Trends to watch in 2024: Property & casualty insurance

December 21, 2023 6:50 AM

Insurance agent examines the car while the driver talks on the mobile phone. — insurance agent examines the car while the driver talks on the mobile phone. Accident claim process. African-American woman checking the damage to the car after an accident. Concept of transportation.

Digital Insurance reached out to insurance professionals about property and casualty trends to expect next year.

The following responses have been lightly edited for clarity.

Mike Prindle, head of complex property at CAC Specialty

This year was an incredibly difficult year for buyers. On the heels of five years of rate/retention increases, 2023 produced the hardest property market we've seen in over 20 years. The 2023 hurricane season was relatively benign. This, combined with increased investment income due to rising interest rates, should result in a profitable year for most property insurers. January 1, 2024 CAT Treaty renewals are projected to be more stable than in 2023 which should help capacity for buyers in 2024. We are anticipating a deceleration of rate increases moving into 2024. Attritional loss and/or heavy CAT exposed risks will continue to be challenged. RMS has released a new CAT model which is projected, at least at the portfolio level, to increase modeled hurricane results for Florida and gulf coast exposure. It remains to be seen the impact of this new model on any given individual risk. Adequate replacement cost valuation is still a hot topic, however subsiding somewhat given the reduction in inflation and the right-sizing of values that buyers have been forced to deal with the last three years.

Most customers are experiencing a high level of "buyer fatigue" when it comes to property insurance. Five years of rate increases has forced buyers to increase deductibles, take SIR's and/or purchase less CAT limits. I wouldn't say insurers are adapting to customer expectations, rather the other way around. Many insurers have adapted a "take it or leave it" mentality when it comes to their capacity offering. Submission data quality and integrity are paramount to a successful property renewal. To be successful as a broker, pre-underwriting and defining a clear and concise marketing strategy based on a client's risk tolerance is key.

Meredith Brogan, president, Crawford Network Solutions

Meredith Brogan, Crawford Network Solutions

As global warming, deforestation, and other kinds of human activities continue to impact the climate and present a multi-faceted threat to our ecosystem, AI can help mitigate some of these risks.

Key areas where AI is poised to be a transformer include:
1) Prediction and analytics - AI models can predict climate patterns or extreme events, providing better opportunities for preparation and response.
2) Resource optimization - AI can help with optimizing the use of resources like water, energy, waste reduction and emissions to mitigate risks.
3) Monitoring and detection - Near to real time monitoring of environmental conditions and detection of these changes can be achieved much earlier.
4) Policy enforcement - AI can also be used to support the enforcement of environmental policies, including monitoring compliance and reporting any kind of violations.

Joel Pepera, director of product development, telematics at Arity

Multiple concerning trends in the auto insurance space have led to skyrocketing rates and premiums, putting pressure on both carriers and insureds. Drivers are facing pressures from inflation, rising costs of vehicles and gas, resuming student loan payments and more, and these all intensify the affordability challenges for auto insurance. In fact, drivers are increasingly foregoing auto insurance altogether. I think the industry will be ripe for disruption in 2024.

Carriers have long offered usage-based automotive insurance programs to help good drivers save money and to provide a fairer pricing mechanism determined by actual driving behavior rather than who someone is or where they live. However, most of these programs also heavily use traditional pricing proxies like credit history, which typically still receive more weight than true driving behavior.

While credit will not go away as a pricing factor in the foreseeable future, looking ahead, I see carriers putting an increasing emphasis on driving scores in their pricing. As consumer interest in telematics continues to increase as an opportunity to save precious dollars and as driving data becomes increasingly available on demand at scale via auto manufacturers and a variety of mobile apps, carriers will increasingly view telematics as a first-class citizen in their rating plans. As this occurs, some carriers will start to leverage the message of pricing fairness and transparency in their marketing and brand positioning to consumers.

Ty Harris, CEO of Openly

Large double digit pricing increases, tightened underwriting, non-renewals, and coverage restrictions, as carriers adapt to the current reality of weather, generationally high reinsurance costs, and suffering auto profitability. An accelerating trend of independent agents winning at the expense of direct and captive agents. While rate increases and other underwriting restrictions create workload for independent agents, they at least have alternative outlets for customers. Direct and captive agents, by contrast, risk losing the customer entirely if their carrier takes strong underwriting actions.

