By Thokozile Mahlangu is the Chief Executive Officer of the Insurance Institute of South Africa
As 2023 draws to a close, the insurance industry must prepare itself for the challenges that it is likely to face in 2024, with innovation being key to mitigating the risks and changes that the new year is expected to usher in.
Some of the biggest challenges local insurance companies faced in 2023 include a tough economic climate and load shedding. These challenges are expected to persist into the new year as there is no silver bullet for Eskom’s power generation struggles or the country’s socio-economic issues driven by constrained economic activity and a high inflationary environment.
The unprecedented levels of load shedding that hit South African consumers and businesses during 2023 are forcing insurance companies to increasingly view blackout-related damages and losses as insurance risks. Similarly, the increasing frequency and severity of climate-related disasters have prompted more insurers to implement different approaches to underwriting that enables better understanding of risk profiles for commercial and private properties to be insured.
The current year also saw digital transformation and climate change being identified as some of the biggest challenges facing insurers, according to research by GlobalData, with cybercrime, legislative changes, geopolitics, and the continued fallout from COVID-19 also making the list.
All these factors have essentially created a tough environment for local insurance providers who not only have to ensure that their balance sheets can sustainably withstand the costs associated with the risks that dominate the environments in which they operate, but also be able to protect the financial well-being of their clients.
Looking ahead to 2024, the commercial insurance landscape is expected to undergo several significant changes, while also facing both new and some already-present challenges and risks that will shape the industry over the next 12 months.
In an ever-changing world, one full of uncertainty and increasing risk, still, we all need peace of mind. Through our partnership with agent companies and brokers, Sasria supports the advice-led approach to help deliver on our promise –
when things go bad, we make good.
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Economic and inflationary pressures are expected to continue to put strain on the insurance sector, resulting in the current tough operating environment continuing into 2023. At the same time, South Africa’s energy crisis is predicted to continue for at least the next two years.
According to global professional services firm AON, climate change and natural disasters will also remain firmly in the spotlight going forward leading to an increase in cover restrictions in some cases and impacting the renewal of insurance policies.
On a more positive note, technology is playing an increasingly key role in shaping the world and is also significantly impacting the commercial insurance industry. This sector is currently undergoing a transformation, driven by game-changing technologies such as generative artificial intelligence (AI). Such technologies have the potential to benefit everyone involved in the insurance ecosystem, from carriers to brokers and policyholders alike.
The EY 2024 Global Insurance Outlook notes that while many technologies are described as transformative, not all of them live up to the hype. Generative AI does live up to the hype and democratised access to such a powerful technology has seen the advent of many creative applications, with even more innovation on the horizon.
The report reveals that 59% of global insurance CEOs believe that jobs impacted by AI will be counterbalanced by new roles, 58% say that AI is a force for good and 52% plan to significantly invest in AI in the next year.
At the same time, the integration of advanced data analytics into commercial insurance is expected to grow substantially in 2024. Insurers will be able to evaluate risks more precisely and thus offer more customized policies by leveraging real-time data analysis. This will allow for optimised pricing strategies and enhance the customer experience.
There is already a growing interest in harnessing the power of technology from insurers looking to expand and structure their data for better decision-making. This is expected to be one of the main trends that will continue into 2024. As technology continues to automate manual tasks, insurers will assume more advisory roles, leveraging their expertise to guide businesses through complex risk landscapes.