Traveling Down a Bumpy Road in Insurance

With rising inflation and interest rates, geopolitical tensions, climate change uncertainty, and growing competition, U.S. insurance carriers face several challenges to delivering consistent, high-quality insurance services and products to the marketplace. In response, the industry is focused on increasing collaboration with partners and investing in innovation to embrace opportunities this year and beyond.

From emerging technologies to shifting customer expectations, and the constant change in the regulatory landscape, almost every aspect of the insurance industry has been altered, touched, or transformed in some way. A recent Gallagher Bassett global survey, “The Road Ahead: An Insight into the Carrier Industry in 2023,” looked at today’s marketplace from the insurance carrier’s point of view. Carriers across industries and geographies provided insights into their views on the top concerns and challenges throughout 2023 across a landscape that continues to shift.

Attracting and Retaining Talent

All industries have reported issues with attracting and retaining talent, and insurance is no exception. Attracting and retaining talent ranked as the number-one challenge for carriers, with over 64% of respondents flagging it as their top concern in 2023. Carriers continue to experience challenges attracting new faces and levels of expertise.

Along with this extensive talent shortage, many carriers likely feel recruitment strain due to growth plans: More than 20% of respondents identified “expanding into new regions” as their business’ biggest goal or opportunity. Growth typically requires an expanded team, and if you do not have the latter, achieving the former can be difficult, if not impossible. As a result, the ongoing talent shortage is having an impact on expansion plans, and while this issue is causing headaches today, there is the prospect of even more pain to come: The U.S. Bureau of Labor Statistics is reporting that 50% of the current insurance workforce will retire by 2036. Organizations that need help finding quality recruits and retaining their best and brightest may need to withdraw or even shelve expansion plans or wait until the economic outlook improves. Of course, streamlining technology to process claims will ease the stress put on an already strained system.

The talent crunch throughout the insurance industry has inspired organizations to focus on recruitment and retention, the onboarding experience, and career path development. Since recruiting new talent remains difficult in the current environment, carriers understand that retaining the talent they have is critical. With that in mind, 14% of executives surveyed indicated that “enhancing the skills of existing team members” was a top goal, and they highlighted the need to invest in employees to improve the retention of their teams. New hires need to understand the opportunities afforded to them across an organization, as they may want to explore new avenues as their careers evolve. Additionally, promoting a culture of greater collaboration and expanded authority levels helps create an attractive working experience for the carrier marketplace, which can be a powerful differentiator.

Further, since 30% of survey respondents reported “enhancing service and claimant experience” as what matters most to their business and to policyholders during this time of change and growth, it makes sense for carriers to work hard to retain the teams they currently have.

Keeping Up With Evolving Technology

It should come as no surprise that technology is occupying the thoughts of carriers more than ever, and the desire to keep pace with competitors can be overwhelming in a sector where minor process improvements can deliver significant results. Among survey respondents, 80% pinpointed “advancements in technology” as the skill or qualification areas they needed more assistance with to achieve better outcomes.

Insurance technology spending in the U.S. is expected to grow by more than 25% in the next four years ending in 2026. More than 64% of respondents said they were looking to invest in technology in 2023 to help improve processes and provide deeper insights into their customers. Meanwhile, 21.4% indicated their biggest goal or opportunity for the year ahead was implementing new business technologies to improve processes.

The pursuit of digital transformation is being driven by consumers. When asked how the expectations of their customers have changed, there was a clear standout among the responses: technology. Specifically, 70% of respondents agreed that today’s customers expect their partners to add value through risk management tools and innovative, technology-based solutions. Therefore, it is understandable that almost 30% of survey respondents consider “keeping up with technology advancement” as one of the primary challenges they face today.

Technological investment cannot be discussed in 2023 without acknowledging the heightened need for real-time data. With the demand from customers to provide more insight, carriers need to be able to efficiently analyze trends and performance. Survey respondents were asked to select up to three technology trends they believe will have the most impact in 2023. The top result was predictive analytics (70%), followed by Internet of Things (60%), automation (40%), artificial intelligence (40%), cybersecurity (20%), insurtech (10%), and chatbots (10%).

Technology has forever changed how the industry operates. However, carriers should never lose focus of what helped them find success—delivering quality. Even in an evolving marketplace, quality people, processes, and systems will always win. Many policyholders cite quality and service level as key factors when making renewal decisions or new carrier selections.

Growth and Expansion

Carriers are under tremendous pressure to grow profitably, but they also face a delicate balancing act in times of economic uncertainty. On one hand, there is a natural inclination to maintain the status quo or hunker down until the storm passes. On the other hand, there is the knowledge that no one ever moved forward by standing still, and there is a fear of losing ground to more ambitious competitors.

There is undoubtedly a need for growth, with many respondents identifying expansion as one of their top goals or opportunities for 2023. This includes, as mentioned earlier, the 21.4% of respondents indicating they want to expand into new regions, and a similar number considering the release of new product lines. Only one other ambition attracted such support: implementing new business technologies to improve processes.

While many carriers identify the opportunity to expand and grow into different regions, they have also expressed concerns about proactively increasing their business in this current economic climate. With inflation rising and many economists predicting a recession in the not-too-distant future, many carriers are looking for cost-effective solutions that are flexible and offer scalability. Beyond having a clear line of sight to the underwriting opportunities associated with expansion, carriers should be focused on differentiating their offerings in the eyes of the policyholder, and identifying strategies to facilitate successful development.

Optimizing the Claimant Experience

Caring for customers has been the foundation of business success for centuries, but recent times have seen carriers adopt customer-centricity as a strategy. This means putting the customer at the heart of all decisions related to products, services, and experiences. Further, the carrier market is highly competitive, and one unpleasant experience can become systemic if not identified early. All of the innovative tools in the world will not matter if quality and service levels deteriorate. Understandably, the most important thing to most U.S. carriers and their clients in 2023 is enhancing service and claimant experiences.

While that may come as no surprise—after all, improving customer experience is a business goal across most sectors—the challenge for carriers is that they are confronted by a client base with ever-evolving ways of thinking. This is reinforced by the 35.7% of respondents who indicated “changing customer expectations” as the main challenge they face in 2023.

To dive deeper, survey respondents reflected on how customer expectations are changing. Of those surveyed, 70% indicated that “customers expect their partners to add value through risk management tools and innovative technology-based solutions.” Additionally, 50% specified that “customers expect more value for money,” 40% reported that “customers expect more risk insight and risk management-related services,” 20% said that “customers expect specialist risk advisory services as part of the policy,” and 20% reported that “customers expect a deeper understanding of risk by sector and size.”

As customers become increasingly insurance savvy and familiar with its protections, they will continue to demand more from insurers, especially regarding claims. In the insurance industry, many products and services can be similar in offering or functionality. Still, superior service, quality, and relationship building are key differentiators in expanding the carrier’s business.

The road ahead provides a great deal of opportunity for insurance carriers, but it is not without bumps and rough paths. For those who can learn to navigate challenging times while understanding what clients need, it will better position them for success, now and in the future.