KPMG has made key Insurance industry predictions for the year 2024. These are trends to watch out for:

1. Ramp up of strategic M&A activity

With the stabilization of interest rates, companies are expected to transition from a passive acquisition approach to a more strategic one.

Insurance companies likely will divest non-core businesses that are not generating returns and acquire businesses that offer new capabilities. In particular, the insurtech space has created tremendous innovation that larger companies may be interested in pursuing.

This will enable them to improve their competitive position and drive growth. KPMG’s CEO Outlook revealed that over half of insurance CEOs (55%) are likely to pursue acquisitions that will significantly impact their organization, indicating that insurance companies are recognizing the importance of M&A as a tool to achieve their strategic goals.

2. Generative AI to transform operations and cut costs

The insurance sector is poised for transformation with the integration of Generative AI. Business leaders anticipate that AI can revolutionize daily operations by enabling their professionals to enhance communication with policyholders, streamline claims processing, and reduce fraudulent activities.

Additionally, AI can automate underwriting and pricing processes, leading to more efficient and accurate decision-making. Every company has its differences and how they will implement AI to solve their unique problems will not be a one size fits all solution.

Despite the potential benefits of AI, there are risks associated with its utilization, such as algorithmic bias and privacy concerns. A significant barrier to the success of insurance organizations is the lack of regulatory guidance, which is perceived by approximately 64% of insurance CEOs.

However, recent regulatory developments, such as the White House’s first-ever executive order on AI and the EU’s creation of the AI Act, are expected to encourage insurance leaders to embrace AI within their organizations while providing guardrails to protect them.

3. Addressing the talent shortage

While larger companies have the advantage of a greater talent pool, smaller companies may face greater challenges in sourcing individuals with technology expertise.

Finding employees with tech capabilities is important for organizations seeking to build a customer centric business model that will help them compile valuable customer data.

To address the talent shortage, companies will need to focus on both attracting tech-savvy talent while also upskilling current employees with Generative AI skills for the changing work environment.

4. Mitigating risks: Climate, cyber, and social inflation

Extreme weather events this year have underscored the importance of obtaining insurance. The frequency and severity of natural disasters have resulted in higher insurance claims and losses for insurance companies.

Some major companies have withdrawn from states such as California that are prone to natural disasters, while others have increased premiums, leading to a reduction of capacity and a need to deploy capital in new and different insurable risks.

Companies are likely to continue offering services and solutions to help homeowners mitigate risk including investing in new technologies and tools such as satellite imagery and climate modeling to provide support and resources to homeowners in the event of a disaster.

The anticipated SEC Climate Disclosure rule is expected to have a significant impact on the way companies disclose their climate-related risks to investors.

In addition, with the recent adoption of climate disclosure rules in California and upcoming compliance deadlines in Europe, companies are already starting to take proactive measures to comply with existing and anticipated rules.

With the rise of automation and artificial intelligence introducing new cyber risks, insurance businesses will need to create mitigation strategies to minimize vulnerabilities and prevent attacks.

Furthermore, social inflation has impacted the sector with increased claims costs, particularly in litigation, forcing insurers to reassess risk models and pricing strategies.

5. Staying ahead of the curve

The insurance industry has a promising future, but it must remain agile and innovative in their approach. By embracing new technologies and meeting the changing needs of policyholders, insurance companies can remain competitive and relevant in a rapidly evolving landscape.

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Speaking during a visit to the Executive Vice Chairman of the Commission, Prof. Umar Garba Danbatta at the NCC’s Head Office in Abuja recently, the Institute’s Director, Research Estimates and Library Services, Dr. Adegboyega Karim, said the visit was on a fact-finding mission to enrich ongoing research that focuses on globalization and regional integration for sustainable development in Africa.

Karim led to the Commission a team delegation of Executive Intelligence Management Course Sixteen Participants (EIM16), a study group with representations from various security agencies under the auspices of NISS, typically senior officers in security agencies, including the military, police, intelligence services, and other relevant agencies.

He noted that the Commission has made giant strides advancing the course of digital economy development in Nigeria, and that its regulatory processes provide a good opportunity for the collaboration to enable the group to research further into matters regarding telecommunications and national security.

Director, Special Duties of the Commission, Dr. Ikechukwu Adinde, who received the team on behalf of Danbatta, affirmed the readiness of the Commission to collaborate with the Institute, and, indeed, any private and public institution that is focused on national development.

Reiterating on the advancements made in ICTs, Adinde said it is within this context that the Commission continued to promote the deployment of robust digital infrastructure capable of supporting and improving the security of lives and property.

“As a way of consolidating on the tremendous successes that had been recorded in the telecoms industry through effective regulatory regime emplaced by the Commission, the Federal Government has formulated a number of policies such as the Nigerian National Broadband Plan (NNBP) and the National Digital Economy Policy and Strategy (NDEPS), among others, which serve as a compass for our efforts at building a resilient digital economy that supports security,” he said.

Adinde enlightened the visiting delegation on NCC’s efforts towards ensuring adequate protection for telecoms facilities, across the nooks and crannies of the country where it is treated as Critical National Infrastructure (CNI), the building of Emergency Communications Centres (ECCs) across states and Federal Capital Territory (FCT) as well as series of collaborations with relevant agencies to ensure effective connectivity to individuals and institutions.