Top 5 P&C trends we are following in 2024
Jan 2024
Betterview, now part of Nearmap, highlights key trends insurers face and how they can focus on the balance between short-term ROI and continuous innovation
Jan 2024
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Since this post was originally published, Betterview was acquired by Nearmap. References to Betterview, the company, or its products have been maintained for historical accuracy. Betterview is now the primary solution for the insurance industry at Nearmap.
What can P&C insurers anticipate in 2024?
To answer this question, it helps to reflect on the events of the previous year. 2023 saw the rise of generative AI, historical highs for reinsurance premiums, and many other climatic, economic, and sociological transformations. Therefore, we believe 2024 is a year for insurers to adapt and navigate these changes. The following list highlights the key trends we – Betterview, now part of the Nearmap family – are monitoring on behalf of our customers, focusing on the balance between short-term ROI and continuous innovation.
1. Evolving Expectations for AI Value & Transparency
2023 saw the rapid ascent of generative AI, dramatically – and perhaps permanently – altering the way humans interact with machines. The impact has been felt in every industry, and property insurance is no exception. From computer vision to large language models, there has been an explosion of use cases for AI in insurance. Insurers are only going to make major investments in AI if they can achieve immediate and tangible value. This means companies selling AI solutions need to focus on use case development, particularly in cost-reducing areas like premium leakage and workflow management. Equally important is transparency. To alleviate fears about AI biases and inaccuracy, companies must go above and beyond to demonstrate their models are reliable and tested. The bottom line is this: to reassure insurers and earn their trust in 2024, technology providers will need to make their tools explainable, transparent, and above all, functional.
2. Market Consolidation of Insurtechs
The market will likely witness a natural consolidation of insurtechs, driven by the pragmatic focus of insurers on immediate return on investment (ROI). This is due to a combination of factors, including the inherent cautiousness of the P&C industry alongside the volatile nature of the economy. At this moment, insurers are not interested in innovation for its own sake. They want to guarantee short-to-medium-term survival – not abstract visions of the future. Nor will insurers be the only source of this pressure in 2024. Venture capitalists, too, are not willing to sign a blank check for insurtechs based strictly on innovation. By year’s end, we may see a leaner insurtech market comprised of companies focused on profitability and ROI.
3. Exploring New Ways to Reduce Reinsurance Premiums
Reinsurance rates for P&C insurers reached a 17-year high in 2023 and are expected to rise in 2024. In the year to come, insurers will explore innovative strategies towards mitigating these costs. While this reduction won’t be immediate, proactive insurers can begin to lower their premiums by focusing on two key areas: decreasing the average risk level across their portfolio and demonstrating these improvements to reinsurers tangibly and transparently. A gradual transition utilizing technologies known to lower risk profiles—like computer vision and predictive analytics—will encourage a more proactive stance in risk management among insurers. With these developments taking time to materialize, 2024 will be a transitional year for insurers who are leveraging digital advancements to specifically tackle reinsurance challenges.
4. The Shift to Predict & Prevent as a Standard Practice
The Predict & Prevent approach is poised to shift from a strategic advantage to standard industry practice. This can be seen in the widespread adoption of predictive analytics, AI, and other tools designed to proactively address risk rather than react after damage has already occurred. This trend will no doubt continue in 2024, with more companies adopting these methods to reduce their exposure and improve their combined ratio. However, this year the pressure to embrace Predict & Prevent will no longer just come from market forces. To mitigate the effects of climate change and severe weather, state legislatures and regulatory bodies will begin to mandate Predict & Prevent. Efforts to proactively manage risk – and a focus on long-term resilience – will not be optional for insurers. Those who have already implemented new strategies will continue to succeed, while those who lag will need to catch up or risk being left behind by new regulations.
5. Transformation in the P&C Insurance Workforce
The dual pressures of economic uncertainty and rapid technological progress will manifest in another significant way for P&C insurance in 2024: a reduction in the workforce. There have already been several rounds of layoffs and reorganizations at household-name companies like Farmers and Liberty Mutual. It’s important to recognize, however, that this trend is not solely driven by the effort to improve margins. There is also a general demographic shift occurring in insurance, a combination of mass retirements, and a lack of new workers entering the industry. As insurers face a reduced talent pool, they will increasingly depend on automation to make up the difference. The best approach will be a synergistic one, combining the best of human expertise and innovative technology. The future of P&C insurance is expanded collaboration between human and machine labor, with both parties drawing on their strengths.
The Bottom Line
Beneath all of these trends lies a common throughline. Faced with both economic challenges and an unprecedented wave of digital transformation, P&C insurers must strike a careful balance. Tangible, short-term ROI is still paramount, but the optimal way to achieve this may look different than it has in the past. Perfecting this balanced approach is key for insurers to adapt to the changes of 2023, and to achieve sustainable growth in 2024 and beyond.