Inflation and the Ukraine conflict: What does it mean for insurance brands
The Russia/Ukraine conflict is impacting the world in ways that many never expected. With inflation on the rise and the conflict growing larger, this has exacerbated pre-existing economic problems and is sure to create new ones. Brands across various industries are hurrying to figure out how to best engage consumers in what has become a very volatile economy and world. But just what impacts could inflation and the conflict in Ukraine have on the insurance industry? It varies across product lines.
Property & casualty (P&C)
Perhaps the most noticeable impacts will come in P&C insurance, particularly personal auto and homeowners. Inflation was already rearing its head in the personal auto industry before the conflict in Ukraine. Claim frequency and severity were on the rise in 2021, as more people began driving and car repairs, replacements, and rentals became more expensive due to supply chain and other pandemic-related issues.
On the homeowners side, labor shortages and increased cost of building materials have not only contributed to the lack of housing supply, but also to more expensive home claim payouts. Several insurers have already sought to combat these trends through filed rate changes across both lines, which will put further strain on consumers who are already dealing with elevated prices.
The impact of rate increases could stimulate insurance shopping in 2022 and beyond, which presents both opportunity and risk for insurers. Firms will need to stress the value they provide for current and prospective customers, including highlighting their expertise and differentiated customer service, as well as promoting additional rewards and perks (more on that later). For example, Amica recently partnered with hit show “This Old House” to provide short videos on whether home projects are DIY or not, teach how proactive inspections can prevent damage, and explain key insurance concepts that determine how customers are protected.
Life and health
Healthcare costs have historically outpaced the rate of inflation, but are currently not growing at the pace of today’s inflation trends. However, industry experts suggest they will eventually catch up. Any ensuing cost increases could lead to reduced healthcare benefits and higher out-of-pocket costs for consumers.
On the life insurance side, there may be some positive outlook. The pandemic caused more people to think about their mortality and the cost of final expenses, a trend that is likely to continue and offers growth opportunities for life insurers. Not to mention, life insurance and similar products can serve as retirement and financial planning tools. In what could be a down market, consumers will be looking at alternatives to help protect, preserve and grow their finances. However, carriers will need to educate consumers on the benefits and importance of life insurance products and blend more financial wellness education initiatives in their marketing strategy to bolster engagement and convey a more customer-centric ethos.
Cyber and travel
Cyber protection will be an ongoing concern for both businesses and consumers as Russia has a history of hacking organizations across the globe. Russia was reportedly responsible for hacking Ukrainian banks just days before its invasions. Rating agency A.M. Best believes the Russian/Ukraine conflict could drive cyber insurance rates higher in the already-hardening market. Carriers should take this time to educate consumers and businesses on the importance of cyber protection and provide advice on how to protect themselves.
While increased travel looked to be a bright spot following the pandemic, there could be some travel deterrents emerging. If the Ukraine conflict escalates, it could hamper some international travel. In addition, increased oil prices could impact all modes of travel for consumers, and supply chain constraints and labor shortages could further impact eating/dining and entertainment. Yet, 8 in 10 consumers plan to travel in 2022 as the pandemic wanes, meaning lots of opportunities for travel insurance providers.
What we think: Lean into incentives in 2022
Ultimately, there are still many unknowns with regard to how the insurance industry will shape up throughout 2022, but we predict that providing perks and incentives will become even more important.
For example, the current environment creates the perfect time for auto insurers to further push telematics adoption, thus giving insureds more control over their insurance prices. The pandemic garnered lots of customer attention for telematics and carriers should keep riding that wave.
Additionally, connected home devices that help mitigate loss could be an incentive for homeowners to save on their premiums. Insurers who can create easy-to-navigate ecosystems of maintenance and loss mitigation will also deepen their relationships with customers. Health and life providers can engage with customers through fitness incentives that support healthier lifestyles and give customers rewards.
The world has dealt with a lot over the last two years and it looks like more things have been put on its plate. There’s no greater opportunity than now for carriers to deepen their commitment to protecting their customers and showing that they care.