Alvarez & Marcal – Insurance Outlook, 2024

The insurance industry is facing a turning point, as economic forces such as investment returns, interest rates, and premium increases that have led to higher profitability are slowing down. This presents new challenges in the form of complex geopolitical risk, climate change, evolving technologies, cyber-security threats, and urbanization. Additionally, the pricing cycle in commercial insurance seems to have peaked, and insurers are facing challenges in their operational approach and risk and profit models due to social inflation. Alvarez & Marcal propose five themes that will bring significant changes to the insurance industry by 2024. Firstly, they predict a rebound in mergers and acquisitions, particularly in the Bulk Purchase Annuity and broking markets, driven by private equity activity in less capital intense businesses. Secondly, they expect business model innovation to accelerate, with insurers expanding their services beyond risk transfer and becoming partners for the end customer. The third theme focuses on insurers adopting a "Digital by Default" approach, with an emphasis on modernizing core platforms and investing in automation and digitalization of front-end and self-service capabilities. The fourth theme highlights the increasing role of data and artificial intelligence in customizing insurance products and driving business model innovation. Lastly, they emphasize the need for insurers to prioritize operational resilience as they embark on building new business models and transforming their operating models. Overall, Alvarez & Marcal foresee a changing landscape for the insurance industry, and these five themes provide a roadmap for insurers to navigate and adapt to these evolving challenges and opportunities by 2024.