2023 Predictions: Cloud, ERM, models and the customer all in focus for insurers

Cloud migration

The increasing digital adoption within the insurance industry has led to a surge in the data generated from online interactions. As a result, technology now serves as a crucial competitive capability for carriers. In that context, cloud computing has emerged as a generational opportunity, with leading carriers already using it to serve customers more efficiently.

Model risk management

Model risk management is expected to become a key consideration for the industry. As firms continue to connect siloed and disparate datasets, they will increasingly use assumptions and inputs from one calculation, or model into the next. This has the potential for a negative impact where one error could lead to a model failure across an organisation.

With thousands of models in operation across insurers and this growing at a rapid pace, the potential for substantial financial loss and reputational damage is heightened.

Model risk is not getting any easier to manage and the introduction of new regulations to the banking industry, following a consultation by the Prudential Regulation Authority, intends to address shortcomings currently observed in UK banks. Whilst this doesn't yet extend to insurance firms, the PRA intends to consider at a later stage whether there is a need to extend their proposal to insurers. The extension of a policy and framework would, in my view, be welcomed.

Focusing on the customer

With the cost of living continuing to rise, the Financial Conduct Authority is expected to ask the market to bolster measures already in place to protect consumers. Back in September, the FCA wrote to insurance industry CEOs to emphasise this, highlighting the importance of customers being protected from unnecessary products or add-ons and unfair penalties. The letter highlighted that if poor practice was discovered, the FCA would quickly intervene to protect customers from harm.

Getting to know customers as individuals, not just segments, will allow firms to deliver seamless experiences, only up-selling or cross-selling relevant products and offers at the right time in their life cycle. Furthermore, by using advanced analytics insurers can continue to protect customers by suggesting proactive approaches for risk mitigation.


As in other industries, ESG is getting a lot of attention amongst insurers. I expect we will see more firms looking to better understand and predict climate risk in 2023. The increased use of interconnected devices and IoT looks set to help firms introduce more robust reporting on climate change and help to ensure that policyholders are better prepared for severe climate events.

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