(Image credit: Shutterstock.)
From skyrocketing premium growth to the ever-increasing adoption of artificial intelligence to wondering which storm will be the next multi-billion-dollar weather event, the property/casualty (P&C) insurance industry continues to face steep challenges in 2023. Combined with the upcoming regulatory changes and emerging digital technologies transforming the landscape, insurers are in a race to keep up with the rapidly changing needs of their customers.
In this article, we will explore three trends driving the P&C insurance industry forward and how they shape the future of insurance. Those organizations that understand these trends and embed them into their business strategies are poised to come out on top in 2023.
- The MGA Market is Experiencing Near Historic Growth
The demand for specialized coverage products has increased due to factors anchored by the changing risk landscape. As the world becomes more interconnected and complex, new risks and threats emerge from cyberattacks, severe weather, the pandemic hangover, record inflation, and emerging industries. Traditional insurance products simply don’t adequately cover these risks, and these gaps in coverage are fueling significant opportunities for specialized products. This results in substantial premium growth prospects for managing general agents (MGAs). One research study estimates that the total premium written through the MGA market in the United States is approximately $70 billion and is expected to continue to increase yearly, with 66 percent currently written by MGAs with less than $500 million in premium.
The premium moving through the MGA market has doubled over the past decade. And while the rise in consolidations and acquisitions led to a decline in the number of brokers, the number of MGAs rose. We’ll continue to see MGAs play a vital role in matching risks with insurers, with cyber and parametric insurance being among the fastest-growing niche opportunity areas. Insurers will benefit from investing in technology solutions that streamline their underwriting processes, enhance data management, and facilitate digital communication with their underwriting and distribution partners, enabling them to capitalize on emerging market opportunities and deliver competitive insurance products.
- Upcoming Bureau Regulatory Changes are Going to Turn the Market Upside Down
2023 will bring a barrage of new regulatory changes to insurance organizations. If insurers don’t have systems or partners to support these changes, they’ll be left behind, noncompliant, and ultimately less competitive. Across the industry, rating bureaus are developing and incorporating new insurance solutions in response to emerging market trends and introducing compliance filings in response to regulatory/judicial updates—however, implementing bureau circulars to address revisions can be complex and time-consuming for carriers. These circulars reflect the influence of 13,200 legislative bills, 8,500 regulatory actions, and 2,000 court decisions. More importantly, the best-known rating bureaus are implementing significant rate revisions for personal and commercial lines to address industry-wide increases in loss costs.
Failure to adequately implement rates and rules can result in a compliance issue or even rate inadequacies, making bureau services and contracted platforms a valuable resource for managing the changes. Insurers need to have conversations with their technology vendors now to ask how these changes will be supported to maintain compliance while minimizing the risk to their business.
- AI and Automation Will Grow More Powerful in Core Tasks
There’s a lot of chatter around how buzzy, new AI tools like ChatGPT will alter the insurance industry—some say insurance will never be the same thanks to AI tools like these, and others say we are light years away from it causing any ripple effects. However, AI and automation are already used to improve underwriting and risk management, conduct photo and video inspections, analyze property characteristics, and import third-party data. Insurance organizations have begun using AI to price policies based on risks, particularly for commercial lines. In claims management, we see a surge in AI used to analyze photos of losses, and weather patterns, identify potential fraud, and streamline workflow processes.
AI has already shown its potential to improve efficiency and accuracy in various aspects of P&C insurance, from underwriting and risk management to claims management. However, insurance carriers’ widespread adoption of AI to automate and enhance insurance operations is still cautious. Developing complex workflows for different lines of business and claim complexities takes time, planning, testing, and adjustments.
AI is the perfect complement to robotic process automation (RPA). Insurers can use AI and RPA-powered solutions to automate tasks, eliminating unnecessary manual intervention and improving the overall efficiency of underwriting and claims management. By partnering with a vendor investing in AI-driven technologies, insurance organizations can stay competitive and drive innovation, delivering more accurate and personalized products and services to their customers.
Is Your Organization Ahead of These Trends?
The P&C insurance industry is experiencing innovatory changes in 2023 due to emerging tech and changing market conditions. If they haven’t already, insurers must actively seek cost-effective ways to access new markets and leverage the necessary tools to help them succeed and better serve their customers. Despite the challenges insurers will see in the year ahead, there are plenty of exciting opportunities to manage costs, streamline claims processing, and provide better service to customers.