Inflation has proven to be one of the most difficult economic phenomena to predict. Almost two full business generations have passed without inflation becoming a major topic of discussion, as it was in the past, led by the top 20.Th-The wars of the century are the dangerous oil of the 1970s:
As we can see from this chart, since the mid-1980s, inflation in the United States has remained within a small, predictable and stable range that allows forecasting of sales and employment to focus on other areas of planning. .
All this has changed in just a few months.
Modern Problems – Not Forever After All
To combat the current inflation, the US Federal Reserve and other central banks have tightened monetary policy and raised interest rates significantly in an attempt to control inflation.
Latest statistics shows that the efforts have not produced significant results, and that US inflation is still very high, at annual rates of the consumer price index (CPI) not seen since the end of 1981:
Although it is not clear, the annual inflation is now more than 7 percent in the UK and the Eurozone, and many countries around the world are seeing an increase in prices of more than 5 percent. Russia’s invasion of Ukraine.
The bottom line: Insurers have no choice but to add inflation to their processes and strategies, regardless of where they operate. According to a recent report by McKinseyThey also need to plan for it to be persistent, not short-lived, running at 1.5 to 2 percent per year more than inflation in the early part of the last decade or so.
Effects of Inflation on Insurance
While everyday financial discussions tend to focus on fuel prices (fuel, food, housing, transportation), insurance executives in their boardroom discussions need to assess the business impact of inflation and its impact and how to respond. reduce them.
Increase in Insurance Liability
In the world of property and casualty insurance (P & C), lower prices than planned drive the debt, while the value of the property protected and the reimbursement of claims increases, and losses must be reimbursed at a higher level than what was previously followed.
Some policies, such as auto and homeowner, can be repaid quickly, reducing the rate of depreciation.
Even before inflation, maintenance and replacement costs for cars and their accessories it has arisen continuouslywhile the technology and cost of the specialized work required to repair and replace those vehicles has increased.
Note that homeowner’s insurance claims were also higher before the current recession, following rising home prices and reflecting sales issues such as roofing:
MeInflation also makes pricing and reimbursement for other, longer-term lines, such as long-term disability, professional liability, health care, and workers’ compensation, more difficult, placing additional risk on future payment reserves and forcing reassessments of insurers’ losses. .
High Income Risks
With rising prices and undermining consumer confidence, customers may be reluctant to make new purchases and take the risks that come with them.
As interest rates continue to rise, insurers are seeing a decline in new business written for building and buying homes, buying cars, and other high-ticket items that require financing.
This leads to increased competition, the need for increased sales and marketing budgets, the need to build an enjoyable online experience, and a redoubled effort in customer support and account retention, all drag down.
Increasing Pressure on Trees and Trees
In times of inflation and market expansion, prices must change in real time. Any delay, no matter how short, risks high costs for insurers.
According to P&C specialistMotor Vehicle Insurance CPI for May grew 4.5% from a year ago, while car repairs rose 6.1% during the same period, showing that insurance is “behind the eight ball” and lags behind what it does in the market.
The time lag caused by inflation is too large to account for inflation. Delays in decision-making also lead to dissatisfaction among end customers and prospects, putting them at risk of losing their business to many competitors.
Unexpected Changes in Consumer Behavior
Inflation can lead to behaviors that may have adverse effects on insurance.
For example, consumers may not drive as much or as much as they used to, look for jobs and additional work-from-home (WFH) options, drive, take “homestays”, or reduce their mileage due to rising gas prices. As a result, claims can be reduced in both numbers and premiums.
On the “side”, while some insurers are pushing for price increases that exceed the rate of inflation, customers can buy the best insurance products, show brand loyalty, or drive away from gas- amazing SUVs, all of which can lower insurance costs and marketing and advertising expenses.
More Hands-on Workers and More Demanders
It’s not always one of the first things, but inflation also drives up costs, especially in markets where there are more open spaces than potential workers. This leads to faster-than-expected labor costs, increasing overhead and weakening the bottom line.
Rising Inflation & Insurance: What’s Next?
With inflationary pressures, there are no “magic bullets”. Reduction works on many things.
The eight-point plan
To survive and thrive in this environment, Eaarnix recommends the following plan, an effective mix of external and internal controls, be implemented now:
- Enhance the ability to analyze the market so that you can take action in real time
- Develop strong simulation skills and technologies
- Enable machine learning (ML).
- Build technology and infrastructure a program that helps to send prices quickly change
- Reduce the cost of claims by increasing efforts to prevent and process claims quickly
- Invest more in customer retention and customer engagement
- Install telematics and other pricing tools
- Prioritize high ROI projects for construction finance
This may seem like a difficult “to-do list”, but the technology exists today to make it happen, and there are proven ways to get started right away:
Get the Data House in the System
Every insurance company faces many data challenges. This disease represents a way of better analysis and decision-making, including the implementation of artificial intelligence (AI) and machine learning (ML), the cornerstone of modern business.
The first important step in managing and integrating internal and external data removes the challenges faced by all organizations, and paves the way for better use of advanced analytics and decision-making capabilities.
Use Leading-Edge Software Technology
With a data system, advanced technology in dynamic decision making and analysis can be leveraged to make informed decisions and act quickly.
When powerful decisions and analytics are integrated into every function throughout the organization, insurers can identify, implement, and manage risk strategies with confidence, while reducing the effort required to improve operations.
Do it for the whole community
Since inflation seems to be stable for a long time, it is time to join the whole organization to reduce its effects.
The entire organization must “have” a customized and responsive customer (CX). Everything works in the organization, including complaints, documents, moneyfinance, sales, and customer service, should be included.
Download The Best and the Brightest
When employees feel that the data they are working with is accurate, they have the best tools and technology, and when they feel connected to their colleagues throughout the organization, their job satisfaction increases, their confidence in decision-making increases, and they feel they have the ability to act quickly and decisively for the benefit of the whole group.
Because of future inflation, it’s time to get a map and start working. Find out more by reading the eBook now.