Global insurance industry to be shaped by 10 trends in 2024

Business a.m

The insurance industry is at a turning point, with rapid transformation driven by factors including technological innovation, evolving customer expectations, and changing market dynamics. 

To this end, InsurTech firm Novidea has outlined its top ten predictions for the insurance sector in 2024. These predictions are based on insights gained from the firm’s extensive experience working with insurers of all sizes and business models.

Legacy tech to be phased out

According to Novidea, the insurance industry has for years struggled with outdated technology infrastructure that is not up to the task of meeting the demands of the modern world. However, the pressure to stay competitive and the emergence of innovative solutions that address long-standing issues are driving insurers to finally embrace digital transformation. In 2024, the company expects to see a significant increase in investment in new technologies and the modernisation of legacy systems. This, it said, will enable insurers to deliver a better customer experience, improve operational efficiency, and unlock new opportunities for growth.

Customer centricity reaching new heights

The changing expectations of today’s customers are reshaping the insurance industry, and insurers are responding by making customer-centricity a top priority. In a recent survey conducted by Novidea, 87 percent of respondents said that providing value to customers is a key consideration when selecting new technology solutions. This focus on the customer experience is not just a buzzword, but a business necessity. Novidea is convinced that changes that do not improve the customer experience are not worthwhile. In an increasingly competitive and demanding marketplace, insurers must ensure that every aspect of their business is designed with the customer in mind. 

Revolutionising claims handling 

The efficiency and effectiveness of the claims process will be a key differentiator for insurers in 2024, with a focus on leveraging technology to speed up and improve claims processing, Novidea posits.  Reports have shown that a growing number of insurance organisations are turning to AI and machine learning to automate claims and make better decisions, leading to a bifurcation between those that are embracing these technologies and those that are falling behind. 

According to Novidea’s prediction, the insurance industry will divide into two groups: those that are investing in technology to transform their claims processes and those that are struggling to keep up. The former will enjoy a competitive advantage, while the latter will risk losing customers due to outdated and inefficient claims handling processes

Innovation to fuel product development 

The insurance industry is undergoing a period of rapid change, with the introduction of new and innovative products. In particular, niche offerings such as cyber insurance and pet insurance are gaining popularity, providing insurers with an opportunity to grow their revenues. As competition increases, it is likely that product innovation will accelerate in 2024, with insurers looking for new ways to stand out from the crowd and capture market share.

Talent acquisition taking centre stage

The tech industry was rocked by widespread layoffs in 2023, with major players like Amazon, Alphabet, and Microsoft cutting thousands of jobs. This has led to a glut of skilled tech workers in the market. Coinciding with this trend is the looming retirement wave in the insurance industry, which is expected to see nearly 400,000 workers exit the workforce in the coming years. 

Novidea noted that the insurance industry needs to fill these critical roles with talented individuals, but there is a major disconnect between the job market and young professionals. It added that the critical challenge for insurance companies in 2024 will be to bridge the gap between these two realities. 

The key to success will be for insurance organisations to embrace technological modernisation, and create an environment that encourages innovation and growth. Those who can successfully attract and retain top talent will be well-positioned to thrive in the years to come. Conversely, those who fail to adapt may struggle to compete in the modern insurance landscape.

Rising frequency of catastrophic events

As climate change continues to intensify, the frequency and severity of natural disasters is also increasing. This poses a significant risk for insurers, who must grapple with higher claims and losses. However, it also highlights the vital role of insurance in protecting against these threats. Novidea noted that in  2024 and beyond, it is expected that demand for insurance coverage that includes protection against climate-related risks will surge. 

Data’s growing role in risk assessment

According to Novidea’s analysis, a new class of companies has emerged in the insurance industry, focused on collecting and analysing vast amounts of data from various sources. These companies then provide this data to insurance companies, brokers, and managing general agents (MGAs) to support underwriting, risk assessment, and other critical functions. 

While this data has great potential value, it can be challenging for insurance organisations to efficiently extract meaningful insights from the large volumes of information being collected. The analysis emphasised that a growing availability of data and the need to extract meaningful insights from it are driving a trend towards collaboration between insurance companies and InsurTech firms. 

These partnerships, it explained, will be critical in advancing the use of advanced analytics and machine learning to improve risk assessment and underwriting. In 2024, it is expected that many insurers will enter into such partnerships, either by working with an existing InsurTech or by investing in a new start-up.

Post-merger integration challenges

As the insurance industry has seen a wave of mergers and acquisitions in recent years, Novidea noted that the focus in 2024 will shift to integrating the newly merged organisations. This will involve efforts to align cultures, standardise technology platforms, and streamline workflows across the combined entities. Novidea stated that Insurers that are able to overcome these challenges will be well-positioned to reap the benefits of their growth, while those that fail to do so may struggle to achieve their goals.

Rise of vertical SaaS

Novidea explains that while traditional InsurTech solutions have played an important role in advancing the insurance industry, they often take a generic approach that doesn’t fully address the specific needs of individual insurers. However, in other industries, such as financial services and healthcare, there has been a shift towards more customised solutions that are designed specifically for those sectors. Novidea predicts that a similar trend will emerge in the insurance industry, with a growing demand for sector-specific InsurTech solutions that address the unique challenges and opportunities of the insurance sector.

Generative AI will take centre stage

In January 2023, the chatbot application ChatGPT became the fastest-growing consumer software in history, reaching more than 100 million users in a matter of months. This rapid growth sparked interest from competitors, who released their own chatbot applications throughout the year. These new offerings allowed businesses and consumers to explore the potential and limitations of this new technology. As chatbots and other AI-powered tools continue to develop and mature, their potential to transform the insurance industry will become more and more apparent. According to Novidea, it is likely that in 2024 and beyond, these tools will play a significant role in tasks such as underwriting and claims handling. 

Underwriting will be transformed by AI’s ability to quickly analyse large amounts of data, identify patterns, and make predictions about risk.

The insurance industry is on the cusp of a massive transformation, and while it may be daunting, it is a natural evolution for any industry. This evolution offers both challenges and opportunities, and insurers who are able to adapt and innovate will be well-positioned to thrive in the years ahead. While the changes in the industry may be unsettling, analysts have emphasised that  it is important to stay focused on the bigger picture and make decisions that will set the stage for long-term success.