5 Key Commercial Insurance Considerations for 2022

Standard and Poor's 2022 Commercial Insurance Industry Outlook is now available. Here are 5 takeaways.
By: | December 13, 2021

2021 was a pivotal year in the risk and insurance industry, and 2022 will no doubt bring new risks to light.

The pandemic created supply chain issues, restricted the ability of many businesses to operate, and spurred the need for innovative technology solutions to allow workers to do their jobs from home. New concerns arose to accompany these changes — like the increased cybersecurity concerns from a newly minted work-from-home workforce.

Ransomware and phishing attacks struck companies and organizations from every industry, even insurance companies.

But opportunities also emerged for companies to work differently.

Innovations in technology allowed work to continue from home as people found new ways to collaborate. Virtual tools made it easier for claims adjusters to view damaged property remotely and to settle claims virtually. Telehealth visits allowed injured workers to see their providers safely without risking leaving their homes during the pandemic.

There is no going back to the way things used to be — the new normal following the pandemic means technological innovations are here to stay. Insurance companies are working differently, and the trend is expected to continue.

To better understand how this flurry of changes will affect the commercial insurance industry, S&P Global Market Intelligence released its report, “The Big Picture – 2022 Insurance Industry Outlook.”

The company’s short take on the industry outlook for 2022 is that insurers will continue to need to respond swiftly to changing market conditions and be willing to “shatter their status quo” to manage the challenges that arise from new and evolving risks in many areas.

In the report, S&P Global Market Intelligence identified five significant areas of focus for the risk and insurance industry next year.

1) Technology Continues to be Key

Our industry has been shaped by technology as a driver — 2022 will be more of the same.

Most of the major carriers in the private passenger auto industry offer usage-based insurance policies or discounts, but privacy and data usage concerns have made adoption by consumers slower than anticipated. In commercial auto applications, however, fleet monitoring technology has flourished.

The report spotlights backend carrier practices as the next money-saving opportunity.

While less exciting on its face compared with telematics, reducing claims cycle time and lowering expenses through technology are predicted to be key efficiency drivers in 2022.

2) Distribution Channels are Expanded with Digital Options

Coming alongside the technology disruption is the growth of digital sales and service in the industry. Consumers have more options than ever before, with many new startups and Insurtechs offering a digital-only product.

Global companies are reaching out to potential customers through non-traditional means, like TikTok, YouTube, and WeChat.

The report notes “the tech industry’s role in influencing customer behavior will help shape the future of insurance distribution.” Consumers expect more digital products and services, and this trend will continue in 2022.

3) New Challenges Arise from Novel Risks

COVID-19 changed many things in our world and brought a renewed focus on risk management and insurance coverage.

Media coverage of businesses battling insurers to collect on their business interruption coverage was prevalent. Life insurance sales increased as people were reminded of their own mortality.

High-profile cyber and ransomware attacks focused the public’s eye on cybersecurity risks. All of this increased attention on insurance and risk management can be a good thing as more consumers want insurance products to protect them.

The report highlights the insurance industry’s unique position to drive social change.

From carriers divesting in coal and tobacco to withdrawing from geographic markets prone to wildfire or flood risk, there is much that insurers can do to precipitate social change. But, as the report notes, there is often little incentive for carriers to take political action.

Social inflation is another concern for 2022.

Pandemic-related court delays eased trial verdicts in 2020 and 2021, but with the return of court dates insurance companies could again see social inflation drive up claims costs. Nuclear verdicts were trending up since the early 2000s, taking a short hiatus during COVID-19 court closures — but now we could see a return to the rising costs with the return of trials.

4) Going Global Looks Different

The global insurance market looks different now than ever before.

The report highlights some reasons for this, including Brexit, pandemic-related differences in various countries, and political tensions around the world.

The aftershocks of the pandemic may alter how markets see risk and handle M&A activity, according to S&P Global report.

“The pandemic may also accelerate global organic growth opportunities due to a renewed focus on underinsurance by consumers and governments in developed and emerging markets alike,” the report said.

5) Modernizing the Definition of an Insurer

While the term ‘disruption’ may be overused, we have still seen challenges to the definition of what it means to be an insurer.

In the property and casualty realm, technology startups, Insurtechs, and new entrants to the marketplace, like Tesla self-insuring its own vehicles, have all disrupted how we view insurance companies.

In many cases, tech companies build a platform first, then apply their technology to various verticals like insurance.

In the life and annuity sectors, the business model has shifted to a more capital-light version where reinsurers take the leading role.

The report states: “The marriage of life and annuity liabilities obtained through reinsurance with differentiated affiliated asset management capabilities, including the ability to manufacture private credit instruments, promotes the potential for otherwise elusive higher returns in a low interest rate environment.” &

Abi Potter Clough, MBA, CPCU, is a keynote speaker, author and business consultant focused on Insurtech, leadership and strategy. She has over 15 years of experience at a Fortune 500 company with expertise in P&C claims operational leadership, lean management consulting, digital communications and Insurtech. As the past chair of the International Insurance Interest Group of the CPCU Society, Abi remains involved in many international initiatives and projects. She has published two books about change management and relocation. Abi can be reached at [email protected].

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