I always look forward to the release of the Global Priorities Survey by our colleagues at the International Insurance Society because it provides a reality check for me. While I read voraciously and talk to as many people in the industry as I can, I hardly have the reach of this survey, which is distributed to nearly 20,000 C-suite insurance executives around the world,
This year's survey didn't contain any huge surprises, but I confess to being struck by how much inflation is still a priority globally -- 69% of respondents listed inflation as a top-three economic priority. It's certainly been a massive issue in recent years, but it has cooled significantly -- Goldman Sachs predicted in June that it would soon drop to 2.2% in the world's developed economies -- and insurers, while initially surprised by surging prices for replacement costs, have been increasing rates to catch up.
The good news is that insurance executives generally said they were prepared to deal with inflation. That confidence is surely buttressed by a jump in emphasis on operational efficiency and, in particular, on AI, which holds enormous potential to take time and cost out of all sorts of processes. Fully 55% of executives said AI is a top-three technology and innovation priority, up from 29% last year and only 17% in 2021.
The bad news is that "more than a third of executives report that their companies are unprepared for [AI's] rapid advancement," the IIS says. "Concerns include the industry's slow adaptation to technological changes and the need for extensive reskilling due to an aging workforce."
Let's walk through some of the other intriguing numbers in the survey, as well as some color provided by Josh Landau, president of the IIS, in a conversation he and I had on Friday.
We'll start with Josh's commentary.
He said he wasn't surprised by the emphasis on AI. "Insurance is a pure information industry," he said, "so it can take full advantage of what AI offers." As early successes, he pointed to "augmented underwriting, to make underwriters more efficient," as well as "uses in call centers for customer service" and "uses on the analytics side, to sort through the vast amounts of data that are increasingly available."
Although many executives said their companies aren't prepared for AI, Josh said he sees progress. "AI is no longer a new topic. I liken it to when Bitcoin first came out. People didn't understand what it was. Today, people are more comfortable thinking about its value proposition or lack thereof. With generative AI, we're no longer in the first inning. It's still early innings but not the first. We've gone from, 'What's generative AI?' to 'What version of ChatGPT are you using?' or 'Are you using Copilot?'"
On inflation, he said executives can see the problem being tamed. He also said they acknowledge that we seem to have achieved a "soft landing" -- 28% said a possible recession was a top-three economic priority, down from 43% last year and 44% in 2022. But he said "the impact of inflation is still being felt because of replacement costs on policies that were written in the past."
He also called out the results on climate change, which 60% of those surveyed said was a top priority, continuing a steady increase from 49% in 2021. The 2024 figure was even higher at property/casualty companies: 71% of executives ranked climate change as a top priority.
The report says, "The increasing volatility of natural disasters makes it 'very difficult to predict future losses,' according to one executive. The associated increase in costs could have a 'destabilizing impact on carriers, governments and consumers.' There are also fears that climate change is driving a lack of insurability and that 'rates are rising to a point that people cannot afford insurance.' A quarter of executives say that their company is not prepared to address the issue in 2024."
Josh adds, "It's no longer just the severity of catastrophes that's increasing. The frequency is increasing, too. The problem is becoming more tangible. It's no longer a one-off event. There's a recognition that we may have to learn how to adapt to a new environment."
In general, I found the survey optimistic. Only one issue -- geopolitical conflicts -- showed up in the quadrant marked as high priority and as an area where insurance executives felt their companies were unprepared.
While cybersecurity remains a major concern, executives are feeling more comfortable -- 62% listed it as a top priority in 2024, continuing the steady slide from 75% in 2021. The concern about managing a hybrid workforce has seemingly dissipated -- it was a top priority for 45% of executives in 2022, but that figure fell to 14% last year and stayed there this year. The worry about competition from outside the industry continued to wane, being expressed by just 22% of executives this year, down from 45% in 2021.
Executives also report seeing major growth opportunities that they feel prepared to tackle in some of the areas I harp on at ITL, including customer engagement, product innovation and Predict & Prevent risk management services. Here's hoping....
Now, optimism always makes me a little nervous. Crises like COVID have a way of popping up unannounced. But it's still nice, at least for now, to see executives feeling good after a crazy stretch for many lines of business.
Cheers,
Paul
P.S. The IIS' report will tee up many of the sessions at its annual Global Insurance Forum, being held this year in Miami from Nov. 17-19,
Josh also says "there will be an increased focus this year on the continuing deglobalization and derisking of supply chains, which is having an impact on insurers following the near-shoring and friend-storing trends."
That's certainly an appropriate topic for a forum being held in Miami, the gateway from the U.S. to Latin America, which figures to see a lot of economic activity as U.S. companies pursue those trends. I hope to see you there.