That said, the best ecosystems and InsurTech innovations in the world arent going to help you if they dont align with your strategy or if youre not executing your strategy properly.

Carriers with adaptable cores that can be quickly configured for newinnovationsa key advantage of cloud technologycan achieve this scale faster. Today, however, leading insurers are taking tangible steps and adopting hard metrics to address the full range of environmental, social and governance (ESG) issues and opportunities. Even before 2020, the insurance industry faced challenges. Climate-related threats present huge risk to the industry, but the sustainability agenda is an opportunity for purposeful growth. Check out the different sections of our industry outlook, Auto components of the consumer price index, Photo estimate capabilities that provide a 360-degree view of damages, Guided estimates using artificial intelligence and augmented reality to identify damage to vehicle components and make recommendations for repairs, Automated estimates leveraging computer vision and algorithms for repair or replace decisions, and to determine parts availability for pricing decisions.

Low-interest rate environment. Read the full report to learn how insurance leaders can respond to these megatrends with urgency, creative thinking and bold action. With the rapid advancement of tech-enabled vehicles entering the market, the lack of skilled technicians can pose additional costs for the insurer such as longer repair cycle times, and additional rental vehicle expenses. Inspiring the next generation of female leaders. Workforce transformation: the promise of a human-centered, tech-enabled enterprise, 3.

Insurers had to be there for customers and undertook large-scale change quickly to make sure they could serve people in need and they must continue to do so, particularly if they are to help the world prepare for increasing climate risk. Mapping action plans to specific targets and establishing quantifiable performance metrics relative to sustainability are two ways insurers can live their purpose. Review ourcookie policyfor more information. If you would like information about this content we will be happy to work with you.

In 2020, the human tragedy of the COVID-19 pandemic triggered a global economic downturn that was initially sharper than the Great Depression. We havent spoken with a single business leader who doesnt recognize that investments in new technologies are the best way to facilitate market access, risk selection and management, quality financial information and customer service capabilities. Natural Disasters Cost Insurers $120 Billion in 2021, Munich Re Says, Reuters, January 10, 2022. A passionate financial guru at work. All Rights Reserved. ECONOMIC RECOVERY & LINGERING PANDEMIC DRIVE UP INSURANCE DEMAND.

Despite the clear upside of ecosystems, most insurers are still working to develop the necessary tech and data capabilities, navigate distribution constraints and address organizational and cultural impacts. How transformations with humans at the center can double your success, Future Consumer Index: In crisis, but in control, Select your location Close country language switcher. EisnerAmper discusses a summary of CARES Act and how self-employed individuals, independent contractors or sole proprietors must submit necessary documentation. In 2022, its anticipated that the Federal Reserve will moderately raise interest rates over the course of 2-3 cycles. We take a look at these driving factors and explore actions insurers can take to combat these ongoing pressures. Industry-specific quarterly insights for the middle market. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. They dont shortchange big bets or dilute key investments with allocations to less vital areas. 2022 Insurance Industry Outlook, Deloitte Insights, November 17, 2021.

They enable carrier representatives to immediately determine client identities and service histories to quickly solve customers problems.

Insurance Business America, November 18, 2021. Global Insurance Industry Could Hit New Record in 2022. Source: PwC 2018 and 2021 surveys of 6,000 insurance customers. Leverages advanced tech and data capabilities to create a seamless, digital-first experience from quote and sale all the way to claims.

Many are wondering if 2022 be an average year for catastrophic losses or results in above-average claims.

You dont need bells and whistles for their own sake, but you do need something that does the essential job of helping you achieve scale faster. Now, competition has intensified for the most talented workers, who are more empowered to work when, where and how they want.

This year, primary and lead umbrella markets will continue to work together to cover the primary because when the same company holds both and handles incoming claims, excess often performs better. We help insurers reset their growth strategies, adopt the right tech and retool experiences for stronger relationships with customers and distributors from crisis to recovery and growth.

