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5 Insurtech trends that will dominate in 2023
The global insurtech market was valued at $3.85 billion in 2021, according to Grand View Research, and is expected to double in the next decade. Despite this anticipated growth, the industry is set for meaningful turmoil and consolidation in the year ahead.
A recent report by CB Insights highlighted muted funding trends experienced by insurtechs throughout 2022. In Q3, funding dropped to its lowest level since Q2 2022, and deal sizes were down by about a third.
In 2023, as tighter VC funding cycles and recessionary pressures are being felt across the broader economy, we can expect insurtechs to face even more scrutiny.
As we saw with recent insurtech IPOs, the public markets have not been kind. Most of these companies were focused on disrupting or even upending the industry, and their aggressive approach to growth at all costs has yielded volatile results. However, the more recent wave of insurtechs seems to have learned from this, with many of them determinedly recalibrating their strategy to fit with the changing macroeconomic environment and funding cycles. There is no one-size-fits-all approach for insurance, but we can expect the following five trends to dominate the industry in the months ahead.
News
Laid-off tech workers are about to get help from Allstate
Allstate Corp. plans to tap the pool of recently fired tech workers to help the insurer overhaul its business.
The company — best known for auto and home policies — is investing in technology including artificial intelligence and telematics, which sets premiums based on customers' driving habits, to help it tap new clients and markets. Massive job cuts at tech companies could make the hiring search easier, according to Chief Financial Officer Jess Merten.
"We're looking to sort of upgrade talent throughout the organization, so there is an opportunity as folks get let go from other places. Top talent is part of our transformation strategy."
Allstate Chief Financial Officer Jess Merten
The push comes as Allstate, which had about 54,300 employees at the end of 2021, battles rising costs that contributed to what the company warned could be a net loss of as much as $385 million when it reports fourth-quarter results next month. The insurer has also set reserves aside for unpaid claims and costs tied to Winter Storm Elliott.
How to attract the next generation into insurance
Creative, entrepreneurial, and rich in opportunities to improve people’s lives: these words could easily describe what it’s like to work in tech, business, or public service. But leaders argue that the same could be said of an insurance career.
Shifting the younger generation’s mindset about insurance will be key to attracting the next generation of brokers, underwriters, risk managers, and claims adjusters. But the industry needs to reinforce the benefits of working in insurance and steer the conversation to better address Millennials’ career goals.
“Millennials want to make a difference and to help people in their careers, and we should be using this in our recruitment playbook”
Diane Delaney, executive director at the Private Risk Management Association (PRMA), a non-profit insurance education organization.
The industry is also its own best advocate when it comes to dispelling myths about the profession. One of the most common misconceptions is that career options and progression are limited.
Insurance Industry Layoffs: What’s Next for Insurance Agents?
In the current economic climate, layoff (or reduction in force) has become increasingly common. Corporations have been responding with hiring freezes and slowdowns – a telling sign for what some are anticipating to be an extended recession. It is estimated that over 600,000 workers have lost their jobs since the start of the pandemic, with the US Bureau of Labor Statistics reporting that the jobless rate peaked at 14.7% in April 2020—the highest it had been since the Great Depression. According to a Crunchbase News tally, more than 91,000 workers in the US tech sector have been laid off in mass job cuts in 2023.
The Hanover reports Q4 cat losses of $190m, mostly from Elliott
P&C insurance company The Hanover has reported estimated catastrophe losses of $190 million for the fourth quarter of 2022, of which $165 million, or 87%, were driven by Winter Storm Elliott.
At this level, the pre-tax loss represented 13.9 points of net earned premiums, and was approximately $137 million above the company’s Q4 catastrophe assumption.
The loss also raises The Hanover’s combined ratio to 108.0%, up from 99.8% for the same period last year, when catastrophes accounted for only 7.7 points.
Excluding catastrophe losses, the combined ratio would be 94.1%, versus 92.1% last year.
Taking this and other currently available information into account, The Hanover expects to report an after-tax net loss per share of $0.33 and operating loss per share of $1.05 for Q4.
Full claims automation is not science fiction
Inflation will pose a lasting challenge to the insurance industry, and it is questionable whether insurers will be able to compensate for rising claims costs on the premium side. Insurers need to become more efficient, as automation is developing into one of the significant drivers of success.
The industry is facing a critical period that will have a lasting impact on many companies in the market. AM Best data shows that inflation has already affected the industry in 2021. Increasing losses in motor insurance, medical malpractice and general liability lines have driven the market to an underwriting loss, despite premiums increasing by 9%. In 2022, the situation became worse. The ongoing economic pressure will force insurers to improve their operational processes. Automation will play a central role in this.
