The future of insurance

As the business models for small business commercial insurance shift and become more modular, insurers will need to pivot their operating models or be left behind. There is a growing focus on digital-first products and partnerships. And because insurance is an essential part of doing business for many small businesses, brokers who can leverage technology in ways that make it easier for businesses to continue to make products and serve customers will benefit.

Commercial insurers have historically relied on physical visits by adjusters to assess, document, and digest loss information and process claims. Now, however, this cumbersome and time-consuming process is being revolutionized. Because digital photos of losses can be captured through drone technology or customer application services, loss events can be recorded in real time, then validated through independent news or weather information. This lets insurers process claims and payments within hours of the loss event. Completely visible to the insured, the process is entirely transparent and reduces waiting and uncertainty for the insured. This is transformational for agricultural insurance and property and casualty insurance.

Insurers are also navigating new and emerging risk classes. Cyber risks are growing steadily, and whether through their own activities or through their partners or their financial institutions, many businesses are facing increased exposure. What about insuring digital assets in the metaverse? Many companies are wondering how to keep these assets secure, and insurers will have to address this emerging opportunity. As technology continues to accelerate rapidly, insurers need to innovate and offer products that reflect their clients’ needs across different segments.

With more people taking ownership of their banking and investment services, it’s a natural progression to look for greater control over insurance. Open banking presents a great opportunity for insurers to improve the customer experience, better understand their client’s financial picture, and expand their offerings to change the way the industry is perceived – less focused on selling products, and more aligned with the customer lifecycle. Facing this emerging disruption of the broker channel, personal insurers are embracing the mandate of “digital first, digital now,” making it easy for customers to understand their options, choose the right coverage, and ask questions in a way that’s convenient for them, and on their own timeline.

For many customers, better service means having access to insurance options that precisely meet their needs. Consider a customer living and working downtown: they might not need auto insurance but could instead opt for coverage on their motorized scooter. With digitization, insurers have the tools to embrace niche markets and personalize their offerings.

Another trend for personal insurers is the continued shift in the value proposition from protection to prevention. With a growing focus on wellness, and on consumers’ willingness to share information, insurers continue to launch products like dynamic pricing for health insurance based on activity data. The proliferation and adoption of usage-based automotive insurance will also continue, as insurers look beyond “pay how you drive” policies to innovate with “pay as you drive.” These products and features can potentially lead to improved outcomes for both parties – the customer and the insurer.

Small insurers are not the only ones adapting to evolving circumstances. While the large commercial insurance market remains buoyant, it, too, faces new client and broker expectations, technological disruption, regulatory complexity, and economic uncertainty. To manage risk and remain competitive, many are adopting technology-enabled, customer-centric, and sustainability-minded operating models designed to build resilience and drive value.

To keep pace with customer expectations, for instance, large international insurers are eyeing the shift from legacy to agile systems that enable swift and seamless execution. Clients want more choice than the standard, 12-month policy, and insurers that can deliver specialized, flexible products for risk prevention and mitigation will retain customers and maximize profits.

Nimbler and more aggressive commercial insurers, meanwhile, can leverage professional expertise, insight-backed decision-making, and technology to embrace new and emerging risks. With advanced algorithmic underwriting helping scale their offerings, these leaders can become innovative specialists and capitalize on niche market opportunities.

Other organizations apply an "open source" approach that combines the best risk management and indemnification solutions to cater to diverse and specialized needs. These insurers thrive by packaging risk into new, innovative groupings and matching insured clients with capital providers. This model envisions and services a "stock market of risk" that transforms the commercial insurance ecosystem as it delivers the best it has on offer.

With a handful of large global players and many smaller companies in the Canadian insurance market, there’s an uneven playing field. However, with a significant percentage of Canadians remaining underinsured, there’s potential for everyone to find their audience. One thing all Canadian life insurance and annuities providers have in common is their increased focus on improving the customer experience and cultivating a deeper appreciation for insurance products among younger demographics.

While existing sales models appeal to many customers, it's less attractive to tech-savvy customers, who prefer to bank online and buy financial products on-demand through self-service digital platforms. In building more effective digital sales tools, forward-looking insurers need to build systems that improve customer onboarding experience allowing for an all-digital experience as a default with seamless human support when needed. Product offerings may also need to be simplified to support a more customer-centric digital experience that reduces complexity and allows customers to better understand and compare their options.

A global trend that we’re seeing is companies reframing their digital onboarding process in terms of life goals and milestones rather than products and face amounts, making the intake process more user-friendly.

Risk classification is fundamental to insurance, and a key emerging trend is to factor in more granular details from a customer's life circumstances to deliver more personalized coverage and pricing. For instance, insurers are starting to reach out to specialized markets through micro-tailored products, such as annuities for impaired lives, and insurance against cancer for women at risk or for diabetes patients based on their management of the disease.

As insurers start to integrate customer data assets into predictive models and advanced analytics, they'll need to grapple with new data governance challenges. Going forward, a successful health insurance and annuities provider is one that is willing to disrupt itself first – before someone else comes in and does it for them.

The insurance industry faces disruption from many sides, including technology providers, utilities, and automoThe insurance industry faces disruption from many sides, including technology providers, utilities, and automotive companies. In this expanded ecosystem, every insurer will need to offer greater transparency and increased customer control.

But it’s also essential that insurers understand that consumer expectations aren’t set by the competition. Instead, a customer engaging online with their insurer is comparing it to their most recent experience on a food delivery or ecommerce platform. If the customer can pinpoint their meal on the map at every stage between the restaurant and their dining room, or the location of their package at every stage in its journey between the shipper and their front door, why shouldn’t they also be able to see exactly what’s happening with their claim, and where it is in the queue? By connecting strategy to technology, business capabilities, and customer needs, KPMG Connected Enterprise helps insurers develop a business approach that puts consumers at the centre of their operations.

Contact our insurance team to learn more about how KPMG Connected Enterprise helps align insurance organizations of all sizes so they can profitably respond to emerging market conditions.tive companies. In this expanded ecosystem, every insurer will need to offer greater transparency and increased customer control.

But it’s also essential that insurers understand that consumer expectations aren’t set by the competition. Instead, a customer engaging online with their insurer is comparing it to their most recent experience on a food delivery or ecommerce platform. If the customer can pinpoint their meal on the map at every stage between the restaurant and their dining room, or the location of their package at every stage in its journey between the shipper and their front door, why shouldn’t they also be able to see exactly what’s happening with their claim, and where it is in the queue? By connecting strategy to technology, business capabilities, and customer needs, KPMG Connected Enterprise helps insurers develop a business approach that puts consumers at the centre of their operations.

Contact our insurance team to learn more about how KPMG Connected Enterprise helps align insurance organizations of all sizes so they can profitably respond to emerging market conditions.