2024 And Beyond: Change Becomes Non-Negotiable

by Stephen Applebaum and Alan Demers —

We cannot imagine a riskier undertaking than predicting the future given the totally unforeseeable events of recent years, the current state of the insurance industry and the world in general. On the other hand, there are some basic principles that help guide us through the exercise. In addition, we have hedged our prediction by widening our guidance to not just 2024 but also to the near future.

Change Becomes a Constant

The one thing we can count on is that very few of yesterday’s approaches will be successful in tomorrow’s world. As they say, the only constant now is change. It has become non-negotiable. Technology, especially AI, will be a major driver.

Insurers Breaks Out of its Bubble

Insurers cannot continue to operate in a bubble. Other segments of financial services and industries have already realized that diversification, partnerships, and bold innovation are critical to success – and perhaps even survival. This is especially evident in bottom line under-performance of P&C insurers.

Technology Moves Beyond Enabler

It has become clear that technology is much more than just an enabler but rather is quickly becoming the life blood of all commercial undertakings. Those who see it as only an optional tool will be left behind. Use cases will expand beyond the basics to meaningful and measurable business outcomes.

Work and Workplace Shifts

Work, employment and the workplace as we have known them has been forever changed and will continue to change as the workforce ages and businesses continue to shed staff, enabled by technology and more efficient business models while attempting to lure, cajole or force return-to-office. There are significant opportunities for innovators who create new business models that can leverage these realities.

Consolidation Marches On

Consolidation amongst competitors and strategic partners will continue apace, fueled by the growth of private equity and growing capital supply on top of already record stockpiles of “dry powder” (investment capital). Recent slowdowns of such transactions are a temporary reaction to overheated start up business valuations and rising interest rates, neither of which will persist. Small independent businesses will find it increasingly difficult to earn a profit and compete with consolidated behemoths.

Transportation Evolves and Converges

The automotive, and transportation industries overall, have already begun their inevitable transformation as major industry segments converge on some future state which is yet to be clearly defined. Whether autonomous vehicles will become reality at some future date is almost irrelevant for now. What is clear is that the key participants in this converged landscape will be car makers, technology providers, aftermarket suppliers and service providers and – if they act quickly enough – insurers. The economic and safety benefits of advanced safety and driver assistance technologies will not fully offset the impact of increasing distracted and reckless driving behavior.

Connected Everything and Everybody

Connected devices and the IoT – including cars, smartphones, wearables, and sensors – will continue to grow in both number and functionality. This will spawn services of many kinds, along with significant revenue opportunities, for those who “own” or “control” the connections. Forward thinking auto makers and auto insurers will have no choice but to collaborate on telematics enabled solutions from subscription services to safe driving, emergency response, accident management and crash detection. We could conceivably see some combination between auto makers and insurers. Consumers will increasingly resign themselves to sharing defined personal information in exchange for perceived savings and these other personal safety benefits.

Climate Change Accelerates ‘Predict and Prevent’

Climate change will continue to attract more headlines and global conference than meaningful solutions, but insurers cannot afford to ignore the extreme implications to their businesses. Simply withdrawing from riskier markets and continuously increasing premiums is not sustainable. And adaptation may well overtake mitigation as a pragmatic strategy to cope with the effects of climate change rather than the cause.

Emerging technologies which can accurately predict extreme weather events further into the future and down to rooftop level accuracy will enable insurers to better price and reduce risk while also providing valuable protection to their customers. Insurers will shift from a ‘repair and replace’ to a ‘predict and prevent mindset’ across the enterprise, including Product, Process, Marketing, Distribution, Underwriting and Claims

Auto Insurers Transform Products and Processes

Auto insurers face an unprecedented number of daunting challenges. Growing vehicle complexity and aftermarket supply chain inflation have driven combined ratios to record levels while consumers are reacting to round after round of premium increases by seeking lower cost coverage and in some cases, dropping coverages. Direct writers are fiercely competing on price for each other’s customers and agency writers are seeking more effective and efficient distribution methods and models. Customer satisfaction – and ultimately loyalty – continues to erode as technology enabled solutions are imperfect and displace comforting human interaction. Carriers who can transform their products and processes to overcome these challenges have an enormous market opportunity.

Further consolidation involving the largest auto insurers is inevitable, in a market where each 1% U.S. market share is worth almost $3 billion in annual premium for Private Passenger Auto. Progressive will take market share and come much closer to overtaking State Farm as #1 auto writer and the top 10 rankings will be further re-ordered through acquisition.

Wild Cards in 2024

Any one of these events could alter our future in material ways.

Global Wars; how widely will they spread?
Presidential Election; a referendum on American Democracy?
Will AI eat software?
S. – China Relations; will economic growth objectives supersede geopolitical ambition?
Crime – both Cyber and Physical; how will it change public policy and consumer behavior?

In the new future, people will still make the difference between highly successful companies and others, but these people will have to be as conversant and comfortable with technology as they are with other people.

About the Authors

Stephen E. Applebaum, Managing Partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem focused on insurance information technology, claims, innovation, disruption, supply chain, vendor and performance management. Mr. Applebaum is also a Senior Advisor to Waller Helms Advisors.  WHA is the premier investment banking boutique focused on the crossroads of the Insurance, Healthcare and Investment Services sectors.

Stephen is a frequent chairman, guest speaker and panelist at insurance industry conferences and contributor to major insurance industry publications and has a passion for coaching, mentoring, business process innovation and constructive transformation, applying disruptive technology, and managing organizational change in the North American property/casualty insurance industry and trading partner communities. He can be reached at [email protected].

Alan Demers is founder and president of InsurTech Consulting LLC, with 30 years of P&C insurance claims experience, providing consultative services focused on innovating claims. After initiating and leading claims innovation at Nationwide, Demers collaborates in the forefront of InsurTech, partnering with insurance leaders, startups, design thinking experts and service providers to modernize personal, commercial and specialty claims.

As Vice President of Claims Innovation at Nationwide, Alan conceptualized a vision and road map to build next-generation claims, automating and digitizing claims experiences, progressing from inception through prototype testing. He served as a founding member of the Corporate Innovation Council and played a key leadership role in establishing goals, practices and an innovative culture at Nationwide.

Alan is an accomplished executive leader and has worked for two separate Fortune 100 insurance companies in a number of corporate, national and regional leadership roles among personal, commercial, non-standard and specialty lines claims. Prior to leading claims innovation, he served as head of claims for Nationwide’s commercial agribusiness and non-standard claims. Other noteworthy roles include: field vice president, regional claims officer and national catastrophe director, quality assurance director.

Alan began his career with Aetna as a claim adjuster and advanced to a corporate claim consultant, prior to joining Nationwide in 1995.

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