- KPMG has made predictions for the insurance industry in 2024.
- Key trends to watch out for include an increase in strategic M&A activity, the integration of generative AI, addressing the talent shortage, mitigating risks such as climate and cyber issues, and staying ahead of the curve with agile and innovative approaches.
KPMG has released its predictions for the insurance industry in 2024. The industry is expected to undergo significant changes and challenges due to the macroeconomic environment, the adoption of digital technologies, extreme weather events, and increased regulatory pressure. Here are the key trends to watch out for:
1. Ramp up of strategic M&A activity
With the stabilization of interest rates, insurance companies are expected to transition from a passive acquisition approach to a more strategic one. This means divesting non-core businesses and acquiring businesses that offer new capabilities, particularly in the insurtech space. KPMG’s CEO Outlook revealed that over half of insurance CEOs are likely to pursue acquisitions to achieve their strategic goals.
2. Generative AI to transform operations and cut costs
The integration of generative AI is expected to revolutionize daily operations in the insurance sector. It can enhance communication with policyholders, streamline claims processing, reduce fraudulent activities, and automate underwriting and pricing processes. However, there are risks associated with AI utilization, such as algorithmic bias and privacy concerns. Regulatory guidance is lacking, but recent developments are expected to encourage insurance leaders to embrace AI while providing necessary guardrails.
3. Addressing the talent shortage
Smaller insurance companies may face challenges in sourcing individuals with tech expertise, so attracting and upskilling employees with generative AI skills is crucial for staying competitive. Building a customer-centric business model and compiling valuable customer data require tech-savvy talent.
4. Mitigating risks: Climate, cyber, and social inflation
The insurance industry faces risks from extreme weather events, leading to higher insurance claims and losses. Companies need to invest in new technologies and tools to help homeowners mitigate risk. Regulatory developments, such as climate disclosure rules, are also expected to impact the industry. Additionally, insurance businesses need strategies to mitigate cyber risks and address social inflation, which has increased claims costs.
5. Staying ahead of the curve
To remain competitive and relevant in a rapidly evolving landscape, insurance companies need to embrace new technologies and meet the changing needs of policyholders. Agility and innovation are key.
The insurance industry in 2024 will need to navigate these trends and challenges to ensure future growth and success.