Insurance Predictions 2022

Jeffery Williams Oliwia Berdak

Senior Analyst Vice President, Research Director

Ellen Carney
Principal Analyst

January 11, 2022. Connect to audio by 11 a.m. Eastern time (16:00 GMT/UK; 17:00 CET)
Insurers operate amid macro- and microeconomic
challenges
Macroeconomic Microeconomic

• Economic uncertainty • Reintegrating remote employees

• Low interest rates • Managing talent

• Volatile financial markets • Adopting emerging technologies

• Evolving consumers • Exploring new operating models

• Rising replacement costs • Identifying partnerships and markets

• Increasing competition • Digitally transforming

© Forrester Research, Inc. All rights reserved. 2

Globally, insurers’ priorities have changed …
“Which of the following initiatives are likely to be your organization’s top business priorities over the next 12 months?”
(High + critical priority respondents; top five)

2020 BT survey (pre-COVID-19)1 2020 BT survey (amid COVID-19)2 2021 BT survey (new normal) 3

Improve experience of Improve the experience of

1 Grow revenue. 1 1
customers. customers.

Improve experience of Improve our ability to

2 2 2 Grow revenue.
customers. innovate.

Improve our
3 Improve our products/services. 3 Reduce costs. 3
products/services.

4 Reduce costs. 4 Improve our 4 Improve our ability to innovate.

products/services.

Improve our use of data

5 Improve differentiation in the 5 Improve differentiation in the 5 insights in business decision-
market. market. making.
1. Base: 423 purchase influencers (past 12 months/next 12 months) in insurance; Source: Forrester Analytics Business Technograph ics® Priorities And Journey Survey, 2020
2. Base: 44 purchase influencers (past 12 months/next 12 months) in insurance who answered during COVID-19; Source: Forrester Analytics Business Technographics Priorities And Journey COVID-19 Recontact Survey, 2020 (April 29 to May 25,
2020)
3. Base: 513 purchase influencers (past 12 months/next 12 months) in insurance; Source: Forrester Analytics Business Technographics Priorities And Journey Survey, 2021
© Forrester Research, Inc. All rights reserved. 3
... and this has filtered down into tech initiatives
“Which of the following technology initiatives is your IT organization prioritizing over the next 12 months?”
(High + critical priority respondents; top five)

2020 BT survey (pre-COVID-19)1 2020 BT survey (amid COVID-19)2 2021 BT survey (new normal)3
Increase our security and Increase our security and
1 privacy capabilities. 1 1 Increase the use of the cloud.
privacy capabilities.

Improve the use of data and Redeployment of existing IT Increase our security and
2 analytics technology. 2 2
infrastructure. privacy capabilities.

Upgrade, replace, or consolidate

our legacy business Create a single view of the Improve the use of data and
3 3 3
applications/systems. customer. analytics technology.

4 Increase the use of the cloud. 4 Invest in digital experience 4 Invest in digital experience
technologies. technologies.

Upgrade, replace, or
5 Create a single view of the 5 5
Increase the use of the cloud. consolidate our legacy
customer.
business applications/
systems.
1. Base: 424 purchase influencers (past 12 months/next 12 months) in insurance; Source: Forrester Analytics Business Technographics® Priorities And Journey Survey, 2020
2. Base: 43 purchase influencers (past 12 months/next 12 months) in insurance who answered during COVID-19; Source: Forrester Analytics Business Technographics Priorities And Journey COVID-19 Recontact Survey, 2020 (April 29 to May 25,
2020)
3. Base: 511 purchase influencers (past 12 months/next 12 months) in insurance; Source: Forrester Analytics Business Technographics Priorities And Journey Survey, 2021
© Forrester Research, Inc. All rights reserved. 4
Competition is measuring opportunity

Big tech (GAFA) Ecosystem orchestrators

Industry incumbents Insurtech

Source: Forrester Research
© Forrester Research, Inc. All rights reserved. 5
Insurtech investment accelerated in 2021
Annual insurtech funding
19.9
20
18
16
14
US$ billions

12
10
8 6.9 6.9 6.7
6
4.2 4.0
3.6
4 2.7
1.9
2 0.7 0.8
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Q1 Q2 Q3 Q4

© Forrester Research, Inc. All rights reserved. 6

 Insurtech has implications across the buying journey
and the insurance value chain
Enablers of
Digital insurers/ Comparison Capabilities/ operational
agents marketplaces proficiencies improvement

