Why is the insurance industry struggling?
The property insurance sector is under heavy pressure from poor financial performance due to unexpectedly high inflation, a shift of exposures to higher-risk areas, and rising reinsurance costs.
- Compliance changes. ...
- Cybersecurity threats. ...
- Technology changes. ...
- Climate change & other environmental factors. ...
- Talent shortage. ...
- Financial risks.
Claims expenses are increasing—driven by a mix of high repair and replacement costs due to inflation, social inflation and surging natural disasters. The latter, in particular, have driven property reinsurance rates up by as much as 50% in the U.S.
The business of insurance, which once was stable and predictable, isn't that way anymore. Growth without sacrificing profitability is challenging, climate change is irrevocably impacting certain risk profiles, distribution needs have become truly omnichannel and customers expect products tailored just for them.
- The Rising Cost of Healthcare. ...
- Regulatory Uncertainty. ...
- Changing Consumer Needs. ...
- Technology Disruption. ...
- Increased Competition. ...
- Changing Demographics. ...
- Financial Wellness Programs Can Help.
Natural disasters fueled by climate change are already threatening insurers' ability to serve U.S. households and businesses. In 2023 alone, damages from billion-dollar extreme weather events reached $92.9 billion, and estimated insured property losses totaled $78.8 billion.
As we venture into the new year, it's evident the challenges posed by the Hard Insurance Market trend of 2023 are persisting in 2024.
Overview of the current market
The market has been hard since 2018/2019, rising strongly until the end of 2020 when in some classes the rate movements began declining. Looking a little closer at the different parts of the global P&C insurance market, it is primarily property that is driving the hard market.
People are leaving the insurance industry
The hiring pool is limited for entry-level and experienced talent, with 65% of people leaving an insurance job also exiting the industry. The leading reason why employees quit is a need for more career development and advancement.
Why are insurance companies losing money?
The property insurance sector is under heavy pressure from poor financial performance due to unexpectedly high inflation, a shift of exposures to higher-risk areas, and rising reinsurance costs.
Specifically, leaders are looking to spark growth and transform operations for a more digital and customer-centric future. The path forward will be defined largely by corporate purpose, with products designed to boost consumers' financial well-being and protect against future shocks (including another pandemic).
The consensus is that AI, machine learning, and business rules engines will help, but not replace underwriters. The traditional underwriting methods will evolve, and underwriters will move to a more strategic role, rather than pure risk management.
In emerging markets revenue growth is expected to reach 5.1% on average in 2024 and 2025. This revenue growth may soften the impact of the ongoing profitability and liquidity challenges the segment faces. Claims volumes and costs across lines of business remain elevated in most major markets.
Now, a lot of insurance agents are asking themselves whether AI is going to take their job, or worse, is AI going to take over humanity!? The short answer is no, it won't take your job as an insurance agent (or take over humanity); but it will change your job and the insurance landscape over time.
Insurers will engage in more process automation across marketing, distribution, underwriting, claiming, and policy servicing. Leading insurers will use automation and empathy during the next decade to reach outcomes such as driving revenues and policies in force, optimizing expenses, and minimizing risks.
After suffering some of the worst years in their history, insurers say they now see a path to profitability for home and auto policies. Big rate increases are driving up revenue, while the inflationary pressures that pushed up repair and replacement costs appear to be easing.
Executive Life Insurance Company (1991) - One of the largest life insurance companies in the US, it went bankrupt due to investment losses in junk bonds.
Insurance is a stable industry, even during a recession. People will always need protection from risks, no matter the state of the economy. Employment with an insurer provides more job security than other career fields, such as the arts, entertainment and construction industries.
Insurance agents succeed when they prioritize their customers' needs over their own profits. The most commonly cited reason insurance agents fail is that they fail to listen to their customers and take the time to find the best product to suit their needs.
Who is the richest insurance company?
| Rank | Company | Net premiums written (US$ Billion) |
|---|---|---|
| 1 | UnitedHealth Group | 201.5 |
| 2 | Ping An Insurance | 118.8 |
| 3 | China Life Insurance | 111.2 |
| 4 | Centene Corporation | 107.4 |
Considering State Farm and Geico are the two biggest auto insurance companies in the U.S., most drivers can find what they need from either company, whether that's minimum or full coverage. However, there are a few key differences between State Farm vs. Geico when it comes to auto insurance options.
- Cyber values at risk (data and information) grow and fluctuate much more rapidly than those for tangible property.
- Cyber property settings (hardware, software, and networks) evolve much more rapidly than those for tangible property.
Retiring Insurance Workforce and the Young Professionals
The average age of an agent or a broker, according to industry statistics, is pushing 60, and a white paper published by McKinsey puts the median age of insurance agents at 59 years old.
