Top insurance industry trends for 2023
See six trends our experts at hx believe will shape the insurance industry this new year and beyond.
As an industry, insurance has traditionally been cautious about change. However, in the last few years, many insurers have shown incredible adaptability and resilience in the face of varying obstacles, from the COVID-19 pandemic to the economic impacts of the ongoing war in Ukraine.
Looking back at 2022, we saw lots of improvements in technology adoption across the ecosystem, creating a highly competitive environment across customer acquisition and talent retention. It is clear that insurance carriers who continue to build on the momentum from last year and prioritise innovation and customer-centricity will be best positioned to win this new year.
For the future, we can anticipate multiple hurdles, from rising inflation and interest rates to a potential recession and increased competition from new market entrants. Here are six trends our experts at hx believe will shape the insurance industry this 2023 and beyond.
#1 – Continued emergence of new risks
The world's risk landscape has changed rapidly over the past decade, with uncertainties spurred by global challenges, government regulations and economic situations. According to McKinsey's 2022 Global Insurance Report, around half of insurers globally are not earning their cost of capital in revenue.
Insurers and underwriters know while increasing risk has serious consequences on global society, the same risk drives demand and opportunity for their industry. To stay ahead of the competition and better support ever-growing customer needs, insurers must leverage technology tools to harness data and act proactively on these market conditions, adjusting their capabilities with speed and agility.
#2 – Looking to the class of 2023: new entrants vs legacy insurers
Hard markets, like the one we're currently living in, usually attract new capital and carriers, creating increased competition in the ecosystem. The Insurtech movement, advancement of emerging technologies, and increased appetite of the global tech titans are all contributing to new entrants, partnerships, and business models.
These new insurers are entering the market with improved processes and agile methodologies, moving quickly and innovating at the speed of light. Older carriers that have historically relied on heavy legacy architecture are forced to simplify these systems and build new, more modern technology stacks. For example, in pricing, insurers can no longer rely on legacy tools to assess and price risks, consuming long amounts of time and resources — forward-thinking insurers are adopting technology tools to optimise the pricing process and meet customer demands faster than ever.
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#3 - Getting ahead in the war for talent
The talent war is one of the insurance industry's biggest challenges today. The sector is chronicled by an ageing workforce, increasing the need for fresh talent every day. Carriers may only be able to fill and retain their workforce through 2023 if changes are made throughout the organisation, from increased technology adoption to an improved culture.
For many of today's young workforce, a workplace underpinned by access to the technology needed to work efficiently, a great culture, equality, diversity, and inclusion is a crucial factor in choosing a place of work and, subsequently, how long they stay at a company.
#4 – Technology-enabled distribution
The future of every industry is increasingly digital, with ever-growing customer expectations. Some industries are more advanced than others, delivering seamless digital experiences to customers with a few taps on a mobile device.
The insurance industry needs to further embrace digital solutions where they make sense, for example, in distribution. We're seeing many examples of tech-enabled distribution throughout the market, from the Amazon insurance store to large brokers and carriers collaborating on API gateways to facilitate risk pricing in the specialty insurance market.
#5 – Data-driven insurers will win
As digital channels multiply, the volume of customer data generated is growing exponentially. This presents both a challenge and an opportunity for insurers. On the one hand, insurers need to find ways to manage and store this ever-growing volume of data effectively. On the other hand, insurers leveraging this data effectively will gain a competitive advantage.
The insurance sector has historically been slow to adopt new tech like AI, which is only now being deployed to help insurers with tasks such as claims classification and data ingestion. Insurers who prioritise technology adoption for data management and processing will enjoy the biggest benefits this new year.
#6 - Leveraging legacy tech for the future
This new year, it's more essential than ever for insurers to prioritise data-driven technology adoption. However, this does not mean these insurers should abandon their legacy systems. Integrating modern technology solutions to capitalise on the data in existing systems is key, especially for larger institutions with vast amounts of historical data.
While newer entrants without legacy tech may be more agile, larger traditional insurers could leverage their legacy tech to enjoy competitive advantages when the hard market changes.
The insurance industry needs to keep the momentum going this new year. The road ahead is dotted with many challenges, but most carriers are well on their way to the future of insurance we all want to see — agile, innovative and technology-focused.
Insurers must continue to build on the steps taken toward digital transformation last year, embracing more technology adoption and prioritising data analysis to stay ahead of the competition and meet customer needs.
At hx, we're enabling the future of insurance with our next-generation pricing tool, hx Renew, enabling high-growth insurers to unlock access to data, refine actuarial and underwriting processes, and enable automation at scale. Our customers have generated real business value across multiple business lines and have enabled their teams with technology for a better work experience.
Reach out to us to learn more about how hx Renew enables data-driven decision-making and loss ratio benefits of up to 2%.
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