The insurance trends shaping the industry in 2024

With a UK general election in the offing and continuing geopolitical tensions, there is still much uncertainty about what 2024 has in store for the UK and rest of the world. With so much going on, insurance industry professionals are likely not having the easiest time when it comes to predicting the consequences and implications of potential events. In spite of these circumstances, however, we have picked out some common themes and trends that are currently shaping the industry.

For industry professionals who work to keep on top of current trends and react promptly to new areas of market growth, there are significant opportunities for business development and expansion.

Demand for cyber insurance

In the year 2022/23, 32% of UK businesses and 24% of charities were victim to cyber-attacks, largely fuelled by the digitisation of processes. With that has come a flood of demand for cyber insurance, with the global cyber insurance market set to grow from $16.7bn DWP to $33.4bn in 2027.  This means that insurers are constantly having to reconsider what they can do to mitigate and manage the risks of cyber-crimes. It is a hard task, as insurers are posed with the challenge of delivering effective coverage against attacks that are largely unpredictable and constantly changing in nature – particularly with ever-evolving AI technology now in the mix.

Ransomware (a type of malicious software that is designed to block access to computer systems until a sum of money has been paid) is also becoming more prominent. In 2017, for example, the global WannaCry ransomware attack hit the NHS, wreaking havoc across the Service and disrupting the transfer of vital patient information. Insurance companies themselves are becoming an ideal target for increasingly sophisticated scammers – meaning they need to do their own vendor risk management.

The impact of climate change

As well as the uncertainty of cyber-attacks, the insurance industry is overexposed to unpredictable events caused by climate change. Extreme weather is becoming more frequent, with the ABI recording 18,000 subsidence claims after the summer heatwave of 2022. Then, in February 2023 alone, there were 170,000 claims for property damage due to storms. Underwriters are therefore required to identify climate risk and offer sufficient policies with affordable premiums.  

Also, insurers are under increasing pressure to be sustainable in their products and policies, as they have the power to influence their clients to be more environmentally friendly. When it comes to damages claims, for instance, insurers can choose to encourage a process which reduces waste and a customer’s carbon footprint.

For example, RSA Insurance Group encourages their policy holders to ‘repair over replace’; they have a partnership with Autoglass to encourage clients to get a windscreen chip repair instead of a replacement – by doing so, they reduce carbon impact by 75%. Meanwhile, the Royal Institute of Chartered Surveyors (RICS) also argues that insurers have a key role to play in promoting sustainable approaches to climate resilience, by supporting policyholders to better protect their homes and businesses against the growing threat of natural perils.

Depleted workforce

In 2022, there was a 74% year-on-year increase in the number of job vacancies in the insurance industry.  Not only is the workforce depleted, but there is also a lack of diversity amongst the people who do work in insurance. Corndel commented that the sector is overwhelmingly white, male and middle-aged, so more clearly needs to be done to increase representation of females and ethnic minority groups, and to entice younger generations to embrace a career in insurance.

Changes in the distribution landscape

The channels via which insurance is distributed have significantly evolved in recent years. While brokers are still being used, technology has made it much easier for people to purchase insurance directly from the insurer. InsurTech startups are enabling insurance to be priced more competitively, meaning that more traditional forms of distribution must find a way to keep up. Embedded insurance is also predicted to grow this year – i.e. offering cover when another product or service is being bought. Deloitte comments that car insurers are particularly likely to be affected by the increase in embedded coverage, advising that “these carriers should, therefore, consider actively seeking alliances before they find themselves without an embedded partner.”