Looking ahead to 2024, while we see many challenges facing the insurance industry, we face them with optimism. Insurance is a resilient industry with a deep purpose – to provide protection and a more secure future for people, families and businesses.
What is the macroeconomic outlook?
Global macroeconomic forecasts for 2024 suggest GDP growth slows and persistent inflationary pressures. The talent shortage is most obvious in the United States, where the unemployment rate is generally below 4% and hovering around About 2% of the insurance industry.
Key markets are feeling headwinds in consumer confidence. Our research shows that U.S. consumers are largely pessimistic due to lingering recession concerns. Meanwhile, in the UK, consumer pessimism stems from uncertainty surrounding recent tax changes and their potential impact on public services.
What can the industry expect?
Revenues for property and casualty insurance companies change with changes in GDP. Average revenue growth for P&C carriers is expected to slow to 2.6% in 2024 and 2025, down from 3.4% in 2023 (Swiss Re Sigma).
On the other hand, there is stronger demand for savings and retirement products in the life insurance space. In emerging markets, average revenue growth is expected to reach 5.1% in 2024 and 2025. This revenue growth is likely to cushion the impact of ongoing profitability and liquidity challenges faced by the segment.
Claim volumes and costs remain high across business lines in most major markets. While some of these are inflation-driven and cyclical, systemic risks such as social inflation, rising NatCat claims and changes in population aging, health and mental health will persist.
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. Monetizing AI
Since the launch of ChatGPT this time last year, there has been a lot of discussion and speculation—dare we say hype—about generative AI? In fact, leading insurance companies have been advancing data, analytics and artificial intelligence for years. By 2024, we will see excitement about the possibilities of GenAI give way to a growing need for AI/GenAI solutions to have substantial economic impact. Insurers investing 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 extends 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 labor gaps in both areas. underwriting and claim. In 2024, we will see AI/GenAI viewed more as complementary talent. Insurers will also test procurement models for closed and traditionally developed “complex” work. For these changes to become a reality, industry will need to move away from traditional talent development through standard practices in apprenticeships and knowledge management.
3. Intensified cost pressure drives changes in operating models
Ongoing cost pressures are forcing department and business unit leaders to ask, “Whose fault is this?” By 2024, the need for greater autonomy and direct control of costs will increase as internal frustration and doubts about centralized cost allocation methods (and stranded costs caused by portfolio changes) continue to grow.
4. Risk portfolio transfer and capital reallocation
While industry convergence is not a new phenomenon, more and more industry players are seeking broader opportunities in property insurance, health and wealth management. Automakers want to offer property and casualty insurance. Property and casualty insurance companies are venturing into health products and services, and health insurance companies are offering voluntary and supplemental benefits. For many insurance companies, the greenest pastures are retirement spaces. Millennials and Generation Z will be the beneficiaries The largest wealth transfer in history over the next twenty years. Their values-driven approach to investing will disrupt retirement and create new opportunities for life/annuity insurance companies that offer a value proposition consistent with their values.
5. Service revenue rises, risk capital falls
As new loss patterns drive claims and volatility higher, insurers will look beyond traditional product offerings and go deeper into advice/services in order to improve return on equity and ease the need for capital. In 2024 and beyond, telemedicine, care navigation and risk mitigation services will become areas of increased focus for operators.
