It’s a new year, and you know what that means: time to break out the crystal ball and make our list of predictions for the biggest trends of 2024. Here’s what we think will take shape over the next twelve months.
#1: Capacity Will Remain A Scarce Resource
It’s no secret that markets were very frothy in the last few years, and the fallout’s probably not over yet. While there’s some indication the Fed might start cutting interest rates this year, the days of free money aren’t coming back any time soon. For the foreseeable future, current profitability is going to outweigh future potential.
In the insurance world, one of the biggest impacts is on the availability of capacity. With greater emphasis on profits, many carriers are likely to be more risk-averse than they might have been a few years ago. New and emerging-risk products in particular might struggle to get the risk capital they need to launch or expand their programs. It’s never been easy for emerging-risk products to get off the ground, but a tight market is likely to ratchet up the already-considerable difficulty.
It’s not hopeless for companies looking to launch new types of insurance products (in fact, bringing emerging risks to market is a specialty of ours), but the most successful businesses will be market-savvy and well-prepared to get what they need.
Which brings us to our next prediction.
#2 We’ll See a Shakeout Among Insurtechs
In boom times, investors are a lot more willing to open their wallets for a flashy presentation and the promise of eventual returns. This can allow shaky businesses to coast along much longer than they might otherwise - or, frankly, than they should.
With the easy-money tap shut off, insurtechs looking to fundraise will likely need to dig deeper. For new startups, investors will want to see credible GTM plans with a clear plan for profitability. For more established insurtechs, who already have a raise or two under their belts, investors are likely to have more direct questions about growth plan and metrics.
Insurtechs that can point to concrete revenue, product, and customer growth will be in a much better position to raise another round; insurtechs whose business fundamentals are largely unchanged from their previous raise are likely to have a harder time securing additional money in 2024. We’re expecting to see more failures and consolidations this year among companies in the second category.
While this isn’t a new trend - 2023 had its own share of notable insurance flameouts, though few as spectacular as Vesttoo - we’re likely to see it accelerate over the next twelve months as the market continues to separate reality from hype.
And speaking of reality and hype, we come to our third prediction.
#3 Insurtech AI Will Get Serious
2023 was the year of AI hype, and the insurance industry was no exception. At the most recent ITC conference, AI was unquestionably the focus of most discussions around innovation in insurtech - and also the biggest buzzword. While we expect both those trends to continue through 2024, we also expect to see some growing pains as insurtech AI transitions from an exciting idea to a business reality.
It’s easy to just slap some AI-related marketing copy on a website, but 2024 will likely see the industry move past initial AI excitement to get serious about opportunities and results. Once various stakeholders are able to get hands-on with more AI-powered offerings, it will start becoming more obvious if a particular product or service is genuinely innovating, or if it’s just cashing in on the hype.
Over the next year we’ll likely see increasing discernment on what AI means for insurtech, where it adds the most value in the insurance lifecycle, and how it helps specific products or services. Real, game-changing workflow innovations will be well-positioned to succeed in the market, and to set new standards for how insurtechs get things done. The hype train riders, however, will likely see diminishing returns.
Regardless of what 2024 has in store, it’s sure to be a memorable year. And if this is the year your business wants to finally build that new insurance program or add that new LOB? Let's get in touch.
