quality of life, more and more foreign (and national) fintechs have settled in Portugal to develop their product and start their European expansion. It was in 2020, however, that the insurtech / fintech ecosystem became more structured.
Fintech House was opened in January of that year to be the home of the fintech community in Portugal. More than a physical space where start-ups work in the heart of Lisbon, this hub came to accelerate innovation and foster collaboration between all entities: start-ups, banks, insurance companies, technical consultants, law firms, investors, and regulators.
As the Portugal Fintech Report 2020[ii] reveals, 20% of the fintechs are insurtechs and 80% of them provide B2B solutions. Although a general pain point expressed by start-ups is related to regulation, initiatives like Finlab have helped to mitigate it. Through this forum, start-ups have had the opportunity to work together with regulators (ASF, BdP, CMVM) for a common understanding regarding technology, regulation, and their specific technological solution.
Moreover, in 2020 insurers have come to acknowledge the value of working together with insurtechs. Through programs such as Ageas INSure and Protechting and hubs as the Fintech House insurers get easy access to innovative solution that they may check are aligned with their corporate strategy. Start-ups, on the other hand, get the needed terrain, data and client base to implement, test and refine their solution. Thus, all gain from this collaboration.
To further facilitate contact and collaboration within local ecosystems, the Portugal Dynamic Insurtech Map was launched in a webinar late November last year, fruit of a joint initiative between Portugal Fintech and The Digital Insurer (TDI). Available on Portugal Fintech’s and TDI’s websites this map will be updated quarterly to become a place to visit by all who wish to have a global perspective of the players active in the digital transformation of insurance in Portugal.
What are the 3 fundamental trends that will mark the sector’s digital transformation agenda in 2021?
To find out what will characterize this year, I questioned 5 personalities in the sector, from different areas of the insurance ecosystem: Hugh Terry from The Digital Insurer, João Freire de Andrade from Portugal Fintech, Eduardo Caria from Ageas Portugal, Sasha DeWitt from Habit Analytics and Nuno Pinto from Coverflex.
The pandemic brought an acceleration of digitalization in the relationship with the client. This bottom wave will continue this year. It will be boosted by a growing collaboration between newcomers and incumbents and will allow the development and implementation of different technologies to service of the relationship with the customer.
Thanks to the adoption of new technologies by more and more market players, new communication channels between customers and stakeholders will be developed, which, interconnected by digital platforms, will originate beyond insurance ecosystems.
The data exchanged in different ecosystems and / or captured by different devices will allow, through data analytics, the definition of more personalized and adapted offers to each one.
I summarize these trends for 2021 with the words of João Freire de Andrade that says: “Insurance will increasingly be where and when the customer needs it most. It will be adapted to the need and sold on the go, moulding itself like water to the form that contains it.”
Conscious of these perspectives, organizations are increasingly aware of the need to adopt a truly digital culture, for which specialized L&D programs are suitable.
Find out here which are the 3 basic trends pointed out by each one, which will mark the sector’s digital transformation agenda in 2021?
Founder of The Digital Insurer
The widening gap between those insurers with modern tech stacks and those without will continue to drive transformation efforts. Incumbent insurers will start to move away from monolithic architectures as pressure to compete continue.
The ongoing change in consumer behaviour combined with the growth in ecosystem models will continue to lead to opportunities to embed insurance in broader digital product propositions. This will be the high growth area and the smart insurers will be thinking and building beyond digital only embedded solutions to create deeper relationships and connectivity with customers.
Increasing understanding by incumbents on the need for adoption of digital culture and effectiveness of specialised L&D on digital insurance to help do that as well as address skills gaps. Opportunities in digital for all promote inclusiveness and create conditions for sustainable adoption of digital across the insurance enterprise.
Co-founder and CEO of Coverflex
Greater collaboration and joint work between incumbents and newcomers.
Something I have believed for a long time. More than competition, the spirit that must be present in the Insurtech ecosystem is one of collaboration. I believe that in recent years we have seen a change in mentalities and increasingly the presence of a collaborative spirit among everyone, and my expectation is that this year, this will be an effective and real change. Incumbents and newcomers working more and more side by side in the search for an answer to the challenges that the market must answer.
