When we consider the year 2024, we are optimistic about the future of the insurance sector, despite the fact that we anticipate a great deal of difficulty. Through the provision of protection and a more secure future for individuals, families, and businesses, the insurance industry is a robust sector that possesses a profound sense of purpose.
What are the chances for the economy as a whole?
The global macroeconomic estimates for the year 2024 show that both the growth of the GDP will slow down and that inflationary pressure will continue. The United States of America, where the unemployment rate is below 4% overall and hovering around 2% for the insurance sector, is where talent shortages will be most noticeable.
The major markets are experiencing headwinds from the sentiment of consumers. Our research indicates that consumers in the United States are generally pessimistic as a result of persistent concerns regarding the recession. On the other hand, consumer pessimism in the United Kingdom is a result of the uncertainty brought about by recent tax changes and the possible impact such changes could have on public services.
What can the business sector anticipate?
P&C insurance companies adjust their top-line revenues in accordance with the GDP. Following a growth rate of 3.4% in 2023, it is anticipated that the revenue growth of P&C carriers will decrease to an average of 2.6% for the years 2024 and 2025.
From the other side of the coin, the life insurance market is experiencing an increase in the demand for products related to savings and retirement. It is anticipated that the average growth rate of revenue in emerging markets would reach 5.1% in the years 2024 and 2025. This expansion in revenue may help to mitigate the effects of the current issues that the segment is experiencing with regard to profitability and liquidity.
There is a continued increase in claims volumes and expenses across all lines of business in the majority of major markets. There are systemic risks that are here to stay, such as social inflation, increased NatCat claims, and demographic trends in aging, health, and mental health. While some of this is driven by inflation and cyclical, other kinds of risks are likely to stay.
Despite the fact that we continue to have a positive outlook on the insurance sector, the difficulties that we will be facing in the coming year are very real. Listed below are five forecasts for the year 2024:
1. Monetizing AI
Since the launch of ChatGPT about this time last year, there has been a great deal of discussion and conjecture around generative artificial intelligence. The fact of the matter is that premier insurance companies have been on the path of increasing data, analytics, and artificial intelligence for many years. Excitedness about the possibilities of GenAI will give way to a growing demand for the material economic impact that can be achieved via the implementation of AI and GenAI solutions in the year 2024.
More general artificial intelligence will be incorporated by insurers who have already made investments in data, analytics, and AI capabilities as the next natural step on that road. As artificial intelligence takes on a more autonomous role, they will also need to increase the level of responsible and ethical usage risk controls.
2. Alternative approaches to human capital management
AI and GenAI have become increasingly prevalent in decision support, processes, and interactions throughout the whole insurance value chain. Fortunately, this comes at a time when the industry is under pressure to address potential manpower deficits in both the underwriting and claims departments. By the year 2024, artificial intelligence and general artificial intelligence will be regarded more as additional skill.
Insurance companies will also try sourcing methods for "complex" work, which is work that has historically been generated and is closely held. In order to make these changes a reality, the industry will need to move away from the traditional methods of talent development, such as apprenticeships and standard practices of knowledge management.
3. Cost pressures reach a boiling point, which drives a change in the operational model
The question "Whose fault is it anyway?" is being asked by the leaders of divisions and business units as a result of the ongoing and persistent cost pressures. The year 2024 will see an increase in the number of people demanding greater autonomy and direct control over costs. This is due to the fact that increasing internal dissatisfaction and issues over allocation methodology of centralized costs while stranded costs from shifts in the portfolio will reach a boiling point.
4. Alterations to the risk portfolio and the reallocation of capital
Although the concept of industry convergence is not a new one, an increasing number of industry players are looking for better opportunities in the fields of property and casualty insurance, health care, and wealth management. P&C insurance is something that automobile manufacturers wish to offer. Both health insurers and P&C carriers are expanding their offerings to include health products and services, and health insurers are include supplemental and voluntary benefits.
A great number of insurance companies view the retirement market as the most promising market. Over the course of the next twenty years, the generation of Millennials and Generation Z will be the recipients of the largest wealth transfer in the history of the world. Their approach to investing, which is motivated by their beliefs, will cause a disruption in the retirement marketplace and open up new opportunities for life and annuity carriers that provide a value offering that is in line with their values.
5. Revenues from services are increasing while risk capital is decreasing
With new loss patterns driving greater indemnity and volatility, insurance companies will expand their offerings beyond traditional products and deeper into advice and services in order to increase their return on equity (ROE) and reduce the demands placed on their capital. The provision of telehealth, care navigation, and risk mitigation services will become an increasingly important area of concentration for carriers in the years 2024 and beyond.