Economic Anxiety Prompts Insurance Cutbacks.  May 16th 2023

Economic anxiety prompts insurance cutbacks among consumers

As uncertainty continues to swirl around the national economy, consumer confidence in their personal finances has extended its decline. According to a new Nationwide Agency Forward survey (PDF) , consumer sentiment on the economy and their personal finances has deteriorated since September 2022, with only 16% of consumers positively rating the overall U.S. economic condition, an 8% decrease from last year. Additionally, only 39% give a positive rating of their own personal finances, also 8% lower than last year.

Looking for ways to cut cost In efforts to save money and manage the impact of inflation, 57% of consumers admit using their savings in the past year for everyday expenses like gas, groceries and housing expenses. Others reported eating out less often (54%), driving less (37%), and delaying major purchases (32%) within the last twelve months.

Eliminating insurance for potential savings
Among the top financial concerns for consumers is the cost of insurance, with 17% rating it among their top financial worries. 51% of consumers said they are looking for ways to save money on their existing insurance policies.

26% are decreasing or plan to decrease coverage/limits on existing policies 23% have or are considering switching to a new insurance agent 20% have already removed a policy from their coverage or plan to in the next six months

“Insurance is a layer of security that policyholders can rely on, especially as consumer prices have risen in the face of inflation. It provides the peace of mind knowing that you’re covered if you encounter a significant claim while your personal budget is stretched thin,” says Beth Riczko, Nationwide’s President of P&C Personal Lines. “My advice, if you are looking at insurance as a way to save, talk to an agent. Make sure you understand the implications of policy changes and how that would impact your current finances.”

If your insurance organization isn't digitizing, you'll lose clients

The 2022 Agency Growth Study conducted by Liberty Mutual and SafeCo reported that digital-first customer engagement has become the standard across industries. Roughly three out of five customer interactions happened online in 2022, compared to less than half in 2019.

While these stats don’t signify an end to in-person encounters, they do illustrate the significant change in customer expectations that companies need to keep up with.

The insurance industry is no exception. Although digitization in the industry grew during the pandemic, the study referenced above suggests insurance-industry modernization has begun to slow down.

The study also found that agencies that had invested in digitization grew 70% faster than agencies that hadn’t, revealing the importance of implementing digital transformation to stay competitive. For agencies still wary of digital transformation costs and processes, the question is actually: Can you afford not to? Let’s explore.

Axa beats first-quarter expectations

Axa, Europe’s second-biggest insurance company, posted a better-than-expected key capital buffer measure in the first quarter, reassuring investors of its capacity to generate cash as it navigates a higher interest rate environment.

The group's solvency II ratio — a measure of its capital strength under EU risk measurement rules for insurers — stood at 217% at the end of March, up 2 percentage points from the end of 2022, driven by strong operating return.

“Solvency was strong at 217%, better than consensus estimate of 208%,” Morgan Stanley said in a note.

KBW and Jefferies noted that the company's new operating capital generation guidance for 2023, between 25 and 30 points for 2023, also beat market expectations.

The French insurer's first-quarter sales rose 2% from the same period a year earlier to €31.8 billion ($35.01 billion), as growth of its property/casualty policies offset a fall in revenue from savings products in France and Italy.

What does risk management innovation look like?

Across the insurance ecosystem, there has been a hastened adoption of digital tools and processes, spurred on by the pandemic and supported by technology breakthroughs such as artificial intelligence.

The push toward the bleeding edge, where a range of vendors clamor for attention to their latest technology, begs the question: What does true risk management innovation look like?

According to Michael Combs, CEO of claims solutions provider CorVel, true innovations are those that wipe the slate clean and allow risk managers to tackle issues in previously unthought-of ways.

“If we were starting from scratch, the question is what can we do today to most effectively manage risk?” Combs said at RIMS’ 2023 RiskWorld conference. “Too often we’re constrained by how things are today and we need to look past that. We need to envision a future where things are very different.”

Innovating risk solutions is in the insurance industry’s DNA, noted Tim Hardcastle, CEO of Instanda.

“MGAs the world over are thriving and raising the bar on innovation through specialization,” Hardcastle said. “In cyber, we’re moving to preventative models to reduce the risk of distributed denial of service attacks. And in the actuarial world, data science, data analytics and machine learning are reshaping how risk management is done. History will recall this period as risk management’s true age of innovation.”

Tech is no death of the insurance salesman

Duck Creek Technologies Inc., an insurance software company, commissioned a survey this year of over 2,000 insurance policyholders in 13 countries and found that 44% of them prefer human interaction — an increase of 9% from a 2022 survey.

Yet, 93% of consumers are confident they have the proper coverage, irrespective of which channel they used to purchase the insurance policy, according to results of the survey released Tuesday.

“As the insurance industry continues to evolve, it is crucial for providers to listen to the needs and preferences of their customers,” Jess Keeney, chief product and technology officer at Duck Creek, said in a statement.