Emerging Consumer Trends in Insurance

Evolving Consumer Dynamics in Insurance

The landscape of how consumers shop for insurance has undergone a remarkable transformation over the past two decades. With the rise of digital direct options and, more recently, embedded insurance solutions, consumers now wield greater influence than ever before. The integration of data capture and advanced technological capabilities continues to shape the insurance shopping experience, regardless of whether consumers opt to engage through agents or work directly with carriers, OEMs, or other service providers.

At the core of these shifts are the increasing capabilities to capture and utilize data, enabling a more personalized insurance experience. We envision a future where consumers can aggregate and manage their data in a personal risk “wallet,” supported by Generative AI that helps match risks to capital more effectively. This evolution opens the door for niche or underrepresented risk pools to access insurance through innovative entrants that connect these risks with alternative capital.

To illustrate these potential futures and discuss their implications for insurance carriers, we will explore three distinct consumer paradigms: the mirrored consumer, curators, and collectives.

Mirrored Consumer

The concept of the mirrored consumer revolves around a rich data profile—a digital twin derived from aggregated first-, second-, and third-party data. This profile enables businesses to anticipate consumer preferences and behaviors in real time. Data sources may include sensors, wearables, and haptic technologies, creating intelligent networks of digital twins. Furthermore, these profiles encompass data about properties owned or used by the consumer, as well as behavioral insights, offering a comprehensive understanding of individuals and their households.

The notion of a mirrored consumer presents several intriguing possibilities for insurance carriers. Traditionally, underwriters rely on a limited dataset—information provided by the consumer or agent and data gleaned from external sources. In contrast, we envision a future where insured individuals create their own risk exposure “wallet.” This wallet would compile not only the data typically used for underwriting but also supplementary data that carriers may not have previously accessed, resulting in a more complete profile.

As a result, insureds will be empowered to take this wallet to different carriers to secure the best pricing and coverage, balancing the trade-offs of sharing additional data in exchange for better service. Instant updates on an insured’s exposures will also become possible, allowing for more accurate pricing and dynamic coverage options. For instance, selling a car could trigger its removal from the policy, while a new roof installation might prompt a re-rating of home coverage. Healthy lifestyle choices could lead to lower life premiums, all facilitated through seamless data exchanges.

Examples of the mirrored consumer model are already emerging in the market. For instance, California has developed a proof of concept that places vehicle titles on a private blockchain. This innovation could allow consumers to store vehicle titles in their digital wallets, triggering automatic updates to their auto policies when ownership changes. Similarly, State Farm’s recent $1.2 billion equity investment in ADT illustrates how partnerships can enhance loss prediction and prevention by gaining deeper insights into consumer behaviors.

To effectively adapt to the future of the mirrored consumer, insurance carriers should consider several near- and medium-term strategies:

Target Market

• Define the target consumer more precisely, focusing on the specific data required for underwriting. Increased data availability enables deeper segmentation and favors specialized providers who can offer personalized experiences and value-added services.

Distribution and Purchase Experience

• Explore methods to engage with consumers at key life events that may necessitate coverage adjustments.
• Leverage partnerships to enhance access to consumer data, generating new sales opportunities.
• Streamline the data exchange process among carriers, agents, and consumers for improved efficiency.

Product, Pricing, and Underwriting

• Utilize Generative AI and Large Language Models to dynamically solicit information from consumers, organizing unstructured data to refine product offerings and pricing.
• Develop a strategy for utilizing first-, second-, and third-party data, including the growing volume of unstructured data, while balancing pricing accuracy and associated costs.
• Ensure that technology infrastructures, including rating engines and policy administration systems, can accommodate real-time requests.

Curators

Curators represent a more advanced evolution of digital assistance compared to traditional chatbots or recommendation engines. These AI-driven intermediaries operate with minimal human intervention, enhancing both consumer purchasing and company selling processes.

In the context of insurance, curators can augment the roles traditionally held by agents and brokers. They can automate various tasks currently performed by these professionals, allowing for more efficient and effective insurance shopping experiences. Curators can analyze consumer data, including property details, behavior patterns (like telematics), and individual risk appetites, to identify the best coverage and pricing options.

