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Library: Capgemini – Top trends in P&C insurance 2023

Executive summary

A complex macroeconomic environment brings challenges and opportunities for property and casualty insurers. While the sector has been growing globally profitability pressure continues and the industry is refocusing on sustainability cost controls and digital transformation.

 The Digital Insurer reviews Capgemini’s Report on – Top trends in P&C insurance 2023

Sustainability – the new watchword

Economic challenges and P&C growth

A volatile global economy and rising inflation will affect P&C claims costs and premiums. Business lines likely to most affected are motor and liability.

  • The International Monetary Fund (IMF) lowered its global growth forecast for 2022 and 2023 to 33.2% and 2.9% respectively, down from more than 6% in 2021. Therefore, insurance growth – which correlates to gross domestic product – is apt to slip.
  • global inflation rose dramatically to around 8% in 2022 versus 4% 4.7% in 2021, which puts considerable pressure on insurance claims and rates in the coming quarters.
  • Central banks are hiking interest rates to control inflation, which will positively impact P&C investment performance to counterbalance equity investment pressure at least partially.

The P&C sector grew steadily in 2020 to be experienced profitability pressure, although expect that pressure to ease going forward.

  • 2022 return on equity is predicted to align with 2021 at 5% to 6% with a 2023 rebound to 6.6% as underwriting results and investment yields improve according to Swiss Re.
  • The combined ratio is estimated to reach nearly 100.7% in 2022 compared with 99.5% in 2021. According to a Triple-I and Milliman actuarial report, loss pressures, inflation supply chain disruptions and geopolitical risks drove the deterioration.
  • After final numbers are tallied the P&C industry is likely to grow more than 11% in 2022, compared with one to 2% in 2021. To surpass US$2 trillion supported by a rate hardening and heightened post pandemic demand.

Market dynamics

The largest P&C insurers outperformed the make jerk global stock markets in 2022. Demonstrating resilience due to their defensive nature and relatively stable income prospects combined with the potential benefit of surging interest rates.

In the first half of 2022, the top indices of the global stock market declined on average by more than 14% While the 15 largest P&C insurance market capitalisation dipped by around 8%.

  • Insurtech funding and valuation declined considerably in 2022 as the optimism of previous year’s gateway to a stricter funding environment and challenging macroeconomic circumstances as a result P&C insurtechs raised US$1.5 billion in investments in quarter to 2022. Down 57% from quarter to 2021. Total deals also slumped by 22.6% suggesting a reduction in the average funding round according to Gallagher Re.
  • Despite worldwide inflation, geopolitical disruption and talent shortages. Digital transformation will likely not slow down. Gartner reports that the sector’s IT investments are on track to an 8.1% CAGR over 2021 to 2026. Reaching US$264 billion in 2026 versus $193.5 billion in 2022.

Looking back at 2022

Last year, the industry navigated a complex environment with high impact headwinds. Nonetheless, several of our property and casualty insurance top trends 2022 predictions were spot on:

  • We highlighted insurers focus on embedding sustainability in their strategy. Later in the year, our world property and casualty insurance report 2022 deep dived into this topic and we presented a roadmap to achieve climate resiliency.
  • We also called attention to insurers need to collaborate with ecosystem providers to offer embedded insurance coverage. And now insurers are creating seamless customer experience through convenient customised prediction embedded in other products at the point of sale.
  • We anticipated a stronger focus on early cyber attack to tension and now cybersecurity is becoming critical enterprise enterprise wide priority.
  • We showcased usage based insurance and today’s insurers and insurtechs are targeting gig economy and micro mobility workers to drive growth and close protection gaps.

Top trends for 2023

Against this complex backdrop, we explore 10 P&C insurance trends across three broad themes.

  • Customer first: Insurers were bolster customer centricity by addressing consumer slash commercial interests or pain points, welcoming new policyholder segments and prioritising risk prevention.
  • Intelligent industry: Digital technologies will impact revenue streams across the value chain.
  • Enterprise management: Strategic organisational priorities will focus on new and evolving insurance risks such as sustainability, cyber threats, and metaverse frontiers.

The matrix represents Capgemini’s view of 2023 trend prioritisation in an operating environment that includes:

  • Rising inflation and interest rates coupled with stagflation trends
  • Operational disruption due to geopolitical instability
  • Intense competition and increased focus on customer centricity due to the entry of new age players.
  • Operational cost overruns and high capital locking
  • dynamic regulatory activity.

Adoption priority refers to the urgency of adopting a 2023 trend to maximise value creation because of its sector importance.

Business impact represents the influence of a trend on the P&C sectors 2023 business as it relates to customer experience operational excellence, regulatory compliance or profitability.

Circumstances will vary for each firm depending on business priorities, geographic location and other factors.

See the full report for more…

Link to Full Article:: click here

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