Top insurance and risk issues to watch in 2024 – part one

From geopolitics to the US presidential election

Top insurance and risk issues to watch in 2024 – part one

Insurance News

By Jen Frost

Geopolitical risks, medical inflation, and climate change are among a ream of issues that could have a critical impact for insurance stakeholders in 2024.

During a recent Out Front Ideas webinar, Sedgwick global head of innovation and product development Kimberley George, and Safety National vice president of client engagement Mark Walls shared their take on 20 issues that North American insurance workers and risk managers need to be paying attention to this year.

Five insurance and risk issues to watch in 2024

Five big issues for insurance industry stakeholders and risk managers to watch in 2024, according to George and Walls, are:

  • Presidential election year
  • Economic outlook
  • Geopolitical risks
  • Employee benefits
  • Frequency rates

US presidential election year

With candidates gearing up for 2024’s US presidential election year, the result could have “significant implications” for both individuals and businesses, Walls said.

The Department of Labor’s independent contractor classification rules, which take effect March 11 and look to reduce the number of workers classified as independent contractors, are already set to have a significant impact on workforces. Walls predicted a “lot of litigation” will ensue as they come into force.

From an insurance standpoint, Governors’ elections are likely to be the most hotly watched, given their influence over state-level insurance policy.

“There are 11 Governor tutorial offices on the ballot in Delaware, Indiana, Missouri, Montana, New Hampshire, North Carolina, North Dakota, Utah, Vermont, Washington, and West Virginia,” Walls said. “Only two of those races – New Hampshire and North Carolina –  are currently rated as toss ups by political rating organizations.”

Economic outlook

Economic growth is set to decelerate in 2024, JP Morgan has predicted, and views differ on when interest rate cuts are likely to kick in.

Mortgage rates are expected to drop – from around 7% to 6.1%-6.5% by year-end – and commercial property has continued to face challenges.

“When leases expire, many companies are downsizing their office footprint, which is leading to rising commercial vacancy levels,” said George. “The Financial Times reported last week that $117 billion of commercial mortgages related to offices either need to be repaid or refinance by the end of 2024.

“Refinancing obviously will result in higher interest rates – some property owners have walked away, letting the bank take over, and other large commercial properties have sold for a fraction of the pre-pandemic valuation.”

Mergers & acquisitions (M&A), meanwhile, is set to see volume in the health and IT space.

“S&P Global suggests creative deal structures and a relentless focus on value creation and private equity portfolios are critical in the year ahead,” said George. “I completely agree that value creation is top of mind, successful companies must find that sweet spot between cost cutting and driving growth.”

Geopolitical risks

Global geopolitical risk is “higher than it’s been in years”, Walls said.

War in the Middle East, in addition to the Russia-Ukraine conflict and the threat of animosity between the US and China over Hong Kong have added to uncertainty.

Recent Yemeni Houthi rebel attacks have targeted Red Sea ships, driving delays and diversions.

“In recent months, there have been violent protests throughout Europe, and the wars in the Middle East and Ukraine have potential to spread,” Walls said. “If you have employees that travel overseas for business, it’s important to know where they are, and have plans to evacuate them if unrest develops.”

War risk exclusions are common in insurance policies and brokers and risk managers should work together to ensure insureds understand what their insurance does and does not cover, Walls urged.

Employee benefits

Employers are expected to continue expanding employee benefits offerings into 2024, with areas such as fertility, family planning, trans care, and menopause care having been in the spotlight.

Financial wellness programs and health plans also continue to be important, George said.

New entrant Surest has challenged incumbents with its no deductible and no coinsurance health plan, which includes price transparency for comparable services and providers.

“I’ve often shared with our Out Front Ideas audience that insurance models are designed around sick care and not well care and the founders of Surest are hoping their insureds will invest more in health to reduce sickness,” George said.

Plan providers are also “grappling” with the impact of sought after GLP-1 drugs, such as Ozempic and Zepbound, with multi-use diabetes and weight loss drugs in hot demand.

“They’re really having to look at: Who do we cover and what are we going to pay?” George said. “More and more plan members want to be able to take this drug beyond those that it was originally designed for.”

Other issues to watch include the rise of specialty medications and complexity around who pays, George said.

Frequency rates

Workers’ compensation accident frequency rates have “mostly” trended down in the past 20 years, but this could be about to change, Walls cautioned.

Private industry employers saw a 4.5% increase in workplace injuries and a 5.7% increase in fatal workplace injuries in 2022, with the workplace injury rate essentially flat on 2021, according to Bureau of Labor Statistics figures cited by George.

However, when factoring in work related illnesses, the frequency rate was up. Large employers and public entities have further reported overall accident frequency rates having increased into 2023.

“Some attribute this to understaffing and the high number of new employees,” Walls said. “There have been numerous industry studies that illustrate the fact that new employees have a higher accident frequency rate than more experienced workers.”

To cut down on accident and illness exposure, risk managers should be paying attention to a need for pre-employment physicals and safety programs.

“In a rush to fill positions, sometimes these standards are relaxed, which can lead to higher injury rates,” Walls said. “You just can’t cut corners with safety.”

What are your picks for the top insurance and risk issues to watch in 2024? Share your perspective in the comments below.

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