As we look ahead to 2024, while we see many challenges for the insurance industry, we meet these with optimism. Insurance is a resilient industry with a deep sense of purpose—offering people, families and businesses protection and a more secure future.
What’s the macro-economic outlook?
Global macroeconomic forecasts for 2024 indicate both slowing GDP growth and continuing inflationary pressure. Talent shortages are most pronounced in the U.S. where unemployment is below 4% overall and hovering around 2% for the insurance sector.
Major markets are feeling consumer sentiment headwinds. Our research shows consumers in the U.S. are largely pessimistic due to lingering recessionary concerns. Meanwhile in the U.K., consumer pessimism is coming from uncertainties caused by recent tax changes and their potential impact on public services.
What can the industry expect?
Top-line revenues for P&C insurance carriers move with GDP. Revenue growth for P&C carriers is expected to slow to 2.6% on average for 2024 and 2025—down from 3.4% in 2023 (Swiss Re Sigma).
On the flip side, the Life insurance segment is seeing stronger demand for savings and retirement products. In emerging markets revenue growth is expected to reach 5.1% on average in 2024 and 2025. This revenue growth may soften the impact of the ongoing profitability and liquidity challenges the segment faces.
Claims volumes and costs across lines of business remain elevated in most major markets. While some of this is inflation-driven and cyclical, systemic risks such as social inflation, increasing NatCat claims and demographic shifts in aging, health and mental health are here to stay.
While we remain optimistic about the insurance industry, the challenges we face going into 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 copious Generative AI discussion and speculation—dare we say hype? The reality is that leading insurers have been on the journey of advancing data, analytics and AI for years. In 2024, we will see excitement about the possibilities of GenAI give way to 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 on that journey. They will also need to elevate responsible/ethical usage risk controls as AI takes a more autonomous role.
2. Alternative human capital strategies
AI/GenAI has proliferated 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 workforce gaps in both Underwriting and Claims. In 2024, we will see AI/GenAI treated more as supplementary talent. Insurers will also test sourcing models for “complex” work that was closely held and traditionally developed. Making these changes a reality will require the industry to migrate away from traditional talent development through apprenticeship and standard practices of knowledge management.
3. Cost pressures boil over to drive operating model change
Continued, sustained cost pressures are driving heads of divisions and business units to ask, “Whose fault is it anyway?” In 2024, demands for greater autonomy and direct control of costs will increase as mounting internal frustrations and questions about allocation methodologies of centralized costs (and stranded cost from shifts in the portfolio) boil over.
4. Risk portfolio shifts and capital reallocation
While industry convergence isn’t a new phenomenon, more industry players are looking over the fence for greener pastures in P&C, health and wealth management. Automakers want to offer P&C insurance. P&C carriers are getting into health products and services, and health insurers are offering voluntary and supplemental benefits. For many insurers, the greenest pasture is in the retirement space. Millennials and Gen Z will become the beneficiaries of the greatest wealth transfer in history over the next two decades. Their values-driven approach to investing will disrupt retirement and create new opportunities for Life/Annuities carriers who offer a value proposition in alignment with their values.
5. Service revenues climb while risk capital declines
To raise RoE and ease demands on capital as new loss patterns drive up indemnity and volatility, insurance carriers will go beyond traditional product offerings and deeper into advice/services. Tele-health, care navigation and risk mitigation services will become a greater area of focus for carriers in 2024 and beyond.