"Cost-of-living crisis” ranked as most severe global risk over the next two years, Biodiversity loss and ecosystem collapse” top fastest deteriorating global risks – WEF Global Risks Report 2023  January 12th 2023

Global Risks Report 2023

The Global Risks Report 2023, published by the World Economic Forum in collaboration with Marsh McLennan, examines how widening geopolitical, economic, and societal fissures will trigger and exacerbate crises to come.

Drawing on insights from more than 1,200 experts and policymakers worldwide, the report unpacks some of the key dangers in the short term, highlights escalating risks over the next decade, and examines how competition for critical resources such as food and minerals may play out in alternate futures.

Auto insurance in 2023: 3 predictions, 3 ways to respond

The year 2022 rocked the auto insurance industry’s boat, leaving all aboard concerned with what’s to come.

In addition to inflation, which hit a 40-year high in the U.S. in 2022, auto insurers are also struggling to handle the rising frequency and severity of claims. In addition to inflation, which hit a 40-year high in the U.S. in 2022, auto insurers are also struggling to handle the rising frequency and severity of claims.

Based on industry and driving behavior trends, it’s clear that auto insurance leaders — along with many other industry “captains” — are faced with rough waters as we kick off 2023.

To help navigate, here are three predictions to anticipate along with three ways leaders can choose to respond.

Henry Kowal, product director, Arity

Insurance in 2023: A slow recovery but there is a silver lining

The world is coming to the end of another tumultuous year and the question on everyone’s mind is: what is next for the global economy and the insurance industry? From Swiss Re Corporate Solutions’ vantage point right now, while the firm still sees short-term pain over the next year, there are also glimpses of a silver lining, CEO Andreas Berger states. Broadly speaking, there are three key themes likely to dominate.

Andreas Berger, CEO, Swiss Re Corporate Solutions

Heading into recession – but it’s not like 1970s-style stagflation

My colleagues at the Swiss Re Institute (SRI) expect inflationary recessions to approach major economies like Europe and the US in the next 12 to 18 months. They forecast full-year real GDP growth of just 0.4% in 2023 in advanced economies, which is the lowest prediction since the 1980s outside of the global financial and COVID-19 crises(1). While the outlook in emerging markets is slightly better (2.8% growth in 2023, excluding China), the situation will likely feel akin to recession.

A New Approach to Embedded Insurance

Embedded insurance is one of the most frequently explored topics in insurance today, yet its potential remains largely untapped. We are limited so long as we consider the concept purely with an insurance industry lens. Unlocking the potential of embedded insurance involves a mindset shift from "point-of-sale" to "point-of-design."

The embedded insurance model is not at all new. We define "embedded insurance" as any instance in which an insurance product is sold in conjunction with a non-insurance product. Examples include bancassurance, point-of-sale warranty products, life insurance sold prior to an airline trip and, increasingly, insurance products bundled with vehicles or higher-risk pastimes (such as insurance bundled with ski passes). The emergence of application programming interface (API) platforms has made it possible to bring insurance products closer to their non-insurance vehicles. In these cases, insurance is typically positioned as a "bolt-on" at a point-of-sale (either as an "opt in" or "opt out" choice).

When we approach embedded insurance design as adding a point-of-sale complement, we miss the opportunity to create even more meaningful customer experiences. The opportunity lies in exploring the affinity between the insurance solution and the non-insurance product and how we can build unity in a singular value proposition. Doing so requires introducing insurance at the point-of-design, rather than as a bolt-on at the point-of-sale.

Chris Bassett, senior director Capgemini Invent

Embedded Insurance Distribution Could Exceed $70 Billion in Premium in the U.S. by 2030

Embedded insurance, through which insurance products are distributed by non-insurance brands, could make significant inroads into both personal lines and small commercial insurance business, exceeding $70 billion in premium by 2030, according to a new report by Conning.

