Foreword

Optimizing Operations Amid a Complicated Insurance Environment

This year marks the third edition of our annual whitepaper, a comprehensive exploration of insights from insurance carriers across the globe. Each edition of this report reflects the collaborative effort of our survey respondents, whose unique perspectives have greatly enhanced our understanding of the industry. We extend our sincere gratitude to all participants for their contributions, which help illuminate the challenges and opportunities shaping the global insurance landscape.

The global insurance sector is currently experiencing diverse and complex market pressures, with conditions varying significantly by region. In North America, we’re seeing a tightening market shaped by economic factors and competitive dynamics. Over two-thirds of respondents to our survey reported that these challenges are driving higher claims costs, which ultimately leads to increased premiums.

However, rising claims costs are only part of a larger puzzle. Additional drivers, such as the increased cost of reinsurance, social inflation, regulatory shifts, climate change, and the frequency of natural disasters, have also contributed to higher claims costs worldwide. While the driving factors are similar, regional nuances have shaped different outcomes across the globe.

North American commercial property and casualty (P&C) insurance lines are exhibiting tough market conditions. Certain business lines, such as auto insurance, are facing additional conditions that are leading to increased premiums. There are several reasons for this, such as increased vehicle and replacement part costs and a rise in jury damages, including exorbitant jury awards that greatly impact the carrier’s loss ratios. Higher deductibles and self-insured retentions are also leading to fewer small claims and, hence, increased severity, albeit at a lower frequency.

Current market conditions are seeing carriers actively optimize strategies to manage costs and maintain profitability. Efforts to enhance operational efficiency and embrace innovative solutions are at the forefront, helping mitigate the financial impact of rising claims.

In North America, carriers are employing several key strategies, with premium adjustments being the most common approach by over half of respondents. This is followed by implementing stricter underwriting guidelines, enhanced claims management, and a strong focus on technology investment. Carriers are also paying close attention to credit rating agencies, such as AM Best, for potential downgrades or negative outlooks that could influence market strategies and competitive positioning. With credit rating agencies anticipating that these challenges will persist in the reinsurance market, carriers should be paying close attention to the effects on the entire supply chain.

While most survey participants foresee a moderate to significant hardening of the market, there continue to be opportunities for carriers looking to differentiate themselves. Looking ahead, advancements in data analytics, cybersecurity, and artificial intelligence will enable carriers to differentiate themselves in a competitive market. However, capitalizing on these would require significant investment. To optimize the return on investment, carriers can get the guidance of a trusted advisor with a deep understanding of the evolving nature of global challenges and technological innovations.

At Gallagher Bassett (GB), our dedicated Carrier Practice model is designed to maximize our ability to partner with carriers by offering a cross-functional team entirely focused on achieving their specific targets and goals, supporting managing general agents (MGAs), program administrators, captives, and alternative risk managers. Additionally, our expertise in AI and our commitment to advancing machine learning through our Waypoint product suite empower us — and our partners — to capitalize on the latest benefits of generative AI. As technological advancements reshape the industry, GB is well-placed to help carriers adapt quickly to both the challenges and opportunities that come their way.

Our seasoned professionals take a proactive approach to managing risks, resolving claims, and optimizing outcomes by focusing on resiliency and efficiency. This ensures carriers stay ahead of the competition now and in the years ahead.