Five trends shaping the insurance industry in 2022

The pandemic rollercoaster continues to rattle the insurance industry as we ride into 2022. One of the bright spots for our industry was the acceleration of technological innovation. All the uncertainty and changing consumer habits are fueling substantial changes in how insurance is marketed and sold by independent agencies.

Here are five key trends that will shape the industry in 2022:

1. Niches are strategic growth levers 
Geography no longer matters as agents scope out new business opportunities within specialized areas of expertise that span beyond regional boundaries. To expand your business, agencies need to identify and solve problems for an underserved economic sector that has its own unique needs and requirements. Developing a specialized niche can draw in targeted customers no matter where they are located.

Niche agents typically enjoy lower competition and the potential for higher-than-average profits. Their expertise is perceived as a huge value add by their clients, who are more likely to refer them to others needing the same specialized insurance.

An example of finding niche sectors that need insurance is something like laundromats. This is a specialized market that can often be underinsured. Search engine optimization, custom insurance packages and a reputation as the experts have proved to be successful in building a book of laundromat clients.

2. Better safe than sorry
Cyberattacks reached record numbers in 2021. This negative aspect of the digital age is expected to only escalate in 2022, highlighting the importance of agents making sure clients have insurance protection in place for data breaches.

Failure to disclose relevant information about cyber insurance could land agents in Errors & Omissions (E&O) court. Insurance agencies must be proactive during the renewal process to ensure clients know all their options and are aware of coverage liabilities. Why? Because when losses happen, those who feel misled and not adequately counseled will look for someone to blame – and litigation is the recourse. Any breach of contract, improper disclosures, poor advice, or discriminatory practices can trigger a suit.

Think of the three ‘T’s — tailored, targeted and timely. Clients must be given relevant information that applies to their circumstances, specific recommendations and be on time when policies are up for renewal. Documentation is key. Keep records of all communications and provide advice through multiple channels — automated messages, emails, website pop-ups, to prove clients have been offered and are aware of offerings. 

3. Be mindful of the customer experience
Based on what we saw last year in client retention, we predict at least 25% of active agents will strategically slow new business efforts in 2022 to focus on customer experience to increase retention rates. Agents with an eye for the long term are increasingly prioritizing customer experience to add to the bottom line from existing business.

A thousand engaged and satisfied customers who buy three policies are more profitable than two thousand frustrated clients buying one. These highly satisfied customers are also more likely to refer friends, families, and colleagues.

Increased retention at scale depends upon automation. Key events in the client lifecycle – onboarding, renewal, ongoing cultivation cross-sales – require relevant communications at the right time. Also measuring customer satisfaction is important. This gives agencies opportunities to ask satisfied current clients for referrals and reach out to dissatisfied clients to address improvement.

4. More independent agents mean more competition
With Nationwide’s successful transfer of its captives to independent agents completed last year, we predict that at least three more major carriers will release their captives in 2022. Even if carriers don’t initiate the move, more agents will leave their carriers to start their own business this year or join existing independent agencies. It gives more options for agents and clients. Many agents are welcoming this change, as we note that former Nationwide agents are reporting an increase in revenue following the transition. Independent agents are now entrepreneurs instead of employees, with the potential for higher income and the pride of owning relationships.

Almost all of those released have kept partnership relationships with Nationwide. The property and casualty insurance market in particular is going through a dramatic transformation that requires agility which IAs can best support. New players, changing consumer expectations, consolidation, and new servicing models are pressuring carriers to find ways for improving the customer and agent experience.

5. Carriers are pouring money into insurtech
Optimism is the watchword for 2022, with society adapting to the new normal of remote work and online consumer transactions. These solidifying behaviors are accelerating tech adoption and innovation. To keep up, carriers made major investments into insurtechs last year and are on track to break records in 2022. A recent report found that USAA made the most startup investments, followed by American Family (primarily through its finance arm American Family Ventures).

And, if trends continue, the industry can expect fewer deals, but those that do happen will be for larger sums. Carriers will invest in startups that support the independent agency distribution channel as well as pure-play digital insurtechs. As a result, the entire industry will accelerate digital transformation to remain competitive. We expect to see a great deal of change as the insurtech investments spur innovation in the months ahead, impacting all these trends.

The past few years of crisis have tested the insurance industry, but we are seeing strong signs of resilience and adaptability. Agencies and carriers alike are adopting modern technology at a more rapid pace than we’ve ever seen and using these tools to make their businesses more efficient, responsive and creative in serving consumers. It can be hard to make predictions given the rapid pace of change over the past few years but these insights should provide some guides to help agents thrive no matter what lies ahead.