Insurance industry to be impacted by 3 trends in 2024, says expert

The U.S. insurance industry will be impacted by three distinct trends in 2024, according to a KPMG leader who analyzes the insurance industry.

Calling the industry "healthy and strong," Scott Shapiro, KPMG U.S. insurance sector leader, said, “We’ve never been without serious challenges but we continue to perform our function in society – managing risk. There really has never been a more time tested, robust mechanism than the insurance system,” said  said during a recent webinar.

Shapiro said KPMG identified three trends for the insurance industry in 2024.

1. Significant increase in mergers and acquisitions.
2. Generative artificial intelligence is taking hold within the industry.
3. The industry is benefiting from high interest rates, but a large protection gap is still present.

The industry should embrace higher interest rates while they last, said Kenneth Kim, KPMG senior economist. High interest rates led to “finally seeing a meaningful return from fixed income instruments,” he said.

“It looks like the Federal Reserve will achieve a soft landing for the U.S. economy,” Kim said, adding that he believes the Fed will begin to cut interest rates in June.

Other economic factors that Kim said impact the insurance industry include:

• Motor vehicle sales have been steady at around 16 million vehicles annually since the pre-pandemic high of 18 million. For 2024, he predicted, auto manufacturers will continue to increase buying incentives.
• The cost of servicing motor vehicles has begun to decline.
• Existing home sales are down as mortgage rates have increased.
• Hospital costs are going up.
• The number of small-business starts continues to be strong since the pandemic.

GenAI hits the insurance world

Enthusiasm toward GenAI continues in the insurance world, said Brian Blomgren, KMPG director of analytics and artificial intelligence.

“Gen AI is definitely maturing. Now it’s focused on value. The question becomes, how do we integrate AI into our business and create value?” he said.

When GenAI first entered the business world, “companies expected to get some quick wins. Now realism has set in,” said Kalpana Ramakrishnan, KMPG AI leader. “Companies know they need to invest a little bit to get returns. Specifically for the insurance industry – we know insurance is rich with data but it’s the unstructured data that’s needed for Gen AI to work.”

Gen AI is an evolving technology that will present new legal issues for companies, said Lou Goldberg, KPMG principal, legal. “I recommend you get prepared for that,” he said. “First, get a team of experts who can identify issues and go out to other experts and bring information back. Start small. Once you have things up and running, set up a governance team to prioritize what’s best for the firm and the clients.”

Efficiency is the most obvious value of GenAI in insurance, said Edward Moran, KMPG managing director, innovation.

“How can AI take what the humans are doing and make it faster and, in many cases, better? How do I increase product development rates? How do I innovate faster?”

GenAI is coming at the insurance industry “at all different types of angles,” Blomgren said.

“But there’s still a knowledge gap – you and I have to learn how this works for us.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on X @INNsusan.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at susan.rupe@innfeedback.com.