At the start of 2023, Hanover made eight predictions for what financial services (FS) might face in 2024. Now, it’s time to evaