Insurance has traditionally been viewed as resilient to recession and economic uncertainty. Yet, besides the tough economic conditions, the insurance industry is facing an unprecedented number of business challenges: increasing claims severity rates due to supply chain issues and rising inflation, climate risk and ever more frequent natural catastrophes, increased regulatory oversight, and greater customer expectations.
Normally, in a difficult environment, insurers would be tightening their belts, yet in 2023, Aite-Novarica Group anticipates many insurers taking a different approach by increasing investment in IT and implementing new technologies to improve operational efficiencies, increase revenue, and enhance customer experience.
Here are some of the top trends Aite-Novarica Group sees dominating the property/casualty space in 2023:
- The new insurance core ecosystem will expand. Insurers often identify point solutions with use cases across their organization but lack the resources necessary to integrate with so many in parallel. Core system technology providers are expanding their “hubs” or “marketplaces” for preintegrated and certified third-party applications that add value to an insurer’s solution and allow them to compete in today’s market.
- Speed of business will continue to accelerate despite a recession. Competitive pressures on insurers mean that slowing down on strategic IT delivery is not an option, and insurers will be expected to find expense reduction while continuing to accelerate the pace of technology delivery.
- Transformation will move beyond core systems. As many insurers’ core modernization projects conclude, transformational efforts are shifting to the next round of business capabilities to be optimized and revolutionized. Ongoing revenue and expense pressures, coupled with talent shortages, are pushing insurers to look for operational efficiency gains across the enterprise.
- Innovation will shift from hobby to competitive advantage. The pandemic and other evolving changes such as climate risk, supply chain disruption, and volatile global economies have pushed insurers to embrace innovation. New technologies will become a crucial element of an insurer’s ability to stay ahead of future disruption and changing market conditions.
- There is a growing AI conundrum. As insurers expand their adoption of AI, they need to contend with forthcoming regulations and address potential model bias. Insurers may begin to implement AI risk management programs to monitor and understand decisions made by AI models and ensure fairness and transparency.
To learn about the rest of the top 10 trends Aite-Novarica Group foresees impacting the property/casualty market in 2023, please read our report Top 10 Trends in Property/Casualty, 2023: Turning Disruption into Opportunities or reach out to me at [email protected]. You can also watch the recording of our February 9th webinar, where we explored each of these trends in detail. Click here to access the recording.