“The year 2024 holds immense potential for insurers … however, (they) must be adequately prepared to tackle the challenges that lie ahead.”
I wrote these words earlier this year when introducing the results of our annual global Claims Insights survey and little has changed in the months since, ‘The Carrier Perspective: 2024 Claims Insights’ whitepaper shone a spotlight on the views of 150 businesses from across the insurance sector and, not unexpectedly, they were approaching the year with a mix of optimism and concern. Potential is one thing. Navigating challenges to realise it is another.
As the end of the year draws closer, we are once again inviting insurers to reflect on the issues that impact them most. The 2025 edition of our Claims Insights survey will be a must-read for industry professionals and to whet the appetite, we have revisited some of the main issues that were on UK insurers’ minds 12 months ago. From premium affordability and technology to the war for talent, there certainly was, and still is plenty to explore.
Wage Inflation
With the UK unemployment rate falling to 3.8% in February, it was no surprise that the battle to recruit and retain skilled staff was among insurers’ top concerns. A separate study had revealed that 63% of UK companies were encountering difficulties attracting new employees, while 64% had faced challenges in staff retention. The result? Wage inflation, with 83% of our UK respondents saying that offering more competitive salaries was their key strategy for retaining employees.
That trend has since resulted in the insurance sector entering the top ten for UK industries that have experienced the most significant wage increases. A study that analysed data from the Office for National Statistics’ Wages and Salaries Survey showed that wages for insurance activities had risen from £1,489.82 to £1,583.41, an increase of 6.28%. The spike in wages was reinforced by job site Reed, which reported insurance salaries were continuing to rise due to the “need for more specialist skillsets” as technology continues to evolve.
I am personally interested to see how the state of affairs plays out in our 2025 survey when it comes to talent, given I addressed The Talent Tide in depth myself following the results of this year’s Claims Insight survey. Whether there has been any movement in the last 12 months that has eased the tension between talent and employer remains to be seen.
Premium affordability
When we asked UK insurers to nominate the primary challenge they faced in 2024, the leading response was premium affordability and insurability. A quarter of respondents had such concerns, outstripping the likes of market competition and keeping up with technology, and it was little wonder given the impact that people being priced out of cover has on balance sheets.
Such pressures have not eased, just last week, the new Labour government, delivered on one of its election promises, by establishing a task force to tackle the rising cost of motor insurance. According to Financial Conduct Authority analysis, motor insurance premiums have grown on average by 21% since June 2022. Whilst that certainly is a significant number, and there is no doubt that many will be feeling that pinch behind the wheel, insurers have been grappling with increased costs as well, from the cost of repairs rising at above the inflation rate to an uphill battle with insurance fraud and theft. We also recently examined the role that increasing EV adoption may have on premiums and insurance offerings in the motor sector, another factor that is likely to keep making its presence felt in the coming year.
Whilst motor insurance is currently copping the brunt of the heat, it has not been the only area to capture the attention of regulators, with the FCA also announcing a review of the premium finance market to evaluate whether people borrowing to afford home and motor insurance are being treated fairly.
So, it seems that this particular concern has not abated over the last 12 months and we’ll no doubt be continuing to watch and discuss this space a lot more in 2025.
Artificial intelligence
Barely a day goes by without someone hailing the benefits of artificial intelligence and it is no different in the insurance sector. Our 2024 survey found 83% of UK insurers had implemented or were in the process of implementing such technology for claims resolutions, with 93% anticipating AI would lead to improved speeds and operational efficiency. Success stories have continued to emerge in the months since the survey, including the fleet management division of Fleet Evolution reporting a 25% reduction in its insurance costs after leveraging AI-enhanced driver profiling and accident damage assessment. We’re also no stranger to the benefits of AI in claims management having begun to explore its potential in different ways ourselves.
Such innovation does not come without concerns though. Our survey identified primary challenges including seamless integration (39%), data privacy and security (26%) and ensuring compliance (20%). Evidence is also emerging that the technology is driving a rise in fraudulent claims, with a recent UK survey finding 19% of respondents suspect up to one in four claims use fake supporting documents that have been created or altered using AI and digital tools and the expectation is that this trend along with many other hot topics surrounding AI will not be going anywhere in the near future, let alone the next 12 months.
Expect to hear much more on the topic of AI from all points of view. I, for one, know I have been in recent times and have no doubt I will continue to.
On that note, I encourage you to join the conversation and take The Carrier Perspective: 2025 Claims Insights Survey. Be it supply chain issues, legacy claims or the impact of climate change, this is your chance to have your say and contribute positively to the industry.
As a leading claims services partner, Gallagher Bassett prides itself on having a finger on the pulse of the insurance industry and our annual survey is a key tool for achieving that goal. To find out we can help your business stay ahead of the curve next year contact us today.
