Lewis & Ellis, LLC

Top Trends To Watch In Property & Casualty (P&C) Insurance

Property and Casualty Insurance
by Katie Koch
Curious what trends will affect the P&C insurance market in 2024? Find out in this blog.
Curious what trends will affect the P&C insurance market in 2024? Find out in this blog.

The PC insurance industry is ever-changing, as are most insurance sectors.

Here, we're discussing the latest trends shaping the sector and how they may affect a PC insurance company by influencing underwriting practices and risk management strategies.

4 PC Insurance Trends To Keep Up With

From digital transformation to climate change, there are quite a few factors that may influence how PC insurers do business. These four trends are ones to keep in mind as we make headway in 2024 and beyond.

1. Digital Transformation

Digital transformation continues to influence nearly every industry on the planet. Compared to where society was in terms of technology as little as 30 years ago, the evolving nature of tech means our digital capabilities grow greater with each year — and insurers need to keep up.

According to a 2021 survey, more than half (57%) of respondents want a better online experience from their insurer. Moreover, 77% of people aged 25-44 would use an app to manage their insurance and other financial products.

In PC insurance, the rise of digital channels has enabled insurers to more seamlessly engage with customers and offer more personalized services and quicker response times. This not only helps to improve the customer experience but can also enhance your business's overall efficiency.

With platforms built for collecting and analyzing data, insurers can take advantage of digital transformation to make everyday processes easier — or even completely autonomous. For example, by leveraging analytics tools, such as generative AI, insurers can assess risks more accurately, detect fraudulent activities and streamline underwriting processes. This helps insurers improve their decision-making and price policies more wisely.

Additionally, automation is playing a crucial role in claims processing. Systems powered by artificial intelligence can expedite claims, reduce human errors and enhance the overall claims experience for both customers and insurance companies.

2. Rising Concern of Climate Change

The effects of climate change can be felt the world over and throughout many industries — and PC insurance is no exception. The year 2023 was marked by extreme weather, and an increase in harsh meteorological events such as hurricanes, wildfires, floods and droughts means that insurers are at a heightened risk of more frequent claims and higher costs per incident.

To combat this, insurers can incorporate climate risk assessments into their underwriting processes. Using advanced modeling techniques, they can better understand and quantify the potential impact of climate-related risks on portfolios, which can ultimately help insurers adjust pricing, set adequate reserves and develop strategies to mitigate the impact of climate change on their business.

3. Economic Uncertainties

Economic headwinds are particularly gusty these days, with factors like inflation, geopolitical and environmental challenges and capital constraints affecting investment portfolios and overall financial stability.

A study by McKinsey outlines four critical challenges that PC insurers must overcome in the face of these uncertainties:

  • Softening and hardening of personal lines: "Rising claims inflation and growing competition are squeezing profits," the study noted, and there's a race to "decarbonize underwriting portfolios."
  • The evolving nature of risks: Natural catastrophes (NatCats), the net-zero transition and supply chain and cyber risks are fast evolving. Carrier management needs to address protection gaps rather than reduce exposure.
  • Tightening capacity in traditional reinsurance capital and alternative capital markets: With the strong hardening that happened in January 2023, the full extent of the capacity squeeze is still uncertain, according to the study.
  • Transforming capabilities: The study notes that underwriting and claims are shifting from "an art to a science," and commercial carriers must prepare for that change.

4. Evolution of Cyber Risks

In correlation with the first and third trends on this list, the increasing demand for and use of digital tools and channels unfortunately means that the frequency and severity of cyber threats have also surged. In fact, projections estimate that cybercrime will cost the world economy $10.5 trillion per year by 2025.

Some forecasts estimate that by 2027, the market share of the cyber insurance market will grow to $33.3 billion.

The expanding threat landscape, including ransomware attacks, data breaches and other cyber incidents, necessitates a paradigm shift in underwriting approaches and risk management strategies.

Insurers must develop specialized cyber insurance products, incorporating comprehensive coverage for financial losses, liability and mitigation expenses, and the evolving nature of cyber risks demands continuous innovation in policy structures and pricing models.

Robust Risk Management for the Years Ahead

These trends, and more like it, will continue to shape the PC insurance sector now and into the future. Insurers require robust risk management strategies to face these challenges head-on.

Lewis & Ellis offers expertise across various insurance sectors, including property and casualty insurance to offer:

  • Expert liability estimates and reserve valuations.
  • Optimized reinsurance services.
  • Effective pricing and loss forecasting solutions.
  • And more.

Contact Lewis & Ellis today — your trusted partner in property and casualty insurance.

News

Categories

Consultants to Contact