What Does The Future of The Insurance Market Look Like?

Together with partner Keith Signoriello, Ben Cavallo is the principal and co-owner of C&S Insurance.

What Does The Future of The Insurance Market Look Like?

Geopolitical unpredictability, economic challenges, cybercrime, climate change, and the rise of AI—in many ways, the future might look bleak, but what challenges do all these issues pose for the insurance market?

These risks certainly pressure the insurance industry’s capacity to act as our financial safety net. In a market experiencing decreasing profitability, insurers are realizing that instead of just reacting, they need to be proactive—to get ahead of losses and prevent them from happening.

Other challenges include inflation, supply chain issues, rising interest rates, and the loss of talent due to early retirements. Technology and the new “digital native” customer are also presenting new obstacles.

But technology also holds the potential solutions insurers need to keep up, including AI.

The Digital Consumer

In 2023, shopping for insurance doesn’t start with a face-to-face interaction—instead, you pick up your phone or laptop and begin with a Google search.

The modern insurance customer utilizes comparison sites, ratings, and social media to determine the best prices and services they can receive. The expectations are set high—and in insurance, customers are expecting to get more than they pay for.

Additionally, the modern customer expects online or in-person sign-up processes to be quick and easy. Any bumps in the road could immediately send them away to a competitor. This process is important to streamline, given the expectation that by 2024, 33% of the premium insurance volume will come from brand-new propositions.

If insurers aren’t upgrading their technology, not only will their operational efficiency decline, but they will also lose business.

Insurance and AI

Will the robots take over? Artificial intelligence (AI) both poses threats and opens doors in many industries, including insurance. As insurers evolve to meet the needs of the modern consumer, generative AI technologies will likely supplement the traditional “recommender” duties. The modern customer wants personalization—which AI can provide by analyzing personal data. You can expect to see a growing supply of highly individualized, need-based, anticipatory insurance policies in the near future.

As a whole, the industry is shifting rapidly towards holistic, individualized, digitized experiences. Advanced data and analytics—AI included—will allow insurers to be more anticipatory and create more custom insurances.

Imagine, for example, using a digital GPS system that incorporates AI in order to map out the safest driving routes. Such a device could be connected to your auto insurance policy. Not only would it report driving data directly to your insurer, but it would also provide you with information about how your choices could impact your wallet.

This isn’t just the far-off future—many similar devices are already in use, such as telematics programs. And such services could exist on the devices you already have, like fitness trackers, home assistants, smartphones, watches, and your car itself. Estimates suggest there will be one trillion connected devices by 2025.

This also isn’t exclusive to auto insurance, as there is potential for “pay-as-you-live” life insurance policies, too—and many others can and will follow suit. This marks a shift from a “detect and repair” mentality to a “predict and prevent” one.

Of course, when collecting so much data, cybersecurity poses a risk for any business. Learn more about how you can prevent cybersecurity breaches and protect your customers’ data.

Merger & Acquisition

Though merger & acquisition (M&A) activity in the insurance industry has been on the decline since 2022, we may witness an increase in such deals in the coming year.

Experts suggest that we will see more M&A activity in the life insurance industry rather than property & casualty (P&C) insurance. These won’t be huge mergers, either—expect to see smaller deals, which will help these companies develop their products and markets and, ultimately, attempt to accelerate their growth in these times of declining profitability.

In times that feel increasingly unpredictable, it’s important to keep yourself and your family protected with a good insurance policy. Increasing personalization and customization of policies will allow you to do so in a cost-effective way.

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