• Intelligent automation Intelligent/workflow

Life and health Life and health automation
across customer journey
and value chain
• Data sourcing and
integration to expedite
quoting, binding,
underwriting, and claims
Digital experience/insurance
Personal lines Commercial lines Personal lines Commercial lines • Integration within platforms
customer ecosystems to
drive revenue growth
and market share
• Deployment of new data
sources to simplify the
customer journey

© Forrester Research, Inc. All rights reserved. 7

Insurers have advantages in legacy and distribution
Competitive advantages Economic opportunities

Entrenched Historical data Operational Product/services

distribution
• Insurers already
distribute through a
multitude of channels,
specifically, the
broker/agent channel.
© Forrester Research, Inc. All rights reserved.
assets improvement innovation
• The thought that • Across the buying • Topics like sustainability
legacy is a bad thing is journey, insurers have and cybercrime and
a “bad thing.” Legacy the opportunity to technologies like IoT and AI
knowledge and data is improve. Faster present myriad
good knowledge and underwriting and claims opportunities to improve
data to have and can settlement rise to the top, current products and
be used in conjunction but other areas include services, and they offer
with new data to digital policy binding and pathways for innovating
innovate. agency integration. new products and services.
8
 1. Insurers will try to outcompete each other on
ESG credentials.

2. One-third of insurers will embed insurance.

Insurance 3. A top P&C insurer will mine diamonds in the
predictions 2022 nonstandard homeowners’ rough.

4. A ransomware attack will hit a major

financial market, forcing a cyberinsurer exit.

5. Digital insurance platforms will raise

$20 billion.

© Forrester Research, Inc. All rights reserved. 9

Insurers will try to
outcompete one another
on ESG credentials
• In 2020, only 11% of global enterprise
security decision-makers in insurance
thought corporate social responsibility
(CSR) and environmental sustainability risk
were a primary concern.
• Insurers must innovate with products and
services that reduce climate change risk,
like extending usage-based insurance to
eco-friendly driving, and target new types of
risk such as coverage for renewable
energy-generation equipment.
Source: Forrester Analytics Business Technographics® Security Survey, 2020
© Forrester Research, Inc. All rights reserved. 10
 Insurers will embed
products into customers’
buying journeys
• Ecosystem orchestrators know their
customers and see insurance as a means
for monetizing the relationship.
• In 2021, only 17% of insurers showed
willingness to partner with other
organizations to differentiate products and
services.
• In 2022, one-third of insurers will increase
their willingness to embed products within
partners’ ecosystems to extend product
distribution.
Image source: iStock_000039093656-wide

© Forrester Research, Inc. All rights reserved. 11

Smart carriers will mine
diamonds in high-risk
property markets
• Extreme weather risks are strengthening:
̶ Weather bombs and rapid intensification
̶ Atmospheric rivers
̶ Snowpack declines and water depletion
• More than 50,000 Florida homeowner
policies were canceled/nonrenewed ahead
of the 2021 hurricane season.
• Smart insurers will use more finely grained
location and behavioral data to expose
profitable opportunities in high-risk markets.

© Forrester Research, Inc. All rights reserved. 12

The cyberreckoning
will force a market
departure
• Cyberpremiums grew the most as threats
boomed in 2021.
• Growth in cyberevents, especially
ransomware, drove coverage changes,
especially exclusions, tanking loss ratios.
• Enterprises are paying ransoms, basically
making other forms of cyberprotection moot.
• With profits and coverage down and risks
rising, a top 10 cyberwriter will cease writing
in 2022.

© Forrester Research, Inc. All rights reserved. 13

 Interest in digital
insurance platforms
will hit a high mark
• The insurance industry is still early in its
digital transformation, so investors see great
opportunity in digital insurance platforms
(DIPs).
• The market for digital insurance platforms is
as diverse as the need for digitization
across the insurance business. DIPs
function as POS, component, or end-to-end
solutions.
• In 2021, DIPs will raise $12 billion
(estimated) versus $2.4 billion in 2020. In
2022, funding will be at its strongest yet.
© Forrester Research, Inc. All rights reserved. 14
Questions?

Image source: Pixabay (https://pixabay.com/illustrations/question-mark-pile-questions-symbol-2492009/)

© Forrester Research, Inc. All rights reserved. 15
Thank You.

Jeffery Williams Oliwia Berdak

Senior Analyst Vice President, Research Director

jwilliams@forrester.com oberdak@forrester.com

Ellen Carney
Principal Analyst

ecarney@forrester.com

© Forrester Research, Inc. All rights reserved.