2024 insurance industry trends: How technology is driving the industry
Insurance companies in 2024 will be operating amid uncertainty on many fronts, whether stemming from geopolitical crises, climate change or a dodgy economy. The impacts on the insurance industry cut both ways. While some consumers and businesses may feel skittish about spending money on policies they may not absolutely need, others may seek to mitigate risk by expanding their current coverage or even adding new policies. Insurers will need to continue to improve their operations and customer experience in this uncertain landscape. In many cases, this will include better use of technology.
Insurers are facing ever-growing pressure when it comes to renewals, premium pricing, cycle times and customer retention. It pays to be aware of the biggest factors likely to affect business in the year ahead. Insurance companies should prepare for these insurance industry trends:
Intensifying natural disasters
It was an alarming year for natural disasters, with 23 separate billion-dollar weather and climate disasters just in the first eight months of 2023 — the largest number ever recorded. Hawaii’s catastrophic wildfire on Maui killed at least 100 people and the winds from Hurricane Dora worsened the effects of what was the deadliest U.S. wildfire in more than a century.
The insurance industry is also finding that hurricane-related damage and claims in the Northeast are rising more significantly than in traditional hotspots like Florida and Texas. With places like New York, Pennsylvania, New Hampshire and Vermont experiencing flooding and severe storm damage, carriers are facing more losses than expected.
So, the course ahead for P&C insurance companies is to fine-tune their risk models and maybe become more selective in their underwriting. To do that, insurers need predictive analytics and other insurance innovations. Whether they’re built in-house, bought from an insurtech or elsewhere, insurance technologies that create more accurate risk models should prevail over the models of yesteryear.
Make sure data is king
Insurance companies will benefit from behaving more like tech companies that sell insurance. Technology continues to be at the center of planning and strategic decision-making. While the use of cloud platforms and services is well underway, data analytics tools in insurance will drive more sophisticated risk modeling driven by machine learning and AI.
Having good-quality, organized data is foundational to having reliable AI. The value of available and actionable data has never been higher. Algorithms will enable better claims processing, whether it’s for P&C or health-related policies, with human managers assuming more of an oversight role.
AI tools can also help companies identify emerging risks and launch innovative new insurance products for customers that generate higher revenue. Cybersecurity insurance is in particular demand given the growing rate of system and data breaches. “Gig insurance” products are another rising insurance trend, designed to meet the needs of the expanding legions of freelancers, contractors and other self-employed individuals without access to employer-provided group benefits.
Digital customer engagement
Technology should also be helping to shape and optimize customer engagement. Customers want their purchase process to be easy and painless. And companies need to be able to meet those customers and prospects using the methods and channels they prefer.
When disaster strikes, policyholders want quick responses and seamless interactions in whatever channel they choose in the moment. If you don’t engage with policyholders on their terms, you risk losing them.
While health insurance claims related to COVID-19 stabilized as the national emergency formally ended, other airborne illnesses like flu and RSV have been spiking, driving demand for affordable telehealth options, which have become another growth opportunity for carriers.
Meanwhile, even though AI chatbots are getting better with higher quality responses, it’s important to remember that some people will always prefer to communicate with a live human from the start of their interactions, while others are relieved to get the information they seek without speaking to anyone.
Serving the needs of multiple generations while recognizing myriad communication style preferences requires a broad, customer-focused engagement model and modern insurance technologies.
Drones and telematics
Drones are taking on a larger role in different aspects of the insurance business as the industry and consumers get more comfortable with them, whether it’s in underwriting, investigating claims, supporting property inspections or identifying fraud.
Telematics will continue to have a significant role in auto and trucking insurance policies. This kind of “wearable technology” for vehicles measures various indicators, including speed, location, driving habits and accidents, enabling safer drivers to save money. Because the younger generation is more likely to be comfortable with insurance technology that shares their driving data, the acceptance of telematics in the insurance industry is likely to keep growing.
Human workforce and values
The increasingly central role of technology presents opportunities to rethink and optimize your strategies around people. Many workers who did labor-intensive manual claims processing can be trained and deployed to higher-impact roles. Building and maintaining a culture of respect for your workforce is essential as changes related to digital transformation and insurance innovation take hold. Don’t overlook the importance of change management in your workplace.
As insurance companies assess their own risk profiles, their practices need to be in alignment with growing expectations around sustainability and the environment. While some jurisdictions are moving toward more ESG reporting, others are resisting it. Policyholders will also have a range of views regarding ESG principles. Insurers need to continue to monitor the landscape and develop an appropriate strategy. Enterprise risk management tools and other insurance tech can help with assessments.
Smart management should set aside biases and emotions around topics that may be politically charged and divisive and make decisions not based on those pressures but on what will make the company more profitable and more valuable to shareholders. The insurance business has many tools and data sources at its disposal. The days of using Excel-driven analysis should, for the most part, be behind you. Using data from drones, telematics, medical devices and other insurance innovations requires readily available and sophisticated cloud computing power, machine learning/AI and other current technologies.
The way to build agility and resilience in 2024 and beyond is through the wise use of all the resources available to you as effectively as possible: your data and tech tools and your people.
How Wipfli can help
No matter what challenges the insurance industry faces, we can help you meet them head-on. We bring decades of experience serving insurance companies and can assist you in everything from insurance innovation and technology to change management.
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