Beyond 2020 - What Trends Will Shape U.S. P&C Insurance Over the Next 10 Years?
Amid the COVID-19 chaos and challenges, insurers can easily lose sight of the other issues and developments more quietly affecting the insurance business. Perhaps that’s why a client asked us to look beyond 2020 to answer this question: What trends and issues will have a significant impact on our industry over the next decade?
After numerous client discussions, we compiled a trends list and asked our reinsurance teams - account executives, account managers, claims executives, underwriters, actuaries, and executive management - to grade the impact of 17 trends over the next decade as “High”, “Moderate”, “Low” or “None/Negligible.” Here we share their combined perspective on the trends that warrant attention beyond COVID-19. Not surprisingly, the pandemic has spawned new trends that could fade or persist, influencing the longer view. However, the seeds of most trends were planted well before 2020.
We also observed some differences in the rating of trends by profession, organizational level and years of experience in the industry.
Trends for the Next Decade
The five trends with the highest impact ratings are:
- Data Usage
- Climate Change
- Virtual Engagement
- Physical Footprint/Building Evolution
It’s not surprising that insurance company employees would see Data Usage as a critical factor over next 10 years. Most of these trends were on radar screens before 2020. The appearance of Virtual Engagement and Physical Footprint are likely attributable to COVID-19.
However, the five trends that emerged at the bottom of the impact rankings offered some surprises, with trends that do not directly influence the everyday underwriting, sales or claims challenges facing most carriers today, at least for the rank and file:
- Infrastructure Conditions
- Cultural Shifts
- U.S. Self-Reliance
- Workforce Evolution
A final observation is about the gap between the high and low ends, signaling the amount of agreement or disagreement over the importance of the trend. Of the top five Highest + Moderate trends, Climate Change had the most Lowest + Negligible grades. Conversely, Data Usage drew the most consistently high response. We do not know the reasons behind any individual impact scores, so the interpretation of their relativities is left to you.
Profession and Position
Do insurance company personnel in different positions, disciplines or age groups express significantly different views of industry trends? Back to Climate Change, we did find that individuals focusing on Property business ranked Climate Change as the number one trend, while it dropped to number four for those specializing in Casualty business. Both groups placed AI/Automation and Data Usage in their top three.
For most disciplines and levels within the company, AI/Automation led for high impact, and Data Usage received the Highest + Moderate impact grades. We thought that underwriters and account executives/managers might present some contrasts, but they listed the same top five trends, albeit in a slightly different order. A few variations are noteworthy. Executive Management led with Data Usage and AI/Automation, but Big Data vs. Privacy made the top five cut while Virtual Engagement did not. The Actuarial team also identified Big Data vs. Privacy as well as the Gig Economy as a top five trend, but AI/Automation did not qualify.
Years of insurance industry experience did not affect the high ranking of AI/Automation or Data Usage. The fundamentals still apply as time goes by. However, Virtual Engagement was a number one trend for the 0-10 years of experience segment and fell to number three or lower for the succeeding 10-year spans.
Commentary From the Survey
Among the few dozen comments submitted with the survey, a few themes stand out. First, “wealth disparity” and “income equality” are clearly on the minds of many in our industry. Strong concerns about fairness and stability were expressed. Second, “social inflation” was cited as a trend posing threats to industry profitability. The forces driving up verdicts and settlements are still at work and will impact insurers throughout and beyond the next decade. In the same vain, “interest rate deflation” will continue to exert stress on underwriting results.
The pandemic has also prompted comments on solutions for “uninsurable risks,” such as pandemics and widespread flooding. The quality of food and products raised concerns as well. Finally, one survey commenter observed that we tend to overestimate “revolutionary change” and completely miss or underestimate the impact of the “unknown unknowns” that sneak up on us.
We hope you found these trends as interesting as we did. While not a scientific survey by any means, the perspectives of insurance professionals across disciplines, levels and tenure may offer insights on the challenges within any insurance organization.
We value the opportunity to discuss insurance issues and trends with our clients. Those conversations and frank exchanges enrich both companies and together build a better view of what lies ahead.