TOP 5 AREAS WHERE INSURANCE LEADERS

ARE LIKELY TO BE HIT HARDEST THIS YEAR

Will lessons learned from past challenges be applied for a better tomorrow?

Many 20- to 30-year-olds wouldn’t be able to tell you a thing

about the Great Recession, which now took place 15 years ago. In this case, ignorance is not bliss … .

By Michael Wayne

George Santayana once wrote, “Those who cannot remember the past are condemned to repeat it.” We’ve all seen different versions of this phrase including one where “doomed” replaces “condemned” and “history” replaces “past.” Regardless of which iteration you know, one thing is abundantly clear—Santayana’s feelings regarding what came before are not warm and fuzzy. Unfortunately, the negative does seem to get more attention than the positive in many respects. That is certainly the case in trends.

In pop culture, trends—good and bad—come and go in the blink of an eye, particularly now with social media’s ever-growing reach. Cycles of financial gain and loss, however, seem to be given lasting monikers that define them for generations—The Roaring Twenties, The Great Depression, The Great Recession among them. Regarding pop culture, of course, there are things that endure, but I am often amazed at how generational icons become lost to history.

Imagine if someone today wrote a weekly newspaper column that appeared in 550 newspapers and reached 32.5% of the US population alone (107,250,000 give or take a few people). For comparison’s sake, some 99.18 million people in America watched the 2022 Super Bowl. The former is basically what Will Rogers did in the 1920s and 1930s. His column reached 40 million people in a nation of 123 million. That’s powerful reach of meaningful, important content.

Today’s attention spans, sadly, are being influenced more by TikTokers, Instagram influencers, and Snapchat. Many 20- to 30-year-olds wouldn’t be able to tell you a thing about the Great Recession, which now took place 15 years ago. In this case, ignorance is not bliss, and while we are not in for a similar housing crisis to drive a financial crisis, some are predicting 2023 will be turbulent.

Insurance implications

National research and advisory company Forrester is generally of the opinion that cash flow pressures on consumers and small businesses will result in coverage disappearing or, at the very least, drying up to an extent. Budgets will be constrained for almost everyone; that’s a given.

According to Forrester, here are the five areas where insurance leaders are likely to be hit hardest.

• Renewals will suffer. The industry is feeling the sting of inflation and weather-related catastrophic hits. The results of both have translated in the form of more expensive labor, litigation, and materials to rebuild. More often than not, this will mean more expensive policies for customers—that is, if customers decide to actually renew. Forrester expects a 20% increase in policy lapses.
• More for more. Losses will have to be made up for somehow. To remedy dwindling premiums and a lack of policies, insurers will branch out into non-insurance services. Another expectation is the addition of value-added services that are fee-based. The range of what that is and could be is vast, and includes various concierge services, roadway assistance during vehicular breakdowns, doctors for a second opinion on the benefits side, and equipment for use in business disaster recovery.
• Not all IT was cracked up to be. Across the industry, tech teams expected that their spend increase would be around 4% this year. Instead, it’s only going to be 2% at most. Not shockingly, the first half of the year will see insurers doing their utmost to cut costs.
• Working to get it done quickly. Not everyone is excited for the “benefits” that artificial intelligence (AI) platforms will bring to the business. While the industry is looking to reach a lofty 70%-75% goal when it comes to hands-free claims and underwriting, regulators are not as keen to see that happen. Pivoting from its concentration on protecting the data of consumers, regulators will instead be looking to ensure that AI models aren’t biased. For insurers, that means that some 75% of short-term projects are being fast-tracked.
• Here today, gone tomorrow. With an approaching recession, inflation on the rise, and investors being much more discerning with their choices, the boon that insurtechs were experiencing just a couple years ago is done. Some 25% of insurtechs, in one way or another, are going away this year. While there will be acquisitions, others will simply fade away into oblivion.

One of Will Rogers’ more famous quotes is, “Don’t let yesterday use up too much of today.” It’s a more optimistic outlook of the past than what Santayana had. Hopefully, the lessons from 2008 and the past won’t go unheeded and will be applied for a better tomorrow.

The author

Michael Wayne is an insurance freelance writer.