Embedded insurance has been widely hailed as a transformative trend in insurance distribution, making insurance far easier to understand and purchase while reducing the coverage gaps that currently leave consumers and small businesses underinsured in the face of many risks. Conning's report, "The Promise and Perils of Embedded Insurance," concludes that the benefits of this approach to insurance distribution have sometimes been exaggerated, but its impact could still be significant.

The report finds that multibillion-dollar investments in technology companies seeking to facilitate embedded insurance solutions have yet to result in a major shift of business towards embedded distribution, with the partial exception of extended warranty type products and some travel insurance. But there is major growth potential across the personal lines market and for standardized small business insurance coverage. The $179 billion personal auto insurance market could be ripe for disruption if manufacturers were to bring insurance in-house, as Tesla has been doing.

2022 U.S. Car Rental Revenue of $36.1B Shatters Records

Despite continuing challenges around vehicle supply, staffing shortages, demand shifts, and the cloud of a recession, the U.S. car rental industry earned an estimated $36.1 billion in revenue for 2022, based on data collected by Bobit. That yearly total represents a 24.7% growth over 2019’s record year and is likely the highest year-over-year gain in industry history.

Meanwhile, the estimated number of new vehicles sold into rental fleets in 2022 represents less than half the total number of vehicles sold in 2019. However, rental companies are holding their cars in fleets longer to compensate.

The high-pricing, tight fleet environment drove another new record for revenue per unit per month (RPU) of $1,424.

GEICO lawsuit decision reversal for woman who contracted STD from insured car

The unusual case of a Missouri woman suing GEICO over claims that she contracted human papillomavirus (HPV) from having sex in a car insured by the company has taken yet another turn, as the state Supreme Court has reversed a previous decision that ordered the insurer to pay the woman $5.2 million.

The Missouri Supreme Court ruled unanimously to overturn a lower court’s ruling that favored the woman, identified only as M.O. The Supreme Court judges added that GEICO should have had a chance to weigh in sooner and sent the case back to the lower court for further discussion, the Associated Press reported.

Court documents said that M.O. had sex with a man she was in a relationship with, in the latter’s car. She claimed that she contracted HPV because the man did not tell her that he had the disease. In February 2021, M.O. notified GEICO that she planned to seek a $1 million insurance settlement from the man, alleging that the man’s auto insurance offered coverage for her injuries and losses.

"Perfect storm": How Canada's P&C insurance industry feels about 2023

Canada’s property and casualty insurance industry may not be facing its “toughest” year ever in 2023, but more than 89% of industry professionals agree the multitude of issues facing the industry at once is creating a “perfect storm.”

“Every year has its challenges,” as one anonymous industry professional commented in a recent Canadian Underwriter survey. “We’ve been in a hard market now for three years. I do believe that the hard market will continue, losses from extreme weather events are increasing, the talent pool is shrinking, all sectors are short-staffed, leading to more issues, and the supply chain is causing delays.

“For all these reasons, 2022 was challenging. I don’t believe any of these issues will be fixed for 2023, but I do believe we will have to deal with all the above issues continuously for many more years to come, with the possible exception of the hard market. It’s easy for us to say it will be the most challenging year ever, because it’s what’s facing us today. What we face today is daunting, but we’ve gotten through it with 100% success so far.”

Revealed – insurers' tech priorities for 2023

Improving customer experience and operational efficiency, rather than growth, will be the driving force for most insurance digitalization efforts in 2023, according to a new survey from Gartner.

The 2023 Gartner CIO and Technology Executive Survey polled 2,203 CIOs – including 91 from the insurance industry – across 81 countries.

“Improving the customer experience (CX) ranked higher in the survey this year than more strategic focuses, such as growing revenue or new products/services development to support transformation,” said Kimberly Harris-Ferrante, distinguished VP analyst at Gartner. “The economic stressors of the coming year are making companies refocus and shift directions to fill gaps which have existed for many years.