Insurance leaders say poorly informed governments, an increasingly heavy regulatory burden and ‘unrealistic’ catastrophe claims handling expectations are front of mind for the industry in 2024

By Miranda Maxwell

The annual Insurance News Industry Leader Survey reveals climate risk and affordability are again of paramount concern for executives, while the growing threat of cybercrime also features prominently.

Leaders we surveyed in January call for greater adoption of technology by insurers, and the industry also needs “a more robust pull factor for university graduates” according to one respondent who is kept awake by “talent management.”
 
Another says “affordability, availability and underinsurance” are the three most pressing market challenges, in that order.
 
“Increase the awareness of the need for greater spending on mitigation by all levels of government,” that respondent said. “Without this, more and more Australians won’t be able to afford insurance or even find insurers that will insure their property assets.”
 
Here is a sample of our 2024 survey responses. Sincerest thanks to those who participated.
 
CGU and WFI Chief Executive Jarrod Hill says climate and disaster risk tops the list of challenges facing the industry this year as extreme natural peril events increase in frequency and severity.
 
Next, and related, is managing communities built in high-risk locations due to poor land planning decisions, and legacy building stock and construction codes that are “not future-proofed”. He wants more urgency around working with government to drive reform.
 
“Collective action is needed at all levels of government and industry to address natural hazard and climate risk in future land planning decisions, protecting future communities and keeping insurance affordable,” Mr Hill says.
The industry needs to improve responses to catastrophes, he says, aligning claims resourcing and processes to deliver more efficient service in line with customer expectations.
 
CGU and WFI are using lessons from previous catastrophes to improve responses, he says, and collaborating with decision-makers to improve affordability and availability of insurance through land planning reforms.
 
“Australia must better consider natural disaster risk and future climate risk, and stop building communities in harm’s way. It is beholden upon us to create a more efficient business to improve affordability for our customers and, more importantly, focus on delivering better claims outcomes to minimise the impact to our customers.” 
 
Long-tail claim cost rises and external events affecting supply chains are other key challenges, along with the sophistication and frequency of cybercrime and how insurers address it.
 
Mr Hill is setting his sights this year on reducing the frictional costs of insurance, with a larger proportion of premiums covering pure claims costs.
 
CGU and WFI are also simplifying, to make it easier for brokers, partners and customers to engage, and creating value by embedding technology enhancements.
 
Allianz’s survey response nominates flood insurance affordability as the most pressing matter for 2024, followed by the availability and cost of financial lines such as public liability, professional indemnity and cyber.
 
Another hurdle is “unrealistic expectations” that extreme weather events can be handled without claims systems “showing signs of stress”. Government intervention in insurance markets and the burden of “ever-increasing” regulatory requirements and expectations also make the list.
 
Cyber breaches also keep Allianz leaders awake at night, while at the same time presenting the biggest opportunity for the insurance industry this year. 
 
Allianz, which is deploying technology to improve efficiency and customer experience, says enhancing claims handling following natural catastrophes is another opportunity this year, and the sector should demonstrate “continuous improvement in everything we do”.
 
Blue Zebra Insurance Managing Director Colin Fagen is succinct as he lists the top external influences on insurance this year: “Regulators, government, catastrophes, inflation.”
Insurers should do more to inform decision-makers through an education initiative for government, which Mr Fagen says “at all three levels is unco-ordinated and reactive to issues in our industry”. He thinks regulatory risk and “creep” tops the list of insurance sector challenges this year, followed by affordability and availability of cover.
 
“The first two are interrelated. Regulatory creep is creating inflationary pressure, with significant management capacity being taken up with bureaucracy that often does not assist customers on a macro basis.”
 
He says larger insurers are struggling with the degree of change required in a quickly evolving landscape, which is affecting their risk appetites, with change management driven by the regulatory environment and pricing strategies.
 
