Looking Back at 2023 and Some Thoughts on 2024

As we reflect on the successes of 2023 and express gratitude to our customers, partners, and employees for pushing the boundaries of insurance digital experiences, it’s clear that 2023 has been a pivotal year for our business and the insurance industry more broadly. The evolving landscape has presented challenges and opportunities, setting the stage for what promises to be an even more transformative year ahead.

Around this time last year, I published a letter on what I thought the major themes of 2023 would be. I mentioned how it would be the “Year of Real-Time Intent Data.” After a year of huge growth and customer adoption of our solutions, it’s increasingly clear that understanding the real-time user intent of applicants and agents and leveraging behavioral data are moving from nice-to-haves to must-haves.

In early 2023, we also wrote about what we were calling “The Great Shop,” as we expected a surge in policy shopping in response to carriers hiking premiums. We got this dead right. We mentioned the importance of having a solid understanding of customer purchase intent to best take advantage of the rise in shopping while maintaining effective risk controls to improve loss ratios. Despite cautious spending on marketing by carriers, Adam Pinchon from LexisNexis confirmed our beliefs last month…“Ongoing rate increases and changing demographics continue to contribute to near-record shopping volumes, while claims severity continues to drive profitability challenges for insurers. The combination of these trends has created a challenging environment that has been the theme for insurers in 2023.”

As a follow-up to “The Great Shop,” we wrote about “The Dark Side of Digital Applications,” which outlined our prediction that Premium Leakage, Misrepresentation, Nondisclosure, Risk, and Fraud would become increasingly important to carriers as they increase digital distribution. This turned out to be an even bigger focus than we anticipated. With that in mind, we continued to enhance our purpose-built solutions for Leakage, Risk, and Fraud in P&C and Non-Disclosure in Life. Schedule some time with us if you’d like to see these updates.

Now, without further ado, here is a recap of my thoughts on the themes from the past year and how I see the next twelve months playing out.

2023 Theme Review

1. Accelerating Digital Commerce & Distribution

Despite industry-wide loss ratio degradations and negative profitability impacts in 2022, the acceleration of digital commerce & distribution powered forward. Some P&C carriers paused or rolled back their digital distribution but the secular trend continued.

In 2024, we expect this trend to intensify. P&C carriers will continue launching and enhancing their D2C experiences and Life carriers will continue migrating towards accelerated digital underwriting and self-service e-med interviews. As pioneers in real-time behavioral data, we’ve witnessed the growing importance of understanding the digital intent of customers as carriers navigate this dynamic digital landscape.

2. Elevated User Expectations: The Need for Instant Gratification

Over the past few years, user expectations have shifted as customers continue to demand instant decisions. Carriers continued to progress from agent to online and from online to instant decisioning.

In 2024, the expectation for instant quotes, swift underwriting decisions, and the ability to purchase insurance online will continue to shape customer and agent experiences. By offering both D2C and Agent distribution solutions, we’re positioning ourselves to add value no matter the distribution channel.

3. Mitigating Challenges in Claims and Adjustment Expenses

The challenges posed by inflation, extreme weather events, fraud, and the enduring impact of COVID on claims and adjustment expenses prompted a strategic shift in focus from growth to profitability. We got this right, which is one of the big benefits of ForMotiv’s Leakage and Fraud solutions.

We obviously cannot predict the weather and are not so bold as to attempt to predict this year’s inflation. That said, in 2024, we anticipate a shift by carriers to profitable growth as inflation has seemingly slowed, loss ratios have come under control, and premium hikes take effect. We’re confident carriers will continue to leverage real-time intent data as they balance growth with profitability. They will strive to provide the seamless experience expected by customers and agents without compromising on risk or fraud.

4. Capital Markets’ Emphasis on Profitability and Cash Flow Generation

Facing mounting loss ratios, many carriers, especially P&C carriers, made the strategic decision to sacrifice aggressive growth to reduce risk and return to profitability. Stocks of insurers such as Allstate, Travelers, Progressive, and Aflac are now trading at or near all-time highs, rewarding profitability and improving cash flows.

The preference for profitability and cash flow generation among capital markets and investors will persist in 2024. This shift has redefined growth priorities for both public and private insurance companies. Striking the balance between profitable growth and effective risk management will remain a core focus, further emphasizing the importance of real-time intent data in decision-making processes.

5. Continued Integration of Advanced Technologies

Big data, machine learning, and data science will continue to be integral to the insurance industry’s evolution. In 2024, the emphasis will shift from merely being data-rich to becoming truly data-driven. The incorporation of machine learning, exploration of new data sources, and deep data science will empower insurance companies to extract actionable insights, enhancing decision-making processes and customer interactions. We also believe carriers and technology providers will continue exploring the potential benefits of Generative AI and Large Language Models as these nascent technologies mature.

6. Evolving Dimensions of Competition

Competition within the insurance sector will evolve, with an increasing emphasis on personalization, ease of use, and speed. In 2024, the challenge for insurers will be not only to differentiate themselves on price but also to provide tailored experiences that resonate with individual customer needs. They’ll also need to fend off increased competition from InsurTechs and embedded insurance offered by companies like Tesla. Real-time intent data will play a pivotal role in achieving this level of hyper-personalization, giving insurers a competitive edge in a rapidly evolving market.

Additional thoughts:

Increased Focus on Risk & Fraud as Application Veracity Declines

While we’re starting to see a renewed interest in growth, carriers are hesitant to remove the increased friction they implemented throughout this year as concerns about risk and fraud persist. Verisk has published studies over the past few years around application veracity declining and, more recently, around the public’s general thoughts on insurance fraud. “The results prove the continued need for insurers to be hypervigilant about the impact of fraud on their book of business,” said Maroun Mourad, president of Verisk Claims Solutions. “The fact that younger generations are more tolerant and motivated to commit claims fraud indicates that this problem is not going away and is likely to persist. Carriers would be wise to set up a strong perimeter defense to ensure they are adequately and accurately detecting potential fraud throughout the policy life cycle.”

With that, we anticipate carriers will continue to tighten risk and fraud measures and look to find solutions and partners that help improve underwriting accuracy.

All in all, 2023 was an exciting year and we’re looking forward to an even more exciting 2024.

Bill Conners


P.S. If you’re interested in discussing any of the above or learning more about our insurance solutions, please reach out.