Specific drivers will prevail in the insurance industry during 2023 and these will include ESG risks, geopolitics, technology change and claims inflation according to Kennedys, the global law firm in its annual forecast report for the insurance sector.
The 25-page report Insurance forecast 2023 Claims trends and future risks released in January 2023 says insurance market is no stranger to significant unanticipated events, including the catastrophic effects of natural disasters. Alongside the natural disasters, the industry will continue to navigate the aftershocks of the COVID-19 pandemic as well as Russia president Vladimir Putin’s invasion of Ukraine and the current economic climate.
It says the losses sustained as a result of such events means that the sector has to adapt, by reviewing the scope of cover it provides, the manner in which it approaches risk assessment and how it prices its products in order to continue to remain relevant and thrive in a global marketplace.
The potential threats of today mean that insurers need to understand and prepare for the risks of tomorrow. The experiences of recent years suggest that unexpected events are becoming increasingly widespread. Consequently, understanding the major trends driving claims activity across different lines of business is vitally important.
Gaining insight from recent claims experience and embracing innovative technology should afford insurers and reinsurers the opportunity to identify and implement more effective loss prevention measures.
According to the report the major trends for 2023 include
How effectively all businesses, including insurers, are perceived to address ESG requirements, such as their corporate disclosures, will increasingly impact the competitive position and reputation of those businesses in the marketplace.
The impact of geopolitical risks – those risks associated with conflict or tension between countries or states - can be felt across almost all lines of business. There is also a clear interrelation between the geopolitical landscape and other priority topics for insurers, including rising inflation, ESG considerations and reputational risk.
Innovation through the use of technology is poised to continue transforming the insurance industry and the businesses that it serves, facilitating growth and furthering broader ESG-related objectives.
World is currently experiencing the highest rate of global inflation for decades. While there are signs that prices are expected to ease in 2023, additional factors will mean that the impact of claims inflation will continue to be felt across all insurance lines in the year ahead.