Our surveys among insurers show that automation is seen as the most important value driver within the industry. The potential is big in almost all areas of the value chain, from reporting and portfolio management and other back-office functions to sales, asset management and risk management. Around the globe, insurers are launching projects to automate risk analysis, underwriting and pricing, sales management and new business, data management, document management, and actuarial processes such as reserve building.
Michal Trochimczuk, is the managing partner of Sollers Consulting
AM BEST TV: EY’s Majkowski: Embedded Insurance Could See Significant Growth in 2023
Ed Majkowski, EY Americas consulting leader, expects to see embedded insurance grow in the year ahead saying, “it is hard to find an automotive manufacturer today that does not have some initiative to launch insurance.”
News Analysis: Duck Creek is a Private Company Once Again
[Ed. Note: Excellent Coverage] The top-three P&C core system provider is likely to see a period of austerity with regard to operational costs, but will enjoy the strategic benefits of not being tied to quarterly expectations.
Miles O’Donnell, Junior Reporter, Insurance Innovation Reporter
Verisk Adds Hail Impact Energy, Tornado Probability to New Respond Solutions
The detailed real-time data gives insights that will help insurers to efficiently deploy resources and more accurately forecast claims after a severe weather event.
Verisk (Jersey City, N.J.) has announced its addition of Hail Impact Energy and Tornado Probability to its Respond weather solutions. With this enhancement, insurance professionals can now get highly detailed, real-time data that gives insight into potential damage from hailstorms and tornadoes to help efficiently deploy resources and more accurately forecast claims after a severe weather event, a vendor statement says.
Hail Impact Energy estimates the total energy of hail when it hits a surface and incorporates Verisk’s existing Respond hail products that account for hail size, duration, and probable severity, the Verisk statement explains. Tornado Probability provides what the vendor characterizes as a highly granular first look at where tornadoes likely hit by leveraging horizontal and vertical radar pulses (dual-polarization radar). Both products are updated every 5 to 10 minutes, the vendor reports.
Anthony R. O’Donnell, Executive Editor, Insurance Innovation Reporter
The Worldwide P&C Insurance Software Industry is Estimated to Reach $28.5 Billion by 2031 at a 9.6% CAGR
According to this report the p&c insurance software market was valued at $11.6 billion in 2021, and is estimated to reach $28.5 billion by 2031, growing at a CAGR of 9.6% from 2022 to 2031.
The public cloud is an IT model in which a third-party provider manages on-demand computing services and infrastructure that is shared across multiple organizations via the public Internet. The public cloud makes computing resources available for purchase by anyone. In addition, a public cloud is typically shared by multiple users., whereas, a private cloud, on the other hand, refers to cloud-based services that are hosted within an organization.
An increase in digital transformation among industries and rising penetration of internet & mobile devices across the world are boosting the growth of the global P&C Insurance software market size. In addition, the growing need for finance among businesses and individuals to insure property positively impacts the growth of the market.
Warming to Make California Downpours Even Wetter, Study Says
As damaging as it was for more than 32 trillion gallons of rain and snow to fall on California since Christmas, a worst-case global warming scenario could juice up similar future downpours by one-third by the middle of this century, a new study says.
People
Hub hires former Aon executive Carol Murphy
Hub International Ltd. named former longtime Aon PLC executive Carol Murphy executive vice president and casualty leader.
Ms. Murphy spent more than 25 years at Aon and was most recently Chicago-based chief client officer, U.S. casualty, at the brokerage. In addition to placing casualty risks, she specializes in loss portfolio and assumed liabilities transactions.
In 2009, Ms. Murphy was named one of the Business Insurance Women to Watch.
Recommended Events
Payments Webinar - CCC Intelligent Solutions
Don’t miss CCC’s VP of Payments Kelli Svymbersky, MBA and Forrester's Ellen Carney in The Check-less Future of Insurance Claims #webinar, moderated by Stephen Applebaum on Feb 1, 2023. Register now!
A critical moment of truth for insurance claims is the orchestration and automation of payments within the claims ecosystem. These important steps and tasks provide resolution for policyholders and service providers that repair, restore, and rehab a loss. As the nature of payments transforms to meet growing customer demand for richer digital experiences - from click-and-collect to mobile payments - the legacy check-based or Electronic Funds Transfer (EFT)-based options for insurance claims disbursement models alone are no longer sufficient.
Join CCC Intelligent Solutions and Guest Speaker Ellen Carney of Forrester Research for their take on why and how claims payments are changing, and what it means for insurers, claimants, and the entire claims ecosystem.