Now is the season when news columns include predictions for the coming year – followed by New Year’s resolutions that will pop up in a few weeks. Predictions are always tricky – and resolutions rarely fulfilled. Weren’t we supposed to all have jet packs or flying cars by now? Wasn’t Hillary going to be president? And what about those Red Sox?
Cambridge, Mass.-based Forrester Research – “one of the most influential research and advisory firms in the world,” or so says Forrester. Forrester – is out with its 2024 predictions for the insurance industry that offer reasonable-sounding insights for the near future and maybe some cautions about what’s ahead for insurers.
Return to expected profitability
Overall, Forrester says that after a couple of years of rising claims expenses, 2024 should see insurers return to greater profitability and stability as they continue to pass on the higher costs to customers and benefit from rising interest rates.
“This will result in moderate tech budget increases and a renewed appetite for tech and product innovation,” Forrester says. While many careers will chase the dream of embedded insurance and generative AI, these won’t have a substantial business impact next year. Climate adaptation, on the other hand, will become very real, as insurers scale back activities in the regions most affected by climate change and explore new types of heat-linked policies.
Top 5 predictions for 2024
Here are Forrester’s top 5 predictions for insurance in 2024:
1. Half of embedded distributors will struggle to convert consumer interest to sales. Embedded insurance is suddenly a big deal. That’s where insurers implement their products and services into third-party experiences like car buying, mortgages, and loans – and consumers might not even realize they’re dealing with a separate insurance company. When Forrester asked adults how likely they are to consider an embedded auto insurance product, 41% in the US (and 59% of US Gen Zers) indicated they would do so when buying or leasing a vehicle. “But factors like keeping policies with a single insurer, the role of the agent, and lack of trust in both the brand and the ability of the embedded seller to answer customer questions are hindering sales,” Forrester said. To ensure success, insurers must launch initiatives that provide sellers with the knowledge they need and give potential customers the trust and confidence that the embedded seller is the real deal. “Co-branding, digital portals, assistive agents, the sensitive positioning of upsell and cross-sell options, and even underwriter access will be must-haves in career toolkits for embedded sellers.”
2. Tech spending will see a modest 5% growth. The company’s priorities survey found insurers are torn between seemingly competing initiatives: improving customer experience (CX), growing revenue, and reducing cost. “Business and tech pros at insurers most often cite these initiatives as high priorities.
3. Generative AI might not be the boon some people expect. Less than 1% of insurers will see tangible, direct benefits from generative AI, Forrester said. Insurers are no doubt hotly interested in the technology, pinning hopes that it will benefit operations, customer service, marketing, sales, and IT. But it’s still too new to buoy the bottom line. “Insurers’ present AI capabilities reveal a substantial gap, and genAI will be no different,” Forrester predicts. “This will make it hard in 2024 to obtain tangible and direct advantages, such as ‘10% of revenue is attributable to genAI.’ Expect to see insurers experimenting with genAI in areas like chatbots, employee-facing tools to summarize data, and content development, particularly in marketing.” But, Forrester warns, be cautious of the “coherent nonsense” it can generate.
4. Insurers will drop ambitious climate collaborations, voting instead with their feet. Launched with much fanfare in 2021, the Net-Zero Insurance Alliance is dead, Forrester predicts, and unlikely to be revived. Insurers can’t afford to ignore climate change but expect another dozen insurers to follow the likes of AIG and Allstate and scale back their business in California and Florida, pushing those risks onto the regulators.
5. The heat is literally on. Half of insurers in established markets will launch heat-related retail insurance products. Heat-related deaths will inevitably rise as temperatures warm, power outages increase, and populations age. Insurers are responding with innovative retail products like one-day heat-stroke protection. California regulators are imagining heat insurance programs that would cover costs for cooling centers and generators and even cooling for bridges, roadways, rail, and runways to keep infrastructure operational. Heat-related coverage could increase traditional offerings by reducing the cost and time of claims — by linking payouts to triggers like the temperature or duration of the heat event.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].
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