5 Predictions for the insurance industry in 2024

What is the macroeconomic forecast?

According to global macroeconomic predictions, a persistent GPA downturn may occur in tandem with inflationary pressure in 2024. The most acute skill deficits are in the US, which has an unemployment rate of under four percent, especially in the insurance industry where it remains around two percent.

Consumer sentiment is becoming an issue for all significant markets. Worryingly low consumer confidence was observed in the US due to ongoing worries about a recession. In Britain, consumer confidence has been affected by a change in the tax regime and its expectation on the provision of public services.

The performance of the line of business written by P&C insurance carriers follows the GDP’s trajectory. P&C insurers are anticipated to experience an annual average revenue growth of 2.6 percent in 2024 and 2025, down from 3.4 percent in 2023 (Swiss Re Sigma).

In stark contrast, the demand for life insurance policies that provide both retirement and saving plans is experiencing a surge. In other developing countries, a revenue growth of 5.1 percent is expected between 2024 and 2025, and this trend is expected to continue. This revenue increase may alleviate some of the effects of the ongoing profitability and liquidity problems currently affecting the segment.

Claim expenses in most major markets by different business lines remain disproportionately high. There are some systemic risks that will not vanish, such as social inflation, gradual rise of Natural Catastrophe claims and increase demographic aging, health and mental health. Some are cyclical and driven by inflation, but still, they exist.

Let us not lose perspective: there are a lot of real challenges that we have to face as we start the new year, but we are still positive about the insurance sector. Some predictions for 2024 include:

A year back during this time when ChatGPT originated, a lot of tread was made around Generative Artificial Intelligence with much more speculation than was actually warranted. Leading international insurers have been on the journey of advancing data, analytics and AI for years, and the most exciting bit is that forecasters put insurer GenAI advocates at the darlings point of this market. By 2024, the GenAI new frontiers of potential will not be the hot topic anymore, and the market will rather shift to locating demand in the opportunity for significant economic value to be generated from AI/GenAI solutions. Insurers who have invested in data, analytics and AI capabilities, on the other hand, will be integrating more GenAI as a logical next step in that development path. Controls on risk of responsible/ethical usage will also be necessary but so will be amped up as AI becomes more autonomous.

AI/GenAI has expanded into decision support, processes and interactions throughout the insurance value chain. Thankfully, this comes at a point when the sector is concerned about anticipated shortages in terms of Underwriters and Claims staff. In 2024, we’ll observe AI/GenAI being regarded more as adjunct talent. Insurers will also experiment with sourcing models for “complex” work that has historically been tightly guarded and slowly developed. Realizing these changes will involve the industry moving away from conventional approaches to developing talent through apprenticeship and standard ways of knowledge management.

Continued, sustained cost pressures are causing heads of divisions and business units to say: “Who’s to blame for it?” In 2024, more vocal requests for more direct control over cost expenditures will be expressed together with growing internal irritations and irritation at the methodologies used in allocating centralized costs being at the boiling point.

Industry convergence is not a new concept, but there seems to be an increase in the number of players looking outside the P&C for health and wealth management. Automobiles manufacturers are wanting to provide P&C insurance. P&C carriers are delving into the provision of health products and services while voluntary and supplemental benefits are being offered by health insurers. For a considerable number of the insurers, the greenest pasture is in the retirement space. In the next two decades, Gen Z and millennials will emerge as the beneficiaries of the highest wealth transfer in human history. Their unconventional approach to making investments will transform the landscape for retirement as they will create prospects for Life/Annuities carriers that are prepared to go along with their value proposition.

In a bid to improve RoE and relieve pressure from the capital, given new loss paradigms with increased indemnity and volatility, insurance carriers will go beyond basic product sales and provide more advice/services alongside it. Tele-health, care navigation, and risk mitigation services will become a greater area of focus for the carriers in the years to come.