This is passed on in costs, creating “disincentive to operate in certain segments” and exacerbating catastrophe claims cost increases, which are above normal levels.
 
Catastrophe costs, claims inflation and reinsurance are pressing challenges, and Mr Fagen says he is often preoccupied with how to deliver claims management that meets customer service expectations while not being too inflationary.
 
The modernisation of systems at major players and ramping up skill sets through recruitment are changes the industry needs to make as a matter of urgency, he says, listing the legacy systems of major insurers as a top opportunity for Blue Zebra.
 
“This is providing opportunities for more nimble organisations, particularly agencies,” says Mr Fagen, who this year plans to expand the Blue Zebra product range and digital service, and is also eyeing overseas expansion.

Embracing tech: Resilium MD Ben Hastie flags technology and climate change as the top external influences

Resilium Insurance Broking Managing Director Ben Hastie says staffing costs and availability of quality candidates are the biggest issue for the industry, and he is also kept awake at night by compliance and legislative changes.
 
He lists other key challenges as disintermediation, availability of cover for northern Australia, delays in repairs, and the frequency and severity of catastrophes.
 
Technology and climate change are the biggest external influences, he says, and going forward, the industry needs to embrace technology and promote the industry more at schools and tertiary institutions.
 
On opportunities for Resilium this year, Mr Hastie lists acquisitions, growth of the authorised representative model in Australia and cyber coverage.
 
Community Broker Network Chief Executive Richard Crawford says he frets over the risk posed by the advice process, the impact of regulation on the quality of consumer advice and the “continued lack of understanding of insurance by the business community”.
 
Public perception is his number one challenge for insurance this year.
 
He also points to issues with market capacity, legacy systems and employee resources. The industry needs to work on advocacy and promoting insurance as a social benefit, and innovating services to be more efficient.
 
“We need to work more collaboratively around shared problems and demonstrate community empathy for the impact of events and economic conditions on the community,” Mr Crawford says.
 
Community Broker Network hopes this year to streamline systems and services, develop talent and leverage data and insights.
 
The economy will partly dictate how insurance conditions unfold this year, and “corporate owners looking for stronger financial returns” will be an influence.
PSC’s David Hosking

Affordability concern: PSC’s David Hosking says cost pressures are affecting clients

PSC Insurance Group Chief Executive Australia, New Zealand and Asia David Hosking says the ever-growing threat of cyberattacks, and building resilience against them, tops the list of challenges for insurers this year. 
 
Sourcing talent is also key, as is affordability and accessibility of insurance – especially in catastrophe-exposed areas – with cost pressures already affecting businesses and consumers.
 
For brokers, it will be another year of “moving forward on what we do best – servicing and providing quality advice to our clients”. He also mentions using technology as a “real differentiator” to build better businesses, and a “much improved and upgraded code of practice”.
 
The economy will be the biggest external influence, and Mr Hosking says that having “been put on the back foot with various regulatory reviews”, insurers and brokers must continue to “protect what’s important to our clients and be there for them when the unexpected occurs”.
 
HDI Global Regional Claims Manager Asia-Pacific David Lloyd nominates claims inflation as the top industry challenge. This “comes in many guises, including wage inflation that could have a longer sting in the liability tail than currently anticipated”. 
 
On a more upbeat note, Mr Lloyd says if he is kept awake at night, it is by the “excitement of what another year can bring, along with the opportunities and challenges that may confront us”. He says HDI has “the agility to meet changing market conditions and clients’ needs, and intends to grow in Asia”.
 
The wider industry should embrace artificial intelligence, innovation and technology, Mr Lloyd says. “This requires significant investment and, to an extent, a leap of faith, but the benefits will far outweigh risk.”
 
This year, geopolitical threats “cannot be ignored”, with more than half of the world’s voters headed to elections. “No two years are the same. The market is so dynamic and, to an extent, unpredictable that it’s exciting to be in a position as a significant market player and to see how we can work with our clients.”