Unlike the conventional process of shopping at renewal, curators will continuously seek the most competitive options for consumers. By leveraging real-time data on consumer transactions and market conditions, curators can proactively find better matches at optimal prices. This innovation not only reduces the effort required from consumers during what is often an unenjoyable shopping experience but also frees up agents and brokers to focus on relationship-building and productivity.

According to our latest insurance Consumer Survey, 60% of respondents across all demographics indicated a willingness to share significant data for faster and easier service. As the use of curators becomes more prevalent, insurance carriers should consider the following actions in the near and medium term:

Target Market

• Identify which consumer segments are most likely to appreciate a curated insurance experience, understanding that these consumers may need to share more data for improved coverage and pricing options.

Distribution and Purchase Experience

• Design consumer experiences tailored to specific products and coverage needs, detailing triggers, detection methods, and the division of autonomous actions versus consumer approvals.

Product, Pricing, and Underwriting

• Develop operational and technical capabilities to manage a landscape where curators constantly seek optimal coverage for consumers, ensuring that the integration of curators does not overwhelm internal operations.
• Determine the data signals that will initiate coverage changes.
• Explore episodic or periodic coverages that adapt to evolving consumer needs.
• Create strategies to enhance consumer loyalty through upselling, cross-selling, and the provision of value-added services.

Collectives

Digital technologies have significantly reduced barriers between people, fostering the growth of global virtual communities that leverage their collective purchasing power. This trend brings us to the concept of collectives in the insurance landscape.

Historically, insurance has relied on pooled risk models, with both advantages and challenges. While collectives allow for shared risk payment, they also have led to broader risk pools that can encompass various factors like geography, age, and gender. As individual risk profiles become more refined through advanced risk wallets, consumers will demand that collectives also reflect their unique risk attributes, offering more tailored coverage options.

We anticipate the formation of insurance collectives around the very products and services that insurance is designed to protect. The growth of digital commerce facilitates this trend, allowing carriers to embed insurance offerings within purchasing experiences. For example, automakers are increasingly partnering with insurance companies to provide auto insurance at the point of vehicle purchase. Similarly, ride-sharing services are collaborating with insurance providers to offer coverage tailored to the unique needs of hybrid personal and commercial drivers, while travel insurance is often embedded within airline ticket purchases.

Looking ahead, we foresee an increasing proliferation of insurance companies focusing on niche or challenging risk areas. This trend poses a potential threat to traditional insurance models, particularly as non-traditional entities leverage advanced data analytics, non-standard risk data, and alternative capital to compete in these spaces. Emerging Managing General Underwriters (MGUs), such as SageSure, which specializes in coastal property risk through proprietary data and analytics, illustrate this shift.

To prepare for the potential future represented by the collective consumer, insurance carriers should explore the following near- and medium-term actions:

Target Market

• Develop a nuanced understanding of the consumer risk profiles and wallets within the target market.

Distribution and Purchase Experience

• Design purchase experiences that enable agents and consumers to feel comfortable customizing risk solutions at a more granular level, moving beyond traditional set deductibles and coverage options.
• Define effective distribution strategies to market to affinity groups, recognizing that these approaches will differ from conventional agency distribution.
• Enhance capabilities to embed the insurance purchasing process into other commercial transactions.

Product, Pricing, and Underwriting

• Cultivate pricing expertise that accurately reflects smaller risk pools.
• Develop scalable approaches to create and price products tailored to various affinity groups, leveraging unique data provided by these groups.
• Implement scalable strategies for balancing risk exposure across portfolios while accommodating increased coverage variations for individual consumers.

Conclusion

As we navigate this new era of consumer dynamics in the insurance landscape, it is crucial for carriers to adapt to these evolving paradigms. By embracing the mirrored consumer concept, leveraging curators, and understanding collectives, insurance providers can enhance their offerings, improve consumer experiences, and position themselves for success in a rapidly changing environment. The future of insurance will be shaped by those who are willing to innovate and respond to the needs of a more data-savvy, empowered consumer base.