Over a third of insurance industry says inflation will be their biggest challenge in 2023 according to a new poll conducted by GlobalData.
The poll reveals that inflation ranks several notches ahead of challenges like climate change, digitalization, regulation, COVID-19 and geopolitics. The poll found that the record-high inflation and the consequent cost-of-living crisis will be the greatest challenge faced by the insurance industry. It said the consumers are more squeezed than ever financially and insurers may need to be flexible and innovative in order to retain customers.
Inflation was ticked as the top challenge for 2023 by 36.4% insurers while digital transformation at 17.9% ranked second with climate change at 9.9% and regulatory changes at 7.9% and cyber crimes at 6.6% followed.
GlobalData senior insurance analyst Ben Carey-Evans said, “Insurers will face inflationary pressure themselves in terms of the cost of running their business and claims costs will rise as a result of supplies and work becoming more expensive.
He said, “While insurers would usually pass on higher claims costs to consumers in the form of higher premiums, individuals have less disposable income than ever, with the cost of living soaring and wages remaining stagnant. This will make it hard for insurers to push through premium rate increases while not losing customers and seeing penetration rates fall.”
GlobalData’s survey found that across personal lines products, consumers are conducting more research at renewal but not necessarily switching more.
This means insurers that offer some point of differentiation are likely to pick up more new business, as consumers are increasingly looking for any added value they can find. This could include increased flexibility such as the ability to switch cover on and off, only paying for exactly what they use (pay-per-mile), or even payment breaks (as was seen during the COVID-19 pandemic).
Mr. Carey-Evans said, “Overall, it will be difficult for insurers to make a profit from premiums and maintain penetration rates in the short term. It may be wise to take a long-term approach to try and keep existing customers happy and gain new ones by offering consumers more flexibility as financial difficulties increase at the start of 2023.”