5 predictions for the insurance industry in 2024 | Insurance Blog
As we look ahead to 2024, while we see many challenges in the insurance industry, we meet them with optimism. Insurance is a strong industry with a deep purpose—giving people, families and businesses protection and a more secure future.
What is macroeconomic theory?
Global macroeconomic forecasts for 2024 show both slow GDP growth and continued inflationary pressures. The talent shortage is most pronounced in the US where unemployment is below 4% overall and hovers around 2% of the insurance sector.
Major markets are feeling consumer sentiment booming. Our research shows that consumers in the US are more optimistic due to persistent economic concerns. Meanwhile in the UK, consumer distrust stems from the uncertainty caused by recent tax changes and their potential impact on public services.
What can the industry expect?
Higher incomes of P&C insurance carriers go with GDP. Revenue growth for P&C carriers is expected to slow to 2.6% on average in 2024 and 2025—down from 3.4% in 2023 (Swiss Re Sigma).
On the other hand, the Life insurance segment is seeing strong demand for savings and retirement products. In emerging markets income growth is expected to reach 5.1% on average in 2024 and 2025. This revenue growth may reduce the impact of ongoing profitability and liquidity challenges faced by the segment.
The level of applications and costs across all lines of business remain high in many major markets. While some of this is driven by inflation and the cycle, systemic risks such as social inflation, rising NatCat claims and demographic changes in ageing, health and mental health are here to stay.
While we remain optimistic about the insurance industry, the challenges we face in the year ahead are real. Here are five predictions for 2024:
1. Making money with AI
Since ChatGPT launched this time last year, there has been a lot of talk and speculation about Generative AI—shall we say hype? The truth is that leading insurers have been on a journey to develop data, analytics and AI for years. By 2024, we will see excitement about the possibilities of GenAI enabling the growing demand for material economic impact from AI/GenAI solutions. Insurers who have invested in data, analytics and AI capabilities will incorporate more GenAI as a natural next step in that journey. They will also need to increase responsible/correct application risk controls as AI takes on an autonomous role.
2. Other human resources strategies
AI/GenAI has expanded to support decisions, processes and interactions across the insurance value chain. Fortunately, this comes at a time when the industry is under pressure to address emerging workforce gaps in both Underwriting and Claims. By 2024, we will see AI/GenAI treated more like an additive talent. Insurers will also explore “sophisticated” sourcing models that were closely held and traditionally developed. Making these changes a reality will require the industry to move away from traditional talent development through on-the-job training and traditional knowledge management practices.
3. Cost pressures boil over to drive operating model change
Constant, persistent cost pressures are causing division and business unit heads to ask, “Whose fault is it anyway?” In 2024, demands for greater autonomy and direct cost control will increase as internal frustrations mount and questions about how to moderate costs (and reduced costs from portfolio shifts) continue.
4. Risk portfolio modification and capital reallocation
While industry consolidation is nothing new, many industry players are looking beyond the fence to find greener pastures in P&C, healthcare and wealth management. Car manufacturers want to offer P&C insurance. P&C carriers go into health products and services, and health insurers provide voluntary and supplementary benefits. For many insurers, the greener pasture is in the retirement area. Millennials and Gen Z will be the beneficiaries of the largest wealth transfer in history over the next two decades. Their principles-driven investment approach will disrupt retirement and create new opportunities for Life/Annuities carriers that offer a value proposition aligned with their values.
5. Service revenue increases while risk premium decreases
To maximize RoE and ease capital demands as new loss patterns increase compensation and volatility, insurance carriers will go beyond traditional product offerings and delve into advisory/services. Tele-health, care navigation and risk mitigation services will be a major area of focus for carriers in 2024 and beyond.
