The Future of Insurance is Digital

Introduction

Consumer habits are changing rapidly, but insurers are not as quick to adapt. In the 2021 Insurance Consumer Report: A Guide to Growing Digital Demands for Insurance, Levvel surveyed more than 1,000 insurance consumers to reveal their expectations from insurance providers today and what the future holds for the industry.

Here are six consumer insights gleaned from the data.

The Demand for Digital Is Growing

There is a great demand for insurance companies to adopt digital products and services. Modern insurance consumers increasingly require immediacy, transparency, and personalization—and for this, digital technology is necessary.

Millennials lead trends in preferences for digital interaction via self-service platforms and web or mobile apps. In contrast, Baby Boomers and Gen X prefer interacting with agents, in person or via a phone call.

Insurance Customers of the Future: Millennials and Gen Z

The future of the insurance market lies with Millennials, but older generations—which account for 60% of the U.S. population—represent its present. What does this mean for the future of the insurance market?

Millennials—who represent 30% of the U.S. population—differ from the preceding generations in many key aspects. They are in various life stages (i.e., pre-family, starting a family, with children), younger, with lower income, less likely to be homeowners, and many have yet to start a family. As a result, they tend to purchase a lot less insurance than the older age groups, focusing primarily on insurance products such as renters’ insurance and term life insurance.

This type of insurance-buying behavior may stick even as they age because Millennials are expected to continue to consume insurance products differently. Furthermore, homeownership is estimated to decline over the next decades, from around 65% today to 60% in 2040, while alternative living arrangements such as renting or living with parents will be on the rise. This can impact the demand for certain types of insurance products, specifically renter’s insurance and homeowners insurance.

Millennials also bring a shift in preferences when it comes to purchasing channels. Unlike older generations that are more inclined to buy insurance through agents, Millennials require a mix of agents and digital channels. And with Generation Z coming of age, the push for digital will expand even further.

Meeting Current Demands While Preparing for the Future

Although the future of insurance clearly points to digital, caution is necessary before removing the human factor from the equation entirely.

First, digital demand is not uniform across the generations. It’s mainly driven by Millennials and Gen Z. In contrast, Baby Boomers and Gen X still prefer traditional ways of buying and using insurance, including aspects such as underwriting and claims processing.

Also, despite the strong demand for digital modernization and personalization, agents are still popular among all consumer segments. Over 50% of respondents in the Levvel consumer report prefer to speak to an agent at least several times a year—and that’s true across the generations.

This dichotomy makes it challenging for insurers to adapt technology infrastructure and product offerings to evolving consumer requirements.

Here, the high-touch, high-tech approach can help. It’s a strategy focused both on technology and human interaction to satisfy the currently dominant consumer segment—Baby Boomers and Gen X—while preparing for the digital future as Millennials and Gen Z become the prevailing consumer group.

Areas Critical to the Future Success of Insurance

Insurers must be quick to jump on digitization and implement modernization initiatives to meet consumers’ need for speed and personalization while maintaining a strong agent relationship. Technology can serve as a tool to humanize the insurance industry. It allows insurers to derive data-driven insights and better understand customers so they can create products more aligned with their needs.

In addition, technology can inspire conversations that are meaningful for consumers, leaving ample space for people to do what they do best—communicate and engage with other people.

Features of Best-in-Class, Next-Generation Apps

So what do modern consumers want to see in an app?

The Levvel report indicates that the features of next-generation, best-in-class web and mobile apps include:

• Personalized offerings with the option to share data
• Safeguards to ensure security and data privacy, as consumers are increasingly concerned with data privacy protection
• In-app chat with convenient access to experts
• High degree of transparency and frequent status updates, especially with claims processing
• Robust access control with protection features such as facial recognition or electronic signature

Future of Insurance: Incumbents and Insurtechs

With traditional insurers slow to adapt their technology infrastructure to meet the requirements of the modern consumer, other players were quick to fill the market gap. Insurtechs— those nimble, digital-first new entrants—are emerging as market actors better attuned to the fast-changing world.

To stay relevant in this increasingly crowded market, insurers need to reimagine their business and move from traditional to technology-led offerings to engage their customers with digital experiences that will differentiate them from competitors. Here, product development and customer experience that is integrated with customer data will be essential.

But the shift from traditional to technology-enabled insurance doesn’t mean that the time for human interaction has passed. It means that a hybrid, high-tech/high-touch model that blends both digital and traditional approaches can help insurers gain a competitive advantage and remain relevant in this rapidly evolving market.

For more insights into the future of insurance, read the full 2021 Consumer Insurance Report by Levvel.