Keeping an Eye on Emerging Insurance Trends: A Necessity

Insurance companies face challenges in predicting, quantifying, and addressing financial and operational consequences due to geopolitical tensions, increased cyberattack vulnerability, data breaches, and climate change.

FREMONT, CA: Unexpected circumstances present opportunities for insurers that accept unpredictability and maintain their agility. Leveraging new technology, customer interactions, innovative product design, and integrated company objectives are necessary for these wins. Insurance executives should keep an eye on these five major trends in 2024 to stay ahead of the curve and adjust to the constantly shifting risk landscape.

Artificial Intelligence

AI and other innovative tools will enhance insurers' performance through improved operational efficiency, new analytical insights, and more flexible product development. However, industry regulators will voice concerns over the use of these technologies due to trust issues and potential unintended bias. AI, machine learning, large learning models, and derivative applications will revolutionize insurance marketing, sales, rating, pricing, underwriting, claims processing, and fraud management. Insurance regulators will closely monitor and tighten controls on AI usage, creating operational challenges and legal, reputational, organizational, and financial risks for non-compliance.

Customer Expectations Shift

The direct-to-consumer distribution trend is causing insurers to rethink their operating models, products, and services. Younger consumers increasingly demand convenient online products, leading to a shift towards online facilities. This will improve access, speed, and customer service, positioning insurers to compete with digital-first startups. The market for embedded insurance, which offers coverage alongside product purchases, is expected to grow in the coming years. To reach younger consumers, insurers must continue targeting them on social media and cross-sector collaborations. The increased use of internet-enabled home appliances and infrastructure-focused sensors will also present opportunities for insurance carriers to offer additional value and protection against expensive risks.

Demand for Cyber Insurance Is Growing

Cyber breaches and ransomware attacks are expected to increase in risk and cost. The adoption of new technology, such as AI, will further increase these threats in the future, driving up demand for cyber insurance protection products. Insurers will face challenges in providing coverage at reasonable costs, as the nature and scale of potential losses are difficult to predict. A comprehensive solution for cyber will require a broad public-private partnership, as demonstrated by the National Flood Insurance Program. Insurance companies will continue to improve their cyber insurance prediction capabilities and pricing models to meet market demand.

Emerging Markets Keep Growing

The growth of the Latin American, Asian, and African middle classes has increased demand for consumer goods and services, providing insurance companies with new opportunities to deliver life and personal property protection products. Rapid technology adoption in these markets allows consumers to access digital direct-to-consumer offerings. 

The Evolution of Climate Change and ESG Compliance

The increasing frequency and severity of natural disasters in disaster-prone areas will pose challenges for insurers globally in calibrating risk models around climate change. Increased regulatory and investor pressures will challenge insurance carriers, particularly from activist stakeholders. New reporting mandates will pressure insured finance and internal audit teams to accurately disclose risks and meet compliance obligations. Aligning with regulators to accurately model, measure, and monitor environmental risks will help design climate change solutions.