KPMG Insurance Industry Symposium: Exploring Key Trends and Transformative Potential

Last week, my fellow KPMG colleagues and I convened for an Insurance Industry Symposium webcast, with an attendance of 1,400 professionals, to delve into the trends shaping the insurance industry this year. Our discussions encompassed crucial topics such as M&A activity, economic trends, and the transformative potential of GenAI. Here are some key takeaways that emerged from our conversation:

State of the industry: growth and innovation

Organizations are juggling how to fundamentally grow their businesses, deliberating between focusing on cost reduction and/or strategic expansion. In the M&A sector, we anticipate seeing increased activity, based on insights from our CEO Outlook Survey which revealed that 55% of insurance executives plan to pursue significant deals in the next 12 months. Additionally, we believe the insurance industry has the potential to take the lead in M&A, particularly in integrating insurtech capabilities into larger business models and leveraging distribution channels.

Inflation, interest rates, and affordability

Although it appears the Federal Reserve is successfully engineering a soft landing for the U.S. economy, the current high-rate environment has had implications for the property and casualty (P&C) sector, particularly in terms of vehicle and housing affordability, but, offset by higher investment returns.

When examining the sales of motor vehicles, there were 15.8 million new car sales annualized in the month of February. However, the average cost of a new vehicle has risen to around $48,000, attributed to inflation caused by prior supply chain disruptions as well as advanced technology in vehicles. In the housing market, last year’s substantial rate increases have led to a fall in homebuying. However, in certain regions of the country we are seeing mortgage rates fall, and we expect further decreases as 2024 progresses, and as the Fed starts to cut its rates.

Accelerating the value creation of Generative AI

The momentum surrounding the adoption of GenAI remains strong. Last year, there was a significant amount of exploratory activity as companies sought to understand the potential opportunities and also the risks associated with the technology. This year, the focus has shifted towards value creation and the integration of GenAI into various business operations.

Efficiency use cases are at the forefront of organizational priorities. Companies are exploring how to reduce the time required for various processes, automate repetitive tasks, and leverage the data comprehension capabilities of GenAI to pull insights more rapidly. As organizations delve deeper into use cases, it is crucial, however, to prioritize the establishment of trusted AI systems that uphold fairness and transparency. At KPMG, we’ve established a Trusted AI framework to serve as our commitment to uphold ethical standards for AI solutions that align with our values and that foster the trust of our clients, people, communities, and regulators.

Risk, an enduring aspect of human history, remains constant in the present day, which is why insurance plays a vital role in protecting personal and economic well-being, making it an essential component of our lives. As an insurance leader, I recognize the immense value that the industry holds, and it is imperative for us to effectively manage the risks that arise in this ever-changing landscape, to continue to drive sustainable growth, and maintain a competitive edge in today's dynamic business landscape.