FORECAST 2023: Impactful Forces

January 2023

Which trends will have the greatest impact on the insurance and financial services industry over the next year or two? Information technology, regulatory pressure, and customer expectations continue to be at the forefront, according to industry executives who participated in the annual MarketFacts forecast survey. The war for talent, lingering COVID impacts, and the economy also are in the mix of top concerns.

The pace of technological change will continue to have a significant impact on the industry. “I think the companies that win will be those that figure out how to make human and digital experiences work together,” says Amy Friedrich, President, US Insurance Solutions, Principal Financial Group. “No specific technology, distribution, or product is going to be the answer — experiences and problem solving will matter more.” 

Mark Holweger, President & CEO, Legal & General America, concurs. “We must leverage technology and the digitization of our processes for the good of those we wish to serve — individuals, families, and businesses that need the protection life insurance can provide. Focusing on using technology to increase ease, access, and beneficial outcomes for all potential clients is where we as an industry can continue to do better.”

Legislative initiatives are always top of mind in the C-suite, given that insurance and financial services companies are among the most highly regulated companies in the world. “On the supply side, China is undergoing major structural and regulatory change,” says John Cai, General Manager & CEO, China Pacific Life. “Tightening regulations will last longer term, especially in this new era of ‘High-quality Development’, reshaping our business activities and product design. The China Banking and Insurance Regulatory Commission (CBIRC) has released a set of new rules and policies to standardize business.”

Insurers must respond to ever-changing customer needs and expectations or risk persistent, or even growing, coverage gaps. “Consumer expectations will continue to rise,” says Michael Simonds, Chief Operating Officer, Unum Group. “In other areas of our lives, we’ve grown used to ease of process, 24/7 accessibility, and similar conveniences. We expect that level of service and ease of doing business from our insurance carriers. Their tolerance for archaic processes is low, especially when procuring insurance that is not mandated such as auto and healthcare.”

As the competition among organizations to attract and retain top talent heats up, executives say employers are facing many challenges. “The power dynamics between employers and employees have shifted,” says Friedrich. “There’s an increased need for employers to offer flexibility and additional benefits to attract talent. This is driving more creativity and innovation among both employers and carriers in the workplace benefits space.”

“The permanent state of hybrid and virtual work will enable greater talent mobility across the industry, creating wage pressure and succession planning challenges for those not prepared to meet changing workforce expectations,” says Wade Harrison, EVP & Chief Retail Officer, Protective Life. “At the same time, the impact of inflation will continue to drive wage growth and expense pressure for the industry.”

COVID continues to have lingering impacts as well. “COVID’s impacts are wide-ranging and will still be influential over the next two years, as economies are re-establishing themselves and governments find solutions to the significant costs arising from their COVID support measures,” says Gordon Watson, Chief Executive Officer, AXA Asia & Africa. “Significantly, there is no clarity over the exit from the ‘Zero-COVID' policies of Mainland China. Therefore, it’s likely that financial markets will remain volatile and consequently impactful on our industry, particularly the savings-oriented sector.”

“We still have much to learn and discover about what the long-term impacts of the COVID-19 pandemic will be,” says Brooks Tingle, President & CEO, John Hancock Insurance. “What we do know is that even the residual impacts like deferred preventative care (mammograms and colonoscopies, for example), a rise in chemical dependencies, and the toll the pandemic took on mental health will all certainly have lasting impacts that we’re just beginning to fully understand.”

The current economic environment is quite volatile, with high inflation, a tight labor market, and tighter financial conditions on the minds of many executives. “Continued inflation will continue to pressure expenses for carriers, driving them to seek opportunities to drive automation, increase the use of artificial intelligence, and drive efficiencies of scale within their business,” says Harrison. “Higher interest rates will provide some relief for certain product lines and will likely shift the product mix of new business in the industry, while at the same time creating the possibility of some disintermediation risk for certain in-force blocks of business.” 

“From an economic standpoint, we are in the middle of a turbulent period, and I don’t see this settling down anytime soon,” says Mike James, EVP, Head of Life & Wealth, NFP. “The geopolitical environment and balance of power in Washington, D.C. will have an indirect effect on our industry as priorities could shift depending on the election results. Historically, this shift has always had an impact on our business, from fiscal/tax policy to regulation (or a lack thereof). But there is so much uncertainty that it will be difficult to predict what the next two years will bring and figure out how we can be productive in affecting outcomes.”

While there are many trends that will impact our industry in the next few years, Neil Sprackling, President, US Life & Health, SwissRe America Holding points out , “Prioritizing areas where we have the most control will be critical for insurers. While some of the macro trends will undoubtedly impact the industry, these are largely out of our control. Those within our sphere of influence are talent development, recruitment, and succession planning, and these are critical as we think about the next generation of technicians and leaders of our industry. Let’s use every communication medium possible to tell everyone what a wonderful industry we are and what an important role we play in society at large.”