While 2021 was a challenging year for insurers, the year’s end provided some semblance of normalcy. Customers embraced new digital capabilities such as intelligent automation and agents, which insurers and their agent/broker partners rolled out throughout 2021. After months of pandemic lockdown, the market outlook was positive, with all businesses resuming operations and consumers continuing spending.
But 2022 caught us by surprise. Europe is experiencing a situation like stagflation as a result of Russia’s invasion of Ukraine, the impact on energy prices, record inflation, and sluggish GDP. This will have a detrimental effect on insurers’ bottom lines. In 2023, insurers will place an even greater emphasis on new initiative prioritisation calls and associated budgets.
In 2023, Insurance Executives Will Face Unprecedented Turbulence
In the coming year, insurance coverage will be reduced or eliminated as consumers and small businesses face cash-flow constraints. Tech teams will batten down the hatches with smaller budgets and increased regulatory scrutiny on the technology that will most likely help them thrive through 2023: AI. As the IPO market evaporates, many insurtechs will exit the market through wind-downs, roll-ups, or carrier acquisitions. Insurers will be forced to look at alternate revenue streams.
Here is a closer look at a couple of Forrester’s predictions for insurance in Europe in 2023.
1. At Least Half Of The Top 10 Insurers Will Offer Value-Added Services For A Fee
More insurers will introduce new non-insurance services, such as value-added services, to offset declines in premiums and policies in force; AXA’s new service to help mitigate environmental risks in Europe is one such value-added service offering. These will have a broader impact among personal-lines insurers in 2023.
According to Forrester’s 2021 data, “Stretched Spenders” in the UK were more interested in receiving repair, buying, security, and disaster planning services from their insurance providers than “Cushioned Savers,” the most financially comfortable segment. Some insurers have jumped in, teaming with Ondo to launch innovative home services that predict and prevent water-leak-related claims. The upside for insurers? They get underwriting insights, because they know which customers maintain their stuff.
2. IT Spending Will Increase By 2% Year On Year, Which Is Half Of What Tech Teams Had Planned
Cost reduction will be one of the top insurance business priorities through mid-2023. According to Forrester’s 2022 data, 70% of insurance software decision-makers worldwide said it was a critical priority for their organisations. Unsurprisingly, insurance IT departments will face budget cuts. In the same survey, 58% of respondents said that cutting IT costs would be an IT goal for their companies in the coming year. Budget cuts will not be distributed evenly across IT priorities, however, and insurers will continue to increase IT budgets — albeit modestly — in 2023. Investment areas include operational cost reducers such as intelligent automation and robotics, application development, and user-experience enablers such as low-code that drive revenue and customer experience. While reducing technical debt will remain a top priority, some insurers will be willing to incur that cost if it means gaining new capabilities that address crucial 2023 insurance business priorities.
For a deeper dive into the forces that will shape the insurance and broader business landscape in Europe in 2023, read our Predictions reports for the insurance industry and for Europe (client access only).
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