Breaking down P&C, life predictions with Transunion

TransUnion published its Insurance Trends and 2023 Outlook Report, which provides insights and predictions on digital trends and transformations in personal, life and commercial insurance. Though employment shortages and rising inflation led to profitability issues for some insurers, digitalization and new emerging technologies continued to transform the insurance industry throughout 2022, according to the report.

Personal

The personal auto industry saw an increase in telematic adoption in early 2022, where 60% of those who were offered a telematics program accepted. However, the report says that those numbers fell flat later in the year. Mark McElroy, Executive Vice President of Insurance at TransUnion, notes that both the rise and plateau in use of telematics may be due to the rising rates from inflation.

“When you think about the number, the percentage of people accepting it really has a lot to do with the people that were offered it,” says McElroy. “It could be the possibility that the telematics components have been built on discounts, and it’s cheaper or it saves you money. But the rate increases that [customers] are going through and new rates on policies are just as susceptible from a telematics perspective as they are from an automatic perspective. And so maybe it changed a little bit in that.”

For all of personal lines, the report suggests to insurers that optimizing marketing through data and new channels can help marketers better reach potential customers. McElroy says that for insurers, this means that they may want to explore channels that will ensure that they are optimizing their marketing spend through digital data sources. 

“…from TransUnion’s perspective, that is bringing additional data and analytics to the process so that you have a propensity to buy, so [that] there’s information around the consumer, how they are shopping, when they are shopping, where they are going, and bring those pieces of information together,” he states. “It does a couple of things. One, it allows you to meet the consumer where and when they want to be met. And the second is that you’re also able to understand what the propensity is of this individual to actually go through with a transaction… It’s that data that allows you to more accurately target rather than putting information out in front of a number of different individuals that don’t even have an intention to buy.”

Life

The report notes that although the life insurance industry is traditionally slow to adopting new technologies (over 90% of life insurance policies have been purchased through agents), there was an increasing trend of digitalization in 2022. The TransUnion Annual Insurance Outlook Survey of October 2022 reports that life saw an increase in respondents shopping for coverage through digital means this past year – 40% of respondents shopped through an app or online.

“As we think about the Covid time, people thought differently about mortality. It was kind of front and center… And so what you saw was a significant increase in the number of applications,” McElroy explains. “And then you also had this environment where people didn’t want strangers to come in their house and take their blood and do attending physician statements and things like that.”

The industry also saw more insurance companies digitizing their underwriting processes through robust data sources, such as medical records, that enable insurers to access information for potential customers. This opportune digitalization of a once more invasive process was especially advantageous during peak Covid seasons, as it removed the need for a home visit or physical exam. Concerns of mortality during Covid also brought an increase in life insurance policy sales, according to the report. 

McElroy adds, “There’s two key points. One is that more and more data is becoming available that is enabling the digitalization of that life insurance quote, so you can really get an assessment, and you can utilize data to do that… The second thing that is really important from this is there’s still a lot of education for people needing to understand the value of a total insurance-related relationship… That gap of people that are uninsured for that is something that the industry I think is very focused on.”

The TransUnion report states, “Life insurance sales grew at the highest level in more than 10 years with a 3.9% increase in 2020,” and a similar increase occurred in 2021 as well. Despite this increase seen in recent years, life insurance sales “reverted back to historical, pre-pandemic levels; 2022 sales declined 5.6% over the previous period…” the report notes.

Commercial

Artificial intelligence and data sources continued to be a large trend in the digital space of commercial insurance in 2022. According to TransUnion, commercial insurance companies of all sizes experience fewer barriers to digital sources, such as credit-based scores, for setting rates. This led to an increase in data collection and usage, such as from telematics for commercial vehicles.

The report explains, “Insurers that set themselves apart from the pack in this space will be those able to maximize the value of information obtained from those data lakes. This is particularly salient for insuring high-volume, low complexity, small business classes where accurate data on the business itself (and the individuals associated with it) are readily available.”

AI and data enables insurers to streamline the underwriting process with more accurate pricing and decision-making for its customers and can also help to detect and protect against fraud during a claim.

As in personal lines, commercial insurers saw a shift in how customers shopped for and purchased coverage. The TransUnion Annual Insurance Survey reports that though 91% of survey respondents showed a willingness to shop and receive quotes online, only 28% ended up following through on a digital channel. This gap indicates “a huge opportunity for companies willing to go beyond sites that just gather contact information and connect you to an agent,” the report says.

Trends in 2023

We can likely expect the imminent recession, low employment and rising premiums to continue affecting insurance in 2023, Transunion says. But the report finds a somewht positive outlook in some aspects of the industry.

“If there’s an upside for insurers, it’s the economy and consumer sentiment have not given way to total gloom. Many customers, including younger ones, still intended to buy new cars and homes. For instance, 16% of insurance survey respondents stated they plan to purchase a home in 2023, according to the TransUnion Annual Insurance Outlook Survey,” the report states.

“That digital experience is really important if [insurers] are contemplating an environment where [they] need to ensure that there’s the expected level of engagement or the expected capability from that digital process,” says McElroy. Looking forward in 2023, he adds, “A lot of people are getting higher loss costs almost across the board. That’s going to continue to drive.. shopping activity going forward.”