As is often the case, what feels innovative today will soon become a baseline. According to a CCC Intelligent Solutions report on trends affecting the property and casualty insurance economy, the U.S. Bureau of Labor Statistics projects a 4% decline in employment in the overall auto technician field through 2029.

Equipping auto repair technicians and auto insurance appraisers for the future may require an investment in technical training programs and certifications, such as those offered by I-CAR, which focus on requirements to meet the rapidly changing needs of the collision repair industry. The above discussion of funding a competitive advantage also applies here.

Claim cost inflation continues to run hot, particularly for auto insurers who will likely feel the heat from shrinking profit margins due to auto repair costs and a labor and skills shortage.

In our view, leadership teams need to capitalize on nine value levers: Addressing these nine imperatives will help carriers answer strategic questions about how to play. But the challenges and recent trends facing the industry will force some insurers to also think about where to play and rebalance their portfolios of businesses and review their capital allocation accordingly. We have detected that you have enabled the Do Not Track setting in your browser; as a result, Marketing/Targeting cookies are automatically disabled. Inorganic strategies have a long history in the industry but have picked up steam recently as carriers focus on core competencies and enhancing technology. None of this is easy, and no single company has mastered all of these ways to win. Ecosystems, open insurance and customer-driven competition are driving profound business model shifts. Leaders know how to prioritize. EisnerAmper is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards. They think often rightly so that they lag behind other sexier industries in attracting and retaining the best people. Discover how EY insights and services are helping to reframe the future of your industry.

In addressing the many challenges of todays market, purpose can and should serve to inspire their strategies and guide their actions as insurers seek to drive and sustain growth. Reporting and compliance platforms that provide high-quality data, facilitate accurate financial reporting and accounting and enable effective compliance. The personal lines insurance sector also saw increased challenges in 2021, including an uptick in catastrophes, a return to pre- pandemic auto loss claim frequency, and a jump in loss costs. EisnerAmper LLP is a licensed CPA firm that provides attest services, and Eisner Advisory Group LLC and its subsidiary entities provide tax and business consulting services. This report is a collaborative effort by Pierre-Ignace Bernard, Stephan Binder, Alexander DAmico, Henri de Combles de Nayves, Kweilin Ellingrud, Bernhard Kotanko, Philipp Klais, and Kurt Strovink, representing views from McKinseys Insurance Practice. 60% of consumers dont feel theyre financially confident or covered across their long-term security and emergency needs. Never miss an insight.

The View for 2022: P/C Insurance Predictions and Trends, Insurance Journal, December 20, 2021.

PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. In other words, its time for insurers to play offense instead of defense. Creates an integrated ecosystem (typically via partnerships) that offers customers more than just insurance, focusing on distribution and product offerings to winat the point of sale. Claim cost inflation continues to run hot, and auto insurers feel the heat from auto repair costs and a labor shortage. Carriers will look to partner with or acquire the most promising InsurTechs, and banks and asset managers will offer more protection products and seek to differentiate on holistic financial wellness value propositions, forcing insurers to choose between collaboration and competition. As numerous wholesalers have consolidated over the last couple of years, so have many retail insurance brokers. Skier.

