Insurance Industry: Looking Ahead
One thing that can be said about the insurance industry: it has demonstrated amazing resilience and adaptability over the last few years. That being said, we live in an ever-changing world with emerging and evolving risks.
Insurance exists to protect people and businesses against unexpected financial losses. To carry out this mission, insurers need to understand and prepare for what is ahead or have something in place that lets them pivot accordingly. Uncertainties spurred by global challenges, government regulations, and economic forces make the risk landscape hard for insurers to navigate.
Here are a few developments that will likely shape the insurance industry in 2023 and beyond.
Cost Increases
Insurance rates are on the rise because of excessive repair costs brought on by economic inflation and social inflation (things like increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury awards). These inflationary pressures—combined with the increased frequency of catastrophic events and the possible removal of some key underwriting factors used by insurance companies—will likely cause rates to continue to increase. Private companies may choose to leave the market, resulting in fewer options and higher costs for consumers.
It’s also important to note that amid concerns about the growing costs of health insurance, policymakers are beginning to take action. Several states have established cost commissions with authority to monitor and regulate the cost of care across both public and private insurance. With the challenges employers face in containing rising prices of employer-sponsored health insurance, many business leaders believe the cost is not sustainable.
Cyber Risks and the Need for More Security
Cybersecurity continues to grow in importance. Companies need to take common-sense steps to protect their business from cybercrime, but now they also need to be aware of enhanced government mandates for protections that have to be in place to protect client information. Cyberattacks can cost a company over a million dollars in damages. Personally identifiable information—data such as an ID number, location data, or online identifiers—are the most reported data breaches, with credit and payment card information being one of the most frequently stolen pieces of data. In the medical industry, Protected Health Information (PHI)—such as medical records—are also at risk.
Maintaining cyber liability insurance will help keep companies operational after an attack. An example of how cyber insurance can protect your business would be if you are hit by a ransomware attack. A policy may not only help reimburse you for the ransom payment, but it may cover your lost expenses as a result of the attack.
The Legalization of Cannabis
There has been significant growth in cannabis stores across the country, and businesses must determine how they can address the issue of insurance in the workplace. Although marijuana remains illegal at the federal level, many states have begun legalizing the substance. Presently, 38 states and the District of Columbia (D.C.) have legalized some form of marijuana. Moreover, recreational marijuana is legal in 19 states and D.C.
Such evolving legislation has created numerous challenges for businesses across industry lines—especially regarding EPL exposures. For instance, some states have enacted statutes that restrict employers’ abilities to conduct drug tests for marijuana while others have introduced laws prohibiting employers from refusing to hire or taking adverse action against workers who use the substance recreationally while off-duty. As this regulatory landscape continues to shift, businesses that fail to maintain compliance could face an increase in EPL claims.
Changes in the Agriculture Industry
It’s no secret that running a farm involves a lot of risks and uncertainties, but there is a positive outlook.
A farm bill is a package of legislation that is passed once every five years and has a tremendous impact on farming livelihoods, how food is grown, and what kinds of foods are grown. It sets the stage for our food and farm systems, covering programs ranging from crop insurance for farmers to healthy food access for low-income families, from beginning-farmer training to support for sustainable farming practices. This legislation sets up budgetary outlays for the next five years to solidify crop insurance as the most important means for farmers to manage risk related to production and price. In 2023, Congress will start negotiating a new farm bill to provide that financial safety net to the agricultural sector.
The Future of Claims
Though the insurance industry as a whole has learned to adapt and pivot across many different areas over the last several years, the claims space is one aspect where innovation and technology have played a critical role. From the initial notice of loss to the claims investigation, technology and innovation have expedited the communication and reporting processes, provided access for policyholders to report and follow their claims, and made aspects of the process easier for claims professionals and claimants.
Customer expectations and purchasing patterns are evolving at an accelerating pace. Concurrently, millennials have become the largest generation in the workforce. Both of these significant shifts have created new exigencies that must be assessed and met. The key growth engine continues to be customer retention and loyalty, both of which are largely driven by customer interactions with their insurers and agents. Claims operations will have to become a powerful differentiator—innovative and uncompromising on customer service, with multifaceted talent and capable of driving strong results.
For more information, don’t hesitate to reach out. We are always here to help with your questions or concerns.