4 Macroeconomic Trends Impacting Insurance Companies

Increasing consumer expectations, decreasing trust, and evolving environments are changing the insurance industry for good. Here’s a breakdown of macroeconomic trends impacting insurance companies in 2023: 

1. New Reporting Requirements in Effect: On January 1, 2023, International Financial Reporting Standards (IFRS) 17 went into effect, determining how insurance contract assets and liabilities are presented on balance sheets. American carriers faced the same deadline for implementing the U.S. GAAP counterpart on Long Duration Targeted Improvements (LDTI) rules from the Financial Accounting Standards Board, which introduced new reporting complexities.
2. Transforming Digital Experiences: Customer expectations for stellar service are increasing, including the desire to integrate digital technology with conventional products. As such, insurance companies will need to continue to increase adoption of technologies such as cloud computing and applied artificial intelligence.
3. Eroding Trust, Decreasing Insured: An erosion of trust, combined with lack of access and poor financial education, has made customers less likely to buy insurance and has led to wider protection gaps and higher economic losses, which will continue through 2025 and beyond. PwC analysis estimates the global protection gap could reach $1.86 trillion by 2025.
4. Climate Change and Catastrophe Claims: As payouts increase because more customers are making claims, the insurance industry either takes in lower profits or it has to increase the regular premiums customers pay. Insurers will need to get serious about reducing emissions, investing in green companies, and creating products to help customers shrink their footprint. Last year’s payout from damages caused by extreme-weather events totaled $120 billion — a 50% increase over the previous decade’s average.