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Memos from Madison
MEMOS FROM MADISON
PETE HANSON, CAE, CISR Executive Director, PIA of Wisconsin
TRENDS FOR 2022: THE NEXT NORMAL
We’re living through strange and eventful times. The pandemic years will likely be viewed as a watershed moment that defines a new generation, similar to 9/11, the Vietnam War or the Great Depression. The good news is, the pandemic is almost over. Whatever the “next normal” is, it arrives in 2022.
Here are some trends to look for:
Overheated economy cools down:
• Inflation peaks in the spring and then calms down, but the Russia sanctions may keep it higher than normal for some time • Workforce grows as some “COVID quitters” come back for higher wages • GDP growth slows to 4% for the year, levels off around 3% by year’s end
The hard market will continue.
Swiss Re predicts global non-life premiums to grow by 3.7% in 2022, but that seems a little low compared to what PIA members are saying about January renewals. Expect modest, single-digit increases in personal lines coverages and in commercial property coverages, but higher increases in some commercial liability coverages. According to Willis Towers Watson, management liability coverages, such as D&O and EPLI could see double-digit increases, while cyber liability increases could be “eye-popping.”
Technology accelerates:
• More insurers switch to cloud-based systems to speed processes • Consumers (especially Millennials) expect more personalized communication and service • Individualized insurance products will take off, spurring more competition in niche markets • Use of Internet of Things smart devices to mitigate losses and reduce prices will grow
COVID pandemic becomes endemic:
By the end of 2022, virtually all Americans will have had vaccinations or been infected with COVID. They will have varying levels of immunity, but everyone will have some level of immunity and the dominant strains will become less virulent. Travel should resume, and we should start to see what life after the COVID pandemic will look like.
Businesses will re-evaluate real estate
to optimize costs: According to Deloitte’s 2021 Insurance Survey, 61% of insurance companies expect to cut costs between 11% and 20%, and they’re not the only ones. Commercial buildings in general had a 30-40 percent rate of unoccupancy, before the pandemic. With more employees now remote or hybrid, many businesses are re-evaluating.
Insurers focus more on mitigation of
climate change risks: Actuaries now rate the risk of climate change higher than terrorism or financial concerns. Expect to see more insurers flee carbon-based fuels industry, incentivize low-emission or electric vehicles, lobby policymakers on climate-sensitive public policy, and more.
M&A activity will continue at a strong pace and profitable agencies will continue to trade at lofty multiples of revenue.
