2024 and Beyond: Change Becomes Non-Negotiable

Stephen Applebaum and Alan Demers

We cannot imagine a riskier undertaking than predicting the future given the totally unforeseeable events of?recent years, the current state of the insurance industry and the world in general. On the other hand, there?are some basic principles that help guide us through the exercise. In addition, we have hedged our prediction?by widening our guidance to not just 2024 but also to the near future.

Change Becomes a Constant

The one thing we can count on is that very few of yesterday’s approaches will be successful in tomorrow’s?world. As they say, the only constant now is change. It has become non-negotiable. Technology, especially AI,?will be a major driver.

Insurers Breaks Out of its Bubble

Insurers cannot continue to operate in a bubble. Other segments of financial services and industries have?already realized that diversification, partnerships, and bold innovation are critical to success—and perhaps?even survival. This is especially evident in bottom line under-performance of P&C insurers.

Technology Moves Beyond Enabler

It has become clear that technology is much more than just an enabler but rather is quickly becoming the life?blood of all commercial undertakings. Those who see it as only an optional tool will be left behind. Use cases?will expand beyond the basics to meaningful and measurable business outcomes.

Work and Workplace Shifts

Work, employment and the workplace as we have known them has been forever changed and will continue to?change as the workforce ages and businesses continue to shed staff, enabled by technology and more efficient?business models while attempting to lure, cajole or force return-to-office. There are significant opportunities?for innovators who create new business models that can leverage these realities.

Consolidation Marches On

Consolidation amongst competitors and strategic partners will continue apace, fueled by the growth of private?equity and growing capital supply on top of already record stockpiles of “dry powder” (investment capital).?Recent slowdowns of such transactions are a temporary reaction to overheated start up business valuations?and rising interest rates, neither of which will persist. Small independent businesses will find it increasingly?difficult to earn a profit and compete with consolidated behemoths.

Transportation Evolves and Converges

The automotive, and transportation industries overall, have already begun their inevitable transformation as?major industry segments converge on some future state which is yet to be clearly defined. Whether?autonomous vehicles will become reality at some future date is almost irrelevant for now. What is clear is that?the key participants in this converged landscape will be car makers, technology providers, aftermarket?suppliers and service providers and – if they act quickly enough – insurers. The economic and safety benefits?of advanced safety and driver assistance technologies will not fully offset the impact of increasing distracted?and reckless driving behavior.

Connected Everything and Everybody?

Connected devices and the IoT—including cars, smartphones, wearables, and sensors—will continue to growin both number and functionality. This will spawn?services of many kinds, along with significant revenue?opportunities, for those who “own” or “control” the connections. Forward thinking auto makers and auto?insurers will have no choice but to collaborate on telematics enabled solutions from subscription services to?safe driving, emergency response, accident management and crash detection. We could conceivably see some?combination between auto makers and insurers. Consumers will increasingly resign themselves to sharing?defined personal information in exchange for perceived savings and these other personal safety benefits.

Climate Change Accelerates ‘Predict and Prevent’

Climate change will continue to attract more headlines and global conference than meaningful solutions, but?insurers cannot afford to ignore the extreme implications to their businesses. Simply withdrawing from riskier?markets and continuously increasing premiums is not sustainable. And adaptation may well overtake?mitigation as a pragmatic strategy to cope with the effects of climate change rather than the cause.

Emerging technologies which can accurately predict extreme weather events further into the future and down?to rooftop level accuracy will enable insurers to better price and reduce risk while also providing valuable?protection to their customers. Insurers will shift from a ‘repair and replace’ to a ‘predict and prevent mindset’?across the enterprise, including Product, Process, Marketing, Distribution, Underwriting and Claims

Auto Insurers Transform Products and Processes

Auto insurers face an unprecedented number of daunting challenges. Growing vehicle complexity and?aftermarket supply chain inflation have driven combined ratios to record levels while consumers are reacting?to round after round of premium increases by seeking lower cost coverage and in some cases, dropping?coverages. Direct writers are fiercely competing on price for each other’s customers and agency writers are?seeking more effective and efficient distribution methods and models. Customer satisfaction—and ultimately?loyalty—continues to erode as technology enabled solutions are imperfect and displace comforting human?interaction. Carriers who can transform their products and processes to overcome these challenges have an?enormous market opportunity.

Further consolidation involving the largest auto insurers is inevitable, in a market where each 1 percent U.S. market?share is worth almost $3 billion in annual premium for Private Passenger Auto. Progressive will take market?share and come much closer to overtaking State Farm as #1 auto writer and the top 10 rankings will be further?re-ordered through acquisition.

Wild Cards in 2024?

·?Any one of these events could alter our future in material ways.

·?Global Wars: how widely will they spread?

·?Presidential Election; a referendum on American Democracy?

·?Will AI eat software?

·?U.S./China Relations; will economic growth objectives supersede geopolitical ambition?

·?Crime—both Cyber and Physical; how will it change public policy and consumer behavior?

In the new future, people will still make the difference between highly successful companies and others, but?these people will have to be as conversant and comfortable with technology as they are with other people.