SMEs will request solutions that meet the challenges
SMEs will increasingly be one of the main search engines for answers to the challenges that insurance presents them. The digitization of processes, the search for greater efficiency and better conditions, as well as the growth of new types of insurance (cyber for example) will cause the market to start paying more attention to this segment that has been somewhat forgotten. At Coverflex, we strongly believe that SMEs will be one of the main drivers of the sector in the coming years. Health Insurance is progressively used in companies, which demand better experience for the employee and a better interaction between company / employee.
Corporate insurance more and more “on the go”
The post-pandemic period and the consequences it will bring to the world of work – increase in remote work, less physical proximity company / employee, abandonment of physical office spaces, will have a great effect on the sector. More than just obliging an acceleration of insurance “digitalization” to reinforce company / employee ties, the entire insurance landscape of a company can undergo a shift. This change in portfolios will have more impact in the property insurance sector – from multi-risk insurance for building and content for a single risk location to more versatile and “hybrid” office-home insurance.
Group Head of Transformation & Efficiency, Ageas Group Portugal
I think one of the biggest changes will be the acceleration in digitalization of the relationship with the Customer. In the face of the Covid-19 pandemic, our behaviour and appetite for the use of digital media and the confidence to acquire products and services through these media, were strongly boosted. Combined with the investment that insurance companies are making in digital, the accelerated growth of insurtechs and the partnerships with them, will significantly boost the commercialization and availability of services by digital means.
Products, services, and channels must have a strong emotional connection and focus on the Customer experience. We will see a growth in technological solutions such as virtual assistants with cognitive artificial intelligence services taking a more dominant position, providing more convenience, speed, and more frequent points of contact with customers.
Strong investments in innovative technologies as a differentiator in a competitive market. Technologies such as IoT, Advanced Analytics and Machine Learning, will pave the way for new digital business models, focused on more personalized products, with a greater focus on the Customer and which will allow data to be monetized. In terms of efficiency, technologies such as intelligent process automation (iRPA) will continue to play a leading role in insurance companies.
Based on these trends, we will see the emergence of more digital ecosystems and services in addition to the traditional insurance products (beyond insurance), contradicting a traditional past of low rates of involvement and interactions with customers, allowing a range of new services, with more interaction and value for Partners and Customers.
Co-founder and CEO of Habit Analytics
One of the major impacts Covid has had on insurance has clearly been the need for insurers to rapidly ramp up on their digitization efforts. Insurers spent 2020 figuring out what technology is out there and ways to reach their customers online. I think 2021 is where we will see more. There will be more unique digital products, offered through innovative channel partners, than ever before.
In addition to leveraging new digital sales channels, I think we will finally see an increased trend of more customized data driven insurance products. Insurers will also be tapping into new data sources, such as smartphone and location data. The clearest example of this is with car insurance and “pay-per-mile”/“pay-how-you-drive” products. With less driving and the continuance of remote work, more and more insurers will offer innovative digital products that leverage data to offer more affordable pricing to customers who are driving less.
Lastly, because so much more of our time is spent online these days, there will be a clear push for increased investment in cyber security. In particular, I think we will see new products for personal cyber security protection in ways we haven’t seen before. Products like cyberbullying protection and online fraud or extortion protection will become far more common. By the end of 2021 more individuals and families will be buying personal cyber security insurance in the same way they buy anti-virus software.
All of these trends are connected and relevant for an increasingly digital world. Insurers and the “insurtech” industry have been talking about “leveraging IoT and AI and Big Data” to offer tailored products for years, but it hasn’t really taken off. The paradigm shift of the last year I think will finally force insurers to launch innovative products and put in the effort to understand and use these new data sources to improve underwriting and the customer experience.
J.Freire de andrade
President of Portugal Fintech
Insurance in ecosystem and adapted to needs. Technology as a springboard.
Insurance will increasingly be where and when the customer needs it most. They will be adapted to the need and sold in the customer journey, moulding itself like water to the form that contains it. The risk covered by insurance can be easily transferred by being traded through a digital-first experience. This experience will be even more interesting as it is integrated into an ecosystem of services that works without friction (with and without associated insurance). Technology, like fashion, is always evolving and is the springboard for all of this to be possible. The potential of artificial intelligence and blockchain is evident and widely spoken, but this year I would highlight the importance of digital identity and biometrics as an unlocker of (n.f.e.: or a key to) all digital systems and as desired seamless usage experiences. The future is uncertain waters and navigating them is only possible with experimentation. Being open to failure, learning and improving quickly is part of an essential culture in this digital transformation process of the industry, which will never end.