As 2022 closed, insurers around the world faced a foreboding outlook for 2023. Big catastrophe losses, a war in Europe, and stubborn inflation spurred insurers to take key actions to ensure profitability, including increasing premiums and cutting expenses. In the midst of these pressures came a blockbuster technology innovation, ChatGPT, that promises to revolutionize business — and create formidable risks. And now, insurers will be awaiting the impacts on risk and rates from a surprise war in the Middle East.

So what’s ahead for 2024? Insurers will return to greater profitability, even if their hoped-for stability is slower in returning, as they continue to pass on higher costs to customers and benefit from rising interest rates. This will lead to moderate tech budget increases as well as more appetite for tech and product innovation. And even though carriers will explore embedded insurance and generative AI, insurers won’t see much impact on their top or bottom lines from either. Climate adaptation, on the other hand, will become very real, as more insurers scale back activities in even more regions affected by climate change and explore new types of heat-linked policies.

Here’s a closer look at a few of Forrester’s 2024 prediction topics for insurers:

• Half of the embedded distributors will struggle to convert consumer interest to sales. Embedded insurance — where insurers embed their products and services into third-party experiences such as vehicle purchases or mortgages — is hot. When we asked online adults how likely they are to consider an embedded auto insurance product, 41% of those in the US and 38% in France — and 59% of US Gen Zers — indicated they would do so when buying or leasing a personal vehicle. But, factors such as keeping policies with a single insurer, the role of the agent, and lack of trust in both the brand and the ability of the embedded seller to answer customer questions, are hindering sales.
• Tech spending will see modest 5% growth to tackle CX and foundational capabilities. Insurers are torn between seemingly competing initiatives: improving CX, growing revenue, and reducing costs. In 2024, tech teams will invest in areas that deliver on all three priorities. Meanwhile, projects with uncertain ROI, such as moving toward in-house development and emphasizing open-source technologies (at the bottom of insurers’ priority lists) will see cuts.
• Insurers will drop ambitious climate collaborations, and vote instead with their feet. Launched with much fanfare in 2021, the Net-Zero Insurance Alliance is dead and unlikely to be revived, given the electoral and legal uncertainty and the backlash against ESG in the US. But insurers won’t be able to ignore climate change (and sustainability more broadly) because of the massive sustainability-related financial risks they’re exposed to. In the US, expect another dozen insurers to follow the likes AIG, Allstate, and others and scale back their business in California, Florida, Louisiana, and now North Carolina, pushing those exposures into the laps of state regulators.

Want to read the complete roundup of insurance industry predictions for 2024? See our full report, Predictions 2024: Insurance (client access only). Forrester clients can also join our webinar on Wednesday, January 10 at 11 a.m. ET, where we’ll discuss our 2024 predictions.

If you aren’t yet a client, you can download our complimentary Predictions guide, which covers our top predictions for 2024. Get additional complimentary resources, including webinars, on the Predictions 2024 hub.

For additional guidance on navigating the changes ahead, please reach out to schedule an inquiry or guidance session here.