As we look to 2024, we see many challenges for the insurance industry, but we are addressing them with optimism. Insurance is a resilient industry with a deep commitment to providing protection and a more secure future for people, families and businesses.
What is the macroeconomic outlook?
The global macroeconomic forecasts for 2024 suggest both Slowing GDP growth and persistent inflationary pressures. The skills shortage is most pronounced in the United States, where the overall unemployment rate is below 4% and fluctuating around 2% for the insurance sector.
Major markets are feeling headwinds in consumer sentiment. Our research shows that U.S. consumers are largely pessimistic due to ongoing recession concerns. Meanwhile, UK consumer pessimism is driven by uncertainty caused by recent tax changes and their potential impact on public services.
What can the industry expect?
The sales revenue of property and casualty insurers changes with GDP. Property and casualty insurance carrier revenue growth is expected to slow to an average of 2.6% in 2024 and 2025, down from 3.4% in 2023 (Swiss Re Sigma).
On the other hand, the life insurance segment is witnessing stronger demand for savings and retirement products. In emerging markets, sales growth is expected to average 5.1% in 2024 and 2025. This revenue growth could mitigate the impact of the ongoing profitability and liquidity challenges faced by the segment.
Claims volumes and costs across all lines of business remain high in most major markets. While some of these are inflationary and cyclical, systemic risks remain such as social inflation, rising NatCat applications and demographic changes in the areas of aging, health and mental health.
While we remain optimistic about the insurance industry, the challenges we face in the coming year are real. Here are five predictions for 2024:
1. Monetizing AI
Since ChatGPT launched this time last year, there has been a lot of discussion and speculation about generative AI – dare we say hype? The reality is that leading insurers have been on a journey to advance data, analytics and AI for years. In 2024, we will see excitement about the possibilities of GenAI give way to growing demand for the material economic impact of AI/GenAI solutions. Insurers that have invested in data, analytics and AI capabilities will integrate more GenAI as a natural next step in this journey. As AI takes on a more autonomous role, they will also need to strengthen risk controls for responsible/ethical use.
2. Alternative human capital strategies
AI/GenAI has expanded to decision support, processes and interactions across the insurance value chain. Fortunately, this comes at a time when the industry is under pressure to address looming staffing gaps in both areas Underwriting And Claims. In 2024 we will see AI/GenAI being treated more as complementary talents. Insurers will also test sourcing models for “complex” work that has been closely watched and traditionally developed. To make these changes a reality, the industry must move away from traditional talent development through training and standard knowledge management practices.
3. Cost pressures take over to drive operating model change
Persistent and persistent cost pressures are driving department and business unit leaders to ask themselves, “Who’s to blame, anyway?” In 2024, demands for greater autonomy and direct cost control will increase as internal frustrations and questions about the allocation methods of centralized costs (and sunk costs from portfolio shifts) take over.
4. Risk portfolio shifts and capital redistribution
While industry convergence is not a new phenomenon, more and more industry players are looking over the fence for greener pastures in property and casualty insurance, healthcare and wealth management. Car manufacturers want to offer property and casualty insurance. Property and casualty insurance carriers are moving into healthcare products and services, and health insurers are offering voluntary additional benefits. For many insurers, retirement planning is the greenest pasture. Millennials and Gen Z will be the beneficiaries of this largest wealth transfer in history over the next two decades. Their values-based investment approach will revolutionize retirement and create new opportunities for life/annuities that offer a value proposition that aligns with their values.
5. Service revenue increases while venture capital decreases
To increase RoE and reduce capital requirements as new claims patterns increase compensation and volatility, insurance carriers will move beyond traditional product offerings and move more into advice/services. Telemedicine, care navigation and risk mitigation services will become a larger focus for wireless providers in 2024 and beyond.
