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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.

As we bid farewell to 2023 in this final Insurance News Analysis of the year, we are happy to welcome Cory McAnelly, Assistant Vice President of Enterprise Innovation Strategy at Principal, to join as we delve into what made the headlines this year.

We start with a recurring theme: generative AI. Cory brings his perspective on where he sees the innovation happening with this technology in the startup ecosystem and, as a former intellectual property attorney for Principal, some of the more interesting legal questions these innovations are raising.

2023 marked the hottest year on record, and insurers are grappling with the unpredictability of claims due to catastrophic events linked to climate change. We talk about how the industry is adapting risk management strategies, considering coverage limitations, new models, and investments in sustainability-focused companies.

Travel is back—not just due to the holidays. We talk about the state of travel insurance and opportunities to innovate to provide proactive and personalized coverage. We also touch on the year in crypto and how insurers’ views on this and other metaverse-related topics have evolved.

Finally, what would the holidays be without a few reindeer games? Watch as Cory challenges his friend and mentor Bruce Hentschel, who joined us in November, to see who gets more views.

Have a safe and happy holiday season! We will see you in 2024.

Insurance Consumer Study: See the people behind the policies: Insurers need a profound understanding of the people behind the policies so they can be ready with solutions that fit each unique risk profile and create a protection ecosystem.

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