Carriers becoming agencies. Faced with their own shrinking underwriting appetites, large captive and direct carriers will increasingly see the benefits of turning their distribution forces into giant independent agencies—giving them a range of products to offer, rather than just the carrier's "house" product.

Hanif Sidi, Americas property & casualty business consulting leader, and Thom Cranley, EY Americas insurance solution leader, at EY

For personal lines, In 2024, we will continue to see a challenging market in automotive and home, as it's trending back to pre-COVID combined rations.

Building on the momentum from 2023, we expect to continue to see the return to profitability for personal lines with premium trends exceeding loss trends for the first time in years. This will be driven largely by the cooling of collateral protection insurance (CPI) (for example, down fourth straight month for used cars, medical care costs etc.), the execution of efficiency-focused transformation programs at most large carriers, and the early productivity gains from the adoption of Gen AI in core functions such as claims and underwriting. Market leaders will continue to extend their lead in 2024, as we will see massive productivity jumps made possible through AI and automation.

For commercial lines, overall, improved profitability through 2023 has been driven by a hard market and will likely continue into 2024. Performance for property remains challenged with rate moderation taking effect in 2024 (some buyer fatigue, lowering of purchase limits, etc).

While casualty is expected to see further firming of rates in 2024 to keep up with loss trends, and Professional lines are expected to see a softening in 2024, including Cyber, D&O. The focus in commercial lines continues to be underwriting excellence and the infusion of Gen AI in core processes to drive accuracy in underwriting risk assessment. We expect to see continued above average growth in Specialty / E&S and MGAs.

Dan Lever, partner, Clyde & Co, Boston

Heading into 2024, further easing of supply chain disruptions in the North American construction industry is anticipated, building on the recovery momentum from the pandemic's peak. Enhanced communication technologies are increasingly being adopted to streamline material ordering workflows. This shift towards digital solutions is not just a reaction to past challenges; it's a proactive measure ensuring more agile and informed material management that is expected to continue in 2024.

Jessica Waters, vice president, manager of climate and structural resilience at FM Global

In 2024, I predict businesses will take a more confident, proactive approach to mitigating their climate risk, which until now has seemed immense and abstract. I'm seeing the attitude change because insurers are capturing, synthesizing and carefully presenting incisive real-world data to policyholders about extreme climate events and risks to specific properties in the context of their resilience.

I'm watching for policyholders, armed with this new data-driven insight, to secure significant advantages in business continuity, supply chain resilience and operational performance.

Siddhartha Jha, founder and CEO of Arbol

Extreme weather events stemming from climate change wreaked havoc on homeowners and businesses in 2023, creating heightened responsibilities for insurers to step up to the plate. As climate change is likely to further intensify in the year ahead, I believe that:

1. Insurers will embrace a more proactive role in climate risk mitigation, not just as underwriters but as strategic advisors, and

2. Insurers will need to leverage advanced predictive models to guide clients through preemptive measures, effectively reducing claims and fostering a new era of sustainability-focused risk partnerships, which can enhance the industry's value proposition.

Charlie Sidoti, executive director, InnSure

The current property insurance model isn't sustainable and the way that insurers react and adapt will be vital to mitigating the impacts of climate-worsened natural catastrophes. Insurance can either take a reactive approach to P&C, adjusting and changing their coverage in the aftermath, or they can take a proactive stance by actively investing in R&D and creating novel insurance solutions that bridge the protection gap. This is an area where insurtechs and technology will play dynamic and essential roles; both have the potential to transform how insurance is delivered and underwritten, making it more accessible and affordable for consumers.

The climate crisis also creates a favorable environment for partnerships across coverage lines to emerge. Life, health, and benefits (LHB) providers will start to team up with P&C to deliver group offerings that give communities a full spectrum of natural catastrophe solutions that blur the line between products and extend beyond physical loss coverage.

Mason Bartleson, VP, process design and organizational excellence, Sedgwick

Process automation continues to be more and more important for property and casualty claims. The industry has been automating administrative tasks for several years using tools like robotic process automation and optical character recognition. But with advancements in AI, parts of the claims process that were once thought impossible to automate are now closer to reality. The challenge for real transformation is shaping these technologies into a seamless workflow for the adjusters and other experts handling claims.

Effective change must significantly increase their efficiency, giving them more time to focus on the quality of outcomes and the customer experience.