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. How can they create more value for shareholders? Yet a profound shift was underway even before the COVID-19 pandemic, with business leaders working to address skills gaps, update their talent practices and instill more dynamic and agile ways of working. The past two years may have been the most peculiar recession and recovery in living memory. EisnerAmper is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC provide professional services. Although most of these kinds of investments arent game-changers on their own, when they get the acquiring company closer to a strategic goal, theyre worth it. At the risk of repeating ourselves, weve seen time and again that many carriers simply dont do this. CRC Group is a leading wholesaler capable of meeting client needs for the full range of property and casualty coverages, individual solutions including life, retirement, benefits, and proprietary programs and products covering many industries. Among the factors driving these costs are supply chain disruptions, geopolitical issues and advancements in technology. Over the last two years, underwriting income has been consistently at historical lows given the interest rate environment, inspiring carriers to push rate and strained, and investment income reduce line sizes, resulting in 2022s continuing hard market. The U.S. inflation rate reached 7% in December 2021 and 7.5% in January 2022 - the highest levels seen in almost 40 years, driving up the cost of first-party coverage due to rapid increases in demand for goods, materials, and labor. Unfortunately, even with higher wages, increased benefits and more work flexibility in the sector, closing the technical gap will remain an issue for the foreseeable future. Over that span, 100% of industry income has been produced by investments. While the following appraisal solutions may not address supply chain issues, they can help insurers improve efficiency, accuracy and the customer experience: With new tech-enabled vehicles comes the need for advanced skill sets and training. Simply setting financial goals isnt enough.

Unfortunately, while most insurers do try to focus on their strengths, they also typically underinvest in these areas and fail to act with urgency, resulting in a race to the middle. Develops innovative differentiated, and customized products to address unserved / underserved segments or new, emerging risks via advanced analytics and pay-as-you go pricing. On the technology side, while advanced driver assistance systems in newer vehicles have made driving, navigating and parking easier and safer, these tech-enabled parts are more complex and expensive to repair or replace in the event of an insurance claim.

Creating value, finding focus: Global Insurance Report 2022.

Of note, theyre typically able to make these investments because theyve implemented structural, financial and tax approaches that minimize their cost ratios. The business of insurance, which once was stable and predictable, isnt that way anymore. In other words, commitment without action wont get you very far. Customers (and employees) increasingly expect insurers to be as easy to work with as anonline retailerand new entrants are giving them exactly what they want.

The decisions and actions leaders take today can meaningfully influence the future of the industryand the lives and livelihoods of billions of people around the globe.

While its anticipated that the risk of rising inflation will remain manageable in 2022, if higher inflation persists, insurance profitability and reserves would likely weaken when it comes to longer-tail segments, including Workers Compensation and other liability lines.2. Insurers must continue to address their technology debt by digitizing core processes, migrating to the cloud and embracing flexible sourcing models. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. We believe that sustainability, workforce transformation and open insurance are three of the most powerful forces reshaping the market in the near term. Younger workers are also looking for more purposeful work, which gives an advantage to insurers that can articulate a clear story about how their products and services benefit society as a whole. To download the full report, click here. In addition, the pandemic shined a light on the role insurance plays in absorbing risk in times of crisis by supplying financial relief to individuals, businesses, and governments.3 While not all COVID-19 losses have been tallied, many experts expect the pandemic to become the largest ever loss event in insurance history. Please email us at: A single approach to culture transformation may not fit all, Five trends shaping tomorrows luxury-car market, Why Infosyss cofounder Nilekani is urging leaders to use tech for good, Find the smartest technologist in the company and make them CEO, Americans are embracing flexible workand they want more of it. Umbrella and excess markets have been hit the hardest by skyrocketing judgments, which is why excess premiums have shot up almost 100% in years months.

At EY, our purpose is building a better working world. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. To help mitigate these risks, insurers may need to upskill resources and leverage technology. EisnerAmper LLP and Eisner Advisory Group LLC practice as an alternative practice structure in accordance with the AICPA Code of Professional Conductand applicable law, regulations and professional standards.

Finally, the insurance industry must seek to lead with purpose and live up to its highest aspirations, particularly in the wake of the COVID-19 pandemic.

