12 Insurance Industry Trends for 2024

Insurers will continue to navigate digital transformation alongside economic, political, and environmental disruption as we move forward in 2024. These challenges will provide the impetus for the industry to optimize operating models, drive more innovation, and reimagine risk management.

Be ready for these 12 trends in 2024.

1. AI Advancements 
   Advancements in artificial intelligence have exploded over the past year with the proliferation of generative AI (GenAI). Estimates show the market potential of GenAI could reach $15 billion by 2025 solely in the insurance and finance industries.¹ But the advancements do come with their challenges and risks. Leading insurers will aggressively explore ways to not only leverage the technology, but also develop a solid AI strategy that includes robust risk management and governance.

2. Data & Analytics
   Long a key focus for insurers, advanced data and analytics is taking on even more importance. Increasingly seen as the connective tissue of the insurance ecosystem, quality data is now critical to effectively leveraging AI. Echoed throughout the conference sessions at Connected Claims USA 2023, commitment to cloud technology and a sound data strategy is vital. According to Majesco, “data is the fuel for optimization and innovation” and insurers must accelerate their data and analytics investment or find themselves left behind.²

3. Social Inflation
   An increase in social inflation and a growing trend toward nuclear verdicts are driving up claim costs at a time when insurers are already struggling with high economic inflation, evolving risks, and deteriorating underwriting profitability. Commonly a predominant issue for commercial insurers, nuclear verdicts are now finding their way into personal lines. Insurers will be devoting more resources toward risk mitigation, reducing litigation triggers, and increasing customer trust.

4. Cybersecurity and Risk Management
   The increase in frequency and severity of data breaches and ransomware attacks has raised global concern. According to the 2023 Travelers Risk Index, 54% of participants believe it’s inevitable that their businesses will experience a cybersecurity incident.³ A recent Corvus Insurance’s Global Ransomware report indicated a 95% increase in ransomware activity year over year from Q3 2022 to Q3 2023.⁴ As cybersecurity risks increase, heightened vigilance becomes critical, and we will see AI play an increased role in both cyberattacks and cybersecurity.

5. Talent Management & Upskilling
   The U.S. Bureau of Labor Statistics has reported that an estimated 50% of the insurance industry is expected to retire by 2036, creating a substantial talent shortage and knowledge gap.⁵ AI is expected to help alleviate some of this gap by performing more of the routine tasks that will enable insurers to operate more efficiently. However, existing staff will need to be retrained to not only learn how to work in partnership with this technology, but also acquire critical skills that will continue to drive innovation within the industry.

6. Organizational Change Management
   Insurers have an aggressive agenda for 2024. To stay competitive and continually adapt to the evolving landscape, they need to build change resiliency within their organizations. Preparing, equipping and supporting the entire workforce through any change initiative will ensure greater success and demonstrate to employees how they can thrive during the process. Per Mike Fiato, Liberty Mutual’s EVP & Chief Claims Officer, insurers need to “anticipate a realistic change curve”.⁶

7. Life Insurance Transformation
   There is a growing life insurance protection gap in the U.S. Per a LIMRA study, only 52% of Americans own a life insurance policy, and 41% of both insured and uninsured individuals report they don't have sufficient coverage.⁷ And while the P&C insurance sector has made great strides in digital transformation, the life space lags behind. According to a report by Deloitte, although most U.S. L&A chief information officers had begun their core system modernization journey, less than one-third had completed some or all of their initiatives.⁸ These challenges are fueling a commitment to innovation. Per life insurtech Quility, the life insurance industry will see significant transformation and growth as we move forward into 2024 and beyond.⁹

8. Embedded Insurance
   Embedded insurance is expected to account for a significant portion of the insurance market, with the auto market especially impacted. EY estimates that within five years, more than 30% of all insurance transactions will likely occur through embedded channels^.10 Per Deloitte, the volume of insurance premiums for major lines likely to be built into other types of third-party transactions is rapidly evolving.¹¹ Insurers not already exploring new distribution channels and partnership options to embed insurance will quickly fall behind.

9. IoT and Telematics
   The proliferation of Internet of Things (IoT) applications is helping the insurance industry move from a ‘repair and replace’ model to one of ‘predict and prevent’. Smart home sensors and connected vehicles are examples of technology that can alert both users and carriers of impending risk, providing opportunity for loss avoidance and risk mitigation. But this technology doesn’t come without its own set of risks. Challenges exist with data privacy, security and fraud protection.

