Most insurance companies have demonstrated remarkable adaptability and resilience in the face of a slew of challenges in recent years, most notably the impact of the pandemic and the economic fallout from the Russia-Ukraine conflict. Systems and capabilities were improved, and agile talent and technology strategies were implemented with success. Is the insurance industry, however, ready for new challenges in 2023 and beyond? Some of the challenges they may face in 2023 is rising inflation, interest rates, and inventory shortages. Along with the talk of a looming recession, climate change, and geopolitical unbalance. Carriers should not be satisfied with the changes they have had to make at this time, but rather, they should build on their previous success to sustain a culture of continuous innovation while making customer-centricity the focal point of the industry’s standard operating model. According to our findings, they should begin shifting their focus from basic operational transformation, such as cloud migration, to fully realizing the value and benefits of infrastructure and technological upgrades; shift from responding to regulators’ and other industry overseers’ requirements to more proactively anticipating and meeting distributor and policyholder expectations; and broaden their historical focus from risk and cost reduction to prioritized risk management.
Inflation reduces nonlife profitability while raising prices and driving up revenue –
While increases in property-casualty prices were one of the factors driving up premium volume and pushing the US consolidated surplus to new highs, inflation is pushing loss costs even higher and faster in most markets, undermining underwriting profitability. The average replacement cost had risen nearly 20% this year, nearly double the Consumer Price Index.
The transformation of life insurers is expected to accelerate in 2023 –
Because of impediments such as inflation-driven disposable income pressure and financial market volatility, the pandemic-driven surge in premium growth appears to be waning since 2020.
Carriers should respond to economic pressures and uncertainties by taking proactive steps such as expanding pandemic-inspired digital enhancements, introducing new products, services, and distribution options, or targeting previously underserved customer niches.
Group insurers are becoming more innovative in response to shifting dynamics.
In order to facilitate portfolio expansion, many insurers are forming partnerships with other providers as well as third-party vendors. These enhancements are intended to provide service solutions and help them differentiate themselves from the competition.
Insurers are reinventing their workplace strategies and culture as the talent war heats up.
Forced virtualization of work during the pandemic fueled revolutionary changes in employee expectations and upended many traditional employment models. The insurance industry as a whole may struggle to fill and retain their workforce in 2022 and 2023 unless major changes to underlying culture are implemented, potentially making these more competitive with fintech market. Insurers must compete for new talent while also attracting talent from other industries like the fintech market. Historically, the technology sector has been the industry leader, with the insurance sector struggling to keep up and retain talent.
Despite advances in technology infrastructure, the focus must now shift to value realization.
Many carriers are benefiting from the technological transformation driven by recent advancement in technology, particularly the point solutions provided by enabling startups in underwriting, claims, and online distribution platforms, among other customer-facing functions. In order to improve customer satisfaction, insurers should begin integrating their systems and data while leveraging cloud capabilities. Using industry-specific cloud applications to focus on microimprovements could be a great next step.
More can be done to improve efforts toward diversity, equity, and inclusion.
While many insurers are working to diversify their workforce, there are still significant gaps in the industry, particularly at the executive level. There is still much work to be done in terms of diversifying their workforce and customer base, expanding access to insurance products and services in underserved communities and market segments, amplifying a broader range of voices in leadership circles, and fostering a more inclusive organizational culture.