Insurance firms have faced tremendous difficulties over the past year, from the COVID-19 pandemic outbreak to global political unrest, supply chain disruptions, and high inflation.
Insurance is all about managing risk and protecting people, and 2023 should make that even more apparent. Industry trends reveal a host of new opportunities and changes within this field.
1. The Economy
As we enter 2023, insurers continue to face significant economic hurdles. Global economic growth is expected to decrease and risk weaker premium growth across more cyclical lines of business.
Additionally, commercial carriers face additional difficulties recruiting and retaining talent – particularly employees with deep expertise in underwriting, claims, data science, and analytics – which could impede their ability to meet customer expectations and ever-evolving regulatory requirements.
As insurance prices skyrocket, consumers turn to other means of controlling costs and finding discounts. This provides insurers with an opportunity to offer new products such as telematics programs that reward safe drivers with lower rates; digital channels could also expand services through such as property loss inspection augmented reality applications; video chats between agents and their customers are another possibility; additionally, insurance agencies seek greater operational efficiencies to provide customers with enhanced service – including using AI and ML technologies such as tools that automate manual tasks while streamlining workflows while also potentially helping reduce back-office costs and risks as well.
2. Inflation
As the insurance industry adjusts to unprecedented disruptions–ranging from environmental, social, and governance (ESG) risks and geopolitical concerns to technological changes–an increasing number of insurers are turning to artificial intelligence (AI/ML) innovations to automate routine tasks and free employees up for higher-value activities such as operational efficiencies, customer service improvements, creating new business opportunities and more. These innovations may contribute significantly towards improved operational efficiencies, enhanced customer experiences, and new business opportunities.
Inflation is expected to remain moderate this year, yet its sudden return threatens insurers. A spike in inflation could wreak havoc with premium growth, loss costs, and investment income – all three being directly affected.
Insurance carriers face increasing cyber threats, with phishing attacks accounting for as much as 10% of P&C losses. Cybersecurity remains a top priority across the industry in 2023; insurers are adopting security measures like identity verification and automated fraud detection to safeguard customer personal data; this trend will become especially important as markets shift toward digital-first models; using technologies can both mitigate data breach risk while simultaneously improving overall customer experience.
3. Insurtech
Over the past year, insurance companies have faced many unprecedented obstacles. Economic turmoil and geopolitical conflict are impacting their industry profoundly and forcing insurers to adapt in new ways.
Insurance carriers have faced disruption across almost every facet of their operations recently, from political uncertainty to shifting customer needs and expectations. These challenges have forced carriers to be more agile and forward-thinking in their business strategies.
Insurance industry leaders are investing in new capabilities such as data science and artificial intelligence (AI) to boost operational efficiencies. They use solutions like TIBCO Spotfire to quickly discover insights in novel ways and act on them accordingly.
New market entrants with tech-driven business plans are rapidly entering the insurance space, competing against incumbents. These “insurgents” use emerging technologies to meet customer needs more easily while creating innovative business models to make insurance more accessible; their presence is creating an outlook for 2023 that differs drastically from that seen just a few years earlier.
4. Claims
Even as catastrophic claims and premiums increase, profits may not return as quickly as predicted. A combination of factors likely impacts profits within the insurance industry, including an uneven rate of favorable reserves development and inflationary pressures that increase wages and medical costs.
Also, there remains a backlog in filing rates with state insurance departments, especially in Florida, while there remains little profitability in personal lines of business such as homeowners and auto. Furthermore, Californian property insurers continue to struggle due to significant wildfire losses.
Insurance industry trends can bring some unease, but they also provide agencies ample opportunities to meet customer needs and optimize operational efficiencies. Insurance firms will utilize advanced AI/ML solutions such as predictive analytics, multi-data source integrations, and automated risk assessments to boost cybersecurity, deliver more precise underwriting measures and produce superior products and services. Technology providers will invest in cloud-native platforms to support dynamic data ecosystems that enable insurance enterprises to remain agile while remaining resilient and responsive.
5. Rates
No doubt about it – insurance has become more expensive since inflation started impacting many consumer markets, including insurance. Customers looking for ways to control costs will likely change providers or reduce coverage as prices rise, creating additional stress on budgets.
2023 is an unpredictable year for commercial insurers, not only due to price increases but also because global economic fluctuations and geopolitical shifts create considerable unpredictability that threatens investment income and capital growth for their investments.
Recession risks could severely erode premium growth, claims costs, and investment gains. Furthermore, an outbreak of high inflation would negatively impact insurance rates and costs associated with goods and services.
Insurance companies must adapt quickly to these challenges by becoming increasingly data-driven, adopting predictive analytics, multiple data source integrations, and AI/ML technologies that allow them to identify patterns from vast oceans of information. They also face greater scrutiny regarding underwriting portfolio emissions, requiring them to demonstrate accountability.