10. Climate Risk Impact
    Per a December Swiss Re report, thunderstorms were a major contributor to 2023’s historic natural catastrophe losses.¹² Last year, the amount of $50 billion insured losses for storm activity was exceeded for the first time and it is set to keep rising. The U.S. experienced 28 confirmed weather/climate disaster events in 2023 with losses exceeding $1 billion each, 19 of which were severe storm events.¹³ Insurers are not only searching for the best ways to apply data and analytics to mitigate natural catastrophe risks but also for the best ways to educate customers on greater resilience measures.

11. Parametric Insurance
    Parametric insurance continues to garner attention due to its swift payouts based upon events rather than actual losses. As global natural disasters continue to mount, 2024 will see parametric insurance rise in popularity, becoming a key component in how risk management is reimagined. Viable insurance use cases will expand beyond catastrophe related weather events as insurers develop new products to help close the widening protection gap.

12. Instant Payments
    Payments Journal reports that the real-time payment sector has experienced enormous growth in recent years – first with services like Zelle, and more recently, with FedNow.¹⁴ With payments serving as a critical part of insurance transactions, enabling instant payments is becoming integral to a seamless, digital insurance experience. Although complete adoption of instant payments will still take many years, consumer expectations are already impacting the insurance industry. According to PYMNTS¹⁵, 23% of consumers say they would pick an instant insurance payout if they were given the option. This is a trend that will continue to grow in 2024. 

Stay tuned next month for our 12 Insurance Industry Trends for 2024 whitepaper. 

Are You Ready for 2024?

The upcoming year will be one of many challenges but also one of great opportunities. Insurers have a good deal to consider as they enter 2024 with several areas of the industry requiring transformation, reinvention and innovation. The road ahead has obstacles to navigate and if you don’t have strong digital payments capabilities, you’re not ready for 2024. As the leading digital payments network for the insurance industry, we’re here to help. Get in touch.

Sources:

1. Digital Insurance - https://www.dig-in.com/opinion/how-ai-could-change-insurance?utm_source=newsletter&utm_medium=email&utm_campaign=V3_DIG_Daily_Briefing_2023%2B%27-%27%2B01092024&bt_ee=q84cgSpGpwdo9C1oylIV9QI%2FHspNoZjkcB9I0qpzabig4tfAMPwWzFjAtZWYtNo3&bt_ts=1704808831710
2. Majesco – https://www.majesco.com/white-papers/10-trends-shaping-the-future-of-insurance-in-2024/
3. Travelers - https://www.travelers.com/resources/risk-index/2023-cyber-top-business-risk
4. PC 360 - https://www.propertycasualty360.com/2023/10/31/ransomware-activity-sees-95-year-on-year-spike/
5. Digital Insurance - https://www.dig-in.com/news/patrick-sullivan-of-munich-re-on-tech-for-life-insurance?utm_source=newsletter&utm_medium=email&utm_campaign=V3_DIG_Daily_Briefing_2023%2B%27-%27%2B12052023&bt_ee=Vo71XNglfBjlIWkCRbZng1J4NebiET%2F%2BbjqIdXrXzL3D3ErlZMIydotyohcpClTn&bt_ts=1701785199679
6. Connected Claims USA 2023 - https://1.reutersevents.com/LP=36112?utm_campaign=6275%2014NOV23%20Content%20Autoresponder&utm_medium=email&utm_source=Eloqua&elqTrackId=b0a89c589775431d876b275dafdbdaa6&elq=e1925692ad694a489f597bac220de1fe&elqaid=88477&elqat=1&elqCampaignId=79267
7. Digital Insurance - Micro insurance and embedded insurance can help close the insurance coverage gap | Digital Insurance (dig-in.com)
8. Deloitte - https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook.html
9. Digital Insurance - https://www.dig-in.com/list/quility-q-a-the-state-of-digital-in-life-insurance
10. EY – https://www.ey.com/en_us/insurance/how-insurers-and-new-entrants-can-take-advantage-of-embedded-ins
11. Deloitte – https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook.html
12. Swiss Re – https://www.swissre.com/press-release/Insured-losses-from-severe-thunderstorms-reach-new-all-time-high-of-USD-60-billion-in-2023-Swiss-Re-Institute-estimates/4a15acf7-64b4-4766-8662-1c35d268ab12
13. NCEI – https://www.ncei.noaa.gov/access/billions/
14. Payments Journal – https://www.paymentsjournal.com/instant-payments-set-to-soar-as-the-fednow-service-comes-online/
15. PYMNTS - https://www.pymnts.com/study/insurance-disbursements-instant-claim-payment-consumer-finance/