In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. Increased frequency and severity of natural catastrophes. Such sustainability concerns relate directly to governance issues. Whatever your businessfocusdata and integration, brand and distribution, products, strategic partnerships or structuringthese three are absolutely essential. To help mitigate these risks, insurers may need to upskill resources and leverage technology for their business. Even with higher wages and more work flexibility in the insurance sector, the technical skills gap will be an issue for the foreseeable future. Cloud, because no insurerneeds toand, more importantly, probably shouldntsupport its own infrastructure anymore. Fully invest in and hold itself accountable for achieving 1 and 2. We strive to provide individuals with disabilities equal access to our website. Multiple factors influence insurance availability and cost, and in 2022 three primary factors will play the biggest role in what is available and how much clients will pay for the coverage: 1. Please see www.pwc.com/structure for further details.

In fact, 2022 is expected to be the 5th consecutive year of higher premium costs, although rate growth should be slower than in 2021.

It's not just a gap on the repair facility sideinsurers are also experiencing a skilled appraiser shortage.

Rising third-party costs are driving the liability arena, and it isnt expected to slow down in 2022. Many expect that global premium will shatter the record by mid-2022 as current market conditions point toward positive pricing momentum that will continue across all lines and regions.2,3 This momentum is reinforced by 40 year high levels of economic inflation, ongoing social inflation, and an upward trend of natural catastrophes as insurers adjust their underwriting and pricing to account for these factors.

The insurance industry has long paid close attention to environmental issues because they directly affect how carriers evaluate and price risk and pay out claims. Uses leading-edge technology to transform the customer experience and insurance landscape. It should come as no surprise that social inflation remains a significant factor in the hardening market. Contact your local CRC producer today to discuss how we can help you protect individuals, businesses, and communities through a wide variety of competitive insurance solutions. Finally, how can insurers, individually and collectively, reframe the role and purpose of insurance in society? Over more than 35 years, the insurance industry has only made a profit on an underwriting basis in 8 of those years. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. A monthly economic report for middle market business leaders. Its a unique moment; insurers now face several fundamental strategic questions. And investors, customers and the workforce are paying close attention. 2022 Global Insurance Outlook Report (pdf), Read the full report: EY 2022 Global Insurance Outlook. Creates scale by funding differentiatingcompetencies and experiences. Additional consolidation is expected to continue in 2022, as customers seek to work with well-diversified wholesalers capable of offering a one-stop shopping experience. With supply chain issues lingering post-pandemic, labor and material costs have increased year-over-year, and claims are staying open longer as required components, materials, and labor are more costly and difficult to obtain. After the dramatic developments of the last few years, insurers have shown they can undertake large-scale change at a faster pace than many industry veterans thought possible and can deal with unexpected developments. Pierre-Ignace Bernard is a senior partner in McKinseys Paris office, where Henri de Combles de Nayves is a partner; Stephan Binder is a senior partner in the Zurich office; Alexander DAmico and Kurt Strovink are senior partners in the New York office; Kweilin Ellingrud is a senior partner in the Minneapolis office; Bernhard Kotanko is a senior partner in the Hong Kong office; and Philipp Klais is an associate partner in the Munich office. Employs a lean operations focus to compete competitively on price and enable investments in key strategic areas. As losses are pushed higher by social inflation, carriers will continue to spread the risk and take smaller chunks of the tower. Subscribed to {PRACTICE_NAME} email alerts. Also, what about talent?

Second only to hurricane-heavy 2017, 2021 proved to be the 2nd most costly year ever recorded for insurers, due in large part to destructive hurricanes and tornadoes as well as extremely cold weather and flooding across the U.S. Last year alone, insurers paid out $120 billion due to natural disaster damage.5 As markets experience catastrophe fatigue and property reinsurance firms, catastrophe-exposed programs will see significant price increases.

The rise of open finance, along with the ecosystems of financial solutions that it enables, has emerged as one of the defining financial services trends of the 2020s, primarily in response to changing customer needs and expectations. Even a clear and consistent strategy is going to founder if your technology cant enable it. Digital data and integration capabilities, Next in insurance: Top insurance industry issues in 2022, 2022 Global Digital Trust Insights Survey, Business applications: Functional and industry apps, Application Security and Controls Monitoring Managed Services, Controls Testing and Monitoring Managed Services, Financial Crimes Compliance Managed Services, Virtual Business Office services for healthcare. Trail runner. Each member firm is responsible only for its own acts and omissions, and not those of any other party. If you change your mind at any time about wishing to receive the information from us, you can send us an email message using the Contact Us page.

For example, early movers are designing products that take into account two increasingly important issues: Stakeholders environmental, social and governance (ESG) concerns and the still overlooked employer as distributor market for a wide variety of financial and service needs, particularly retirement and college savings and paying for childcare or elder care. To succeed, ecosystem business models need strong leadership from the top and a clear and executable ecosystem strategy based on their current market position, brand value, business models, talent pool, and level of technology sophistication.

The current landscape is also notable for its fragmentation; convergence and intense competition, including from a mix of non-traditional players; and widespread collaboration. Yet the scarcity of key skills and the Great Resignation mean that insurers must address the traditional view of the industry as slow-moving and dull if they are to become employers of choice.

All the while, technology has continued its relentless advance and an emerging player ecosystem is threatening to shake up customer acquisition.

Listen to our latest On-Demand Webinar featuring Andrew Robinson, CEO at Skyward Specialty Insurance Group, and Andy Cohen, COO, Snapsheet PwCs Next In Insurance describes how insurers can win the war for talent in an insurance industry talent crisis. Required fields are marked with an asterisk(*). New market entrants will increase competition, which may drive rates lower. EisnerAmper provides some federal and state resources that are providing coronavirus-related assistance. All rights reserved.

3. A truly strategic technology platform features: A core processing system that efficiently issues policies and contracts, enables payments and keeps track of finances. The best in the insurance industry often do the same thing as they examine market conditions and strive to meet client needs in an ever-evolving landscape. For example, whats the right balance between covering climate-related risks and underwriting initiatives that could increase those very same risks? While carriers may have been able to get away with a fuzzier approachin the past, that is not the case today. For the former, insurers are experiencing increased scrutiny of their business models.

EY | Assurance | Consulting | Strategy and Transactions | Tax. We have received your information.

In 2021, the U.S. launched COVID-19 vaccines, which were expected to end the pandemic and ease economic strain. A clear road map must also reflect the impacts on different parts of the business and how ESG strategies will be executed. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets. Even though the pandemic has ebbed and flowed, the pace of change has remained relentless.

Committing to a way to play, then continuing to do everything you did before while funding whatever else comes along, isnota strategic direction. Across all commercial lines, higher hazard risks will continue to see rate increases that exceed the average rate increases in the commercial sector. How can they regain momentum on the long-running quest to improve productivity? Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

But sustainability and governance are becoming equally important.

https://www2.deloitte.com/content/dam/insights/articles/US164650_CFS-Insurance-industry-outlook/DI_Insurance-industry-outlook.pdf, https://www.insurancejournal.com/magazines/mag-features/2021/12/20/645852.htm, https://www.insurancebusinessmag.com/us/news/breaking-news/global-insurance-industry-could-hit-new-record-in-2022-317017.aspx, https://www.usnews.com/news/the-report/articles/2021-12-23/will-2022-be-naughty-or-nice-for-the-economy-or-both, https://www.reuters.com/markets/commodities/natural-disasters-cost-insurers-120-billion-2021-munich-re-says-2022-01-10/, Senior Living Market Easing but Reprieve May be Brief, Anti-Phishing Training Helps Employees Avoid Cyberattacks, State of the Market: Excess Trucking in 2022, Wildfire Risk is Growing for U.S. Those that do risk it being an impediment to operational flexibility.

Extends core capabilities by offering products and services to other carriers, distributors or other adjacentbusinesses. He currently leads a number of Statutory and GAAP external audit engagements, and also provides internal control consulting services to insurance companies and brokers. Moreover, an effective integration layer facilitates quick incorporation of new partners and solutions into your digital capabilities.