Social and political change: The insurance industry at a crossroads

This year, voters from more than 60 countries are heading to the polls, marking a historic level of engagement in electoral activities. This surge in electoral activity coincides with heightened geopolitical tensions and conflicts, particularly in Ukraine, tensions between Israel and Hamas, and Houthi missile attacks in the Red Sea.

Amidst this, the insurance industry is at a critical juncture, grappling with these political and economic risks and societal changes. More insurers now realise they have a greater role to play than just providing a financial safety net for individuals and recognise the sector’s role in mitigating the impact of this instability.

Navigating economic threats

A wave of economic crises has increased levels of poverty and inequality across the globe. In Europe, nearly 9% of the working population is below the poverty line, struggling to make ends meet. Those in lower-skilled jobs are increasingly bearing the brunt of these economic shifts – whether from outsourcing, the rise of automation, or job insecurity.

This downturn in the economic landscape doesn’t just affect individuals; it trickles through sectors, including the insurance industry, and the influence is extensive, from underwriting policies to the strategies behind investments.

For insurers, the big challenge lies in maintaining growth and staying profitable. With inflation pushing claim costs up much faster than average premiums can adjust, and consumers and businesses tightening their belts, the sector faces a tricky balancing act.

To navigate the complexities of today’s economic landscape, the industry must prioritise innovation, particularly by adopting new technologies that enhance operational efficiency.

Digital advancements, notably the integration of AI, are revolutionising how insurance companies interact with their clients – from product creation to claims processing. This shift towards a more digital approach allows insurers to provide responsive, predictive, and available services on demand. As a result, insurers can remain agile in response to economic fluctuations and stay on the front foot when it comes to meeting market demands.

Insuring through geopolitical tensions

Rising geopolitical tensions bring an array of risks – from political unrest to the repercussions of trade disputes and the impact of economic sanctions.

Geopolitical tensions, combined with evolving data requirements and regulatory changes, have added layers of complexity to insurers’ coverage provision. To address these challenges, insurers must develop specialised solutions and tailor their services to individual clients. Such solutions could include analytical tools and robust risk management frameworks to remain adaptive to volatile situations.

Utilising these tools and establishing frameworks is critical for the underwriting process. As risks from multiple sources emerge, such as those associated with threats to health, inflation, and international trade, insurers will need to adopt a new approach that spans multiple lines of business.

By leveraging real-time data and predictive analytics, insurers can better understand potential risks and tailor underwriting criteria to accurately reflect the geopolitical landscape. This strategy helps insurers minimise risks effectively and identify potential new growth opportunities.

An ageing population

According to Kearney analysis, almost 10 percent of the world’s population was 65 or older in 2020, and by 2030, projections suggest that approximately one in six people will be 60 years or older. This ageing demographic presents both challenges and opportunities for the insurance industry.

One of the primary challenges lies in addressing the increasing demand for longer-term care among older individuals. As life expectancy rises and people live longer, there is a growing need for insurance products that cater to the specific requirements of elderly policyholders, with a big question mark: how to make these products profitable.

However, this challenge brings a golden opportunity for product innovation. With telehealth and remote diagnoses becoming increasingly common, insurers can leverage these advancements to improve their offerings and provide more comprehensive coverage tailored to policyholders’ evolving needs.

As society’s age profile evolves, insurers must also understand how long-term care solutions will vary. Despite the gap narrowing, women outnumber men at older ages, and insurers need to take this into consideration when designing products and services.

Understanding gender-specific healthcare needs is necessary for innovative advancements like genetic manipulation, and insurers must stay ahead by addressing these dynamics and ensuring their offerings resonate with evolving demographics and medical breakthroughs.

The road ahead

2024 will be a pivotal year for the insurance industry. Beyond providing financial security, insurers are tasked with navigating a complex landscape of political, economic, and societal challenges. As such, the industry must focus on staying agile, embracing digital transformation, and understanding emerging risks and opportunities. Only then can they mitigate these threats and unlock new avenues for growth amidst global uncertainty.