The COVID-19 pandemic not only changed the way we live and work, it forced insurers and reinsurers to change many of the ways they do business, creating new incentives and rewards for innovation, according to A.M. Best.

In a Best’s Special Report titled Insurer Innovation Accelerated by COVID-19 Continues Post-Pandemic, the rating agency notes that the challenges that confronted insurers and reinsurers resulting from the emergence of the pandemic in 2020 continued into 2021, with low investment yields and stagnant growth adding further pressures on the industry. Then, 2022 saw inflation and rising interest rates for the first time in more than 2 decades. Throughout, technological changes continue to alter consumer behavior.

“These trends have created challenges and opportunities for insurers, accelerating the need for innovation and rewarding the most innovative insurers,” the August 25, 2023, Best report says.

In response, insurers accelerated their shift to digital technology while intensifying their focus on product innovation, Best says.

While some lines of insurance lend themselves more readily to innovative strategies, in other lines innovation can be more difficult, the report suggests. “As the pace of innovation accelerates, the top performers in more complex lines may be those that overcome the innate challenges of their segment to develop new products, processes, sources, and business models,” Best says.