As we anticipate 2024, we acknowledge the numerous challenges facing the insurance industry but approach them with optimism. The insurance sector is known for its resilience and strong sense of purpose—providing protection and a more secure future for individuals, families, and businesses.
What’s the macro-economic outlook?
Global economic forecasts for 2024 suggest a slowdown in GDP growth alongside ongoing inflationary pressures. Talent shortages are particularly significant in the U.S., where overall unemployment is below 4% and around 2% within the insurance sector.
Major markets are experiencing headwinds in consumer sentiment. Research indicates that consumers in the U.S. are generally pessimistic due to persistent recessionary concerns. In the U.K., consumer unease stems from uncertainties surrounding recent tax changes and their potential effects on public services.
What can the insurance industry expect?
Top-line revenues for P&C insurance carriers typically align with GDP trends. Revenue growth for P&C carriers is projected to slow to an average of 2.6% for 2024 and 2025, down from 3.4% in 2023 (Swiss Re Sigma).
Conversely, the Life insurance segment is witnessing increased demand for savings and retirement products. In emerging markets, revenue growth is expected to reach an average of 5.1% in 2024 and 2025, which may help mitigate ongoing profitability and liquidity challenges faced by this segment.
Claims volumes and costs across various lines of insurance remain high in most major markets. While some of this is inflation-driven and cyclical, systemic risks such as social inflation, rising natural catastrophe claims, and demographic shifts related to aging and mental health are likely to persist.
Despite our optimism about the insurance industry, the challenges we face as we enter the coming year are significant. Here are five predictions for 2024:
- Monetizing AI
Since the introduction of ChatGPT last year, discussions around Generative AI have surged—perhaps even reaching a hype level. However, many leading insurance companies have been advancing their data, analytics, and AI capabilities for years. In 2024, we expect the initial excitement around GenAI to shift toward a demand for tangible economic impact from AI/GenAI solutions. Insurers that have invested in these areas will begin to integrate GenAI as a natural progression, while also enhancing responsible and ethical risk controls as AI takes on a more autonomous role. - Alternative human capital strategies
AI/GenAI has become integral to decision-making, processes, and interactions throughout the insurance value chain. This development is timely, given the industry’s urgent need to address workforce gaps in both Underwriting and Claims. In 2024, we will see AI/GenAI viewed more as a supplementary talent source. Insurers will explore new sourcing models for complex tasks that have traditionally been closely held. Implementing these changes will necessitate a shift away from conventional talent development methods like apprenticeships and standardized knowledge management practices. - Cost pressures drive operational changes
Sustained cost pressures are prompting leaders within insurance divisions to ask, “Whose responsibility is this?” In 2024, there will be a growing demand for greater autonomy and control over costs, as frustrations mount over centralized cost allocation methodologies and shifts in portfolio management. - Shifts in risk portfolios and capital allocation
While industry convergence is not a new trend, more players are looking to diversify into areas like P&C, health, and wealth management. Automakers are venturing into P&C insurance, while P&C carriers are expanding into health products and services, and health insurers are introducing voluntary and supplemental benefits. For many insurers, the most promising opportunities lie in retirement planning, as Millennials and Gen Z prepare to inherit unprecedented wealth over the next two decades. Their values-driven investment approach will reshape retirement planning, offering new avenues for Life and Annuities carriers that align with their values. - Growth in service revenues as risk capital declines
To enhance return on equity and relieve capital pressures caused by emerging loss patterns, insurance carriers will expand beyond traditional product offerings into advisory and service-based roles. Areas like telehealth, care navigation, and risk mitigation will become focal points for carriers in 2024 and beyond.
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