As we look ahead to 2024, the insurance industry faces a wide array of challenges against a
global landscape marked by slowing GDP growth, inflation concerns, and talent shortages.
However, in spite of these challenges there remains an overall sense of optimism for the
upcoming year. The insurance sector is buoyed by both its history of resilience and its
commitment to fulfilling a meaningful and essential role in society: providing consumers with
protection and the promise of a more secure future.
Unemployment in the U.S. hovers at a low rate, particularly within the insurance sector, reflecting both the industry's stability and its importance in the broader economic landscape. Despite consumer pessimism arising from concerns about a potential recession, the insurance industry still plays a crucial role in mitigating financial shocks and stabilizing both the economic and social aspects of society.
Mark Hauser, founder of Hauser Insurance, a risk advisory and insurance brokerage firm, emphasizes the need for industry professionals to remain adaptable and innovative in order to maintain a strong footing for the year ahead. Having grown from a small local insurance agency to a national, full-service brokerage over the course of the past 25 years, Hauser Insurance’s finger on the pulse of the industry is what has allowed it to thrive through a time in which change has come with increasing rapidity.
In the upcoming year, economic challenges are unavoidable. However, strategic investments in both human resources and emerging technologies can serve as effective solutions to these problems, yielding better results in the long run. Below, Hauser provides further insights into key topics that are generating significant buzz within the insurance industry for the year ahead.
An emphasis on social responsibility
According to EY’s global insurance outlook report for 2024, growing disparities in savings and protection, coupled with macroeconomic uncertainty and heightened awareness of more severe risks, have spurred regulators and public authorities to reexamine established rules and guidelines within the industry. Deloitte similarly pointed out in their 2024 report that regulatory bodies and stakeholders are increasingly expecting consistency and transparency regarding sustainability, climate, and equity (SC&E).
Enterprises in nearly every industry are being called upon to tackle substantial societal challenges, and the insurance sector is no exception. Going beyond mere compliance and philanthropy, insurance companies must embrace strategies such as creative product solutions, forward-thinking business frameworks, and strategic investments. These measures are not only avenues for business growth, but also a means to enhance protection against climate risks, foster financial well-being, and support physical and mental health. Additionally, insurers' adeptness in risk assessment uniquely positions them to extend their influence beyond their industry, allowing them to play a larger role in effecting tangible societal impact by contributing to the establishment of innovative new systems in workplaces and marketplaces alike.
Industry professionals should be mindful that while regulatory bodies and stakeholders are increasingly emphasizing the importance of commitment to diversity, equality, and inclusion (DEI), this focus continues to have the potential to serve as a market differentiator in the coming year.
Thinking beyond conventional methods of societal impact will allow insurers to fully capitalize on emerging opportunities. Financial inclusion initiatives that consider greater social goals could extend beyond internal ventures, such as exploring options to expand the reach and affordability of coverage for populations and regions currently underserved or unserved, or collaborating with governments and industries to enhance accessibility to extended savings and health insurance options. Furthermore, a diverse workforce enhances the ability to cater effectively to a broad range of demographics.
Hauser advocates for a concerted effort within the sector to drive a shift towards a more comprehensive and socially impactful role for the insurance industry. By doing so, insurers can align more closely with societal expectations and the genuine mission of the industry, which is to contribute to the improvement of life for all individuals.
Prioritizing customer-centricity as needs evolve
Changing customer behavior is influencing every industry sector, causing previously distinct boundaries to blur and reshaping the competitive dynamics among insurance companies. As energy and food prices rise, putting pressure on consumer budgets, individuals are inclined to seek high value wherever possible. In the realm of insurance, the search for comprehensive solutions that holistically address wellness, security, and protection has expanded the competitive landscape. Now, a diverse range of entities, from health systems and banks to tech platforms and disruptors, are vying for the attention of the same stakeholders.
At the core of a robust customer base lies trust. As the stakes related to protection and savings grow, coupled with the evolving landscape of products and services, consumers are increasingly relying on trust as a key indicator to guide their financial decisions. Hauser emphasizes that in the realm of insurance, trust is established through the delivery of accurate advice, the provision of fitting solutions, and consistently aligning action with mission and value statements.
As the pursuit of value drives changes in consumer behavior, the question arises: what does that value actually entail? Digital transformations have extensively impacted retail, ecommerce, and technology, shaping consumer expectations for personalized, easily accessible, and cost-effective products. Analogous to a modular sofa that can be customized to suit individual preferences, consumers now anticipate tailored offerings to meet their unique needs.
Now, it's up to insurers to offer these customer-centric products. With trust being paramount, as well-known brands from other sectors enter the insurance arena, consumers may opt to switch providers if their desired offerings aren't met.
The AI of it all
An exploration of 2024 would be incomplete without delving into the impact of AI on the sector.
Experts, futurists, philosophers, and industry leaders alike are all deeply engaged in uncovering both the full potential and the challenges posed by AI. However, alongside this meticulous assessment, it is crucial to acknowledge that widely used applications like ChatGPT have gained rapid adoption. Moving at a slower pace in this context risks falling behind. Hauser underscores the importance of determining the appropriate applications for both immediate performance enhancements and understanding the long-term effects that AI will have on transforming the industry.
In the insurance sector, Generative AI (GenAI) has the potential to revolutionize various facets of business, including risk assessment, claims processing, marketing, sales, and virtually every other operational facet. Despite the pressure to adopt a rigid stance on AI, industry leaders must prioritize foresight. It involves not only understanding how these new technologies can enhance their business but also considering the responsible and ethical implications of their implementation. When dealing with AI, especially for risk assessors by trade, a top priority should be to inquire about and identify the full spectrum of risks. Additionally, establishing the appropriate framework for managing these risks is crucial.
Consumer adoption of AI has been remarkable, and although the term "transformative" is frequently used in the context of technology, AI has demonstrated its ability to live up to the hype more convincingly than others have in the past. That being said, we are still in the early stages of this technology's development. Leaders who grasp its significance while acknowledging its nascent phase will be better positioned to establish a strong foundation for governance, oversight, and controls that will ensure safe and successful implementation of AI.
As individuals and businesses grapple with uncertainties, the insurance industry can play a pivotal role in providing stability and assurance. By embracing change, focusing on customer-centric solutions, and staying ahead of technological trends, the industry can indeed serve as a source of stability and resilience, laying the foundation for a promising and sustainable growth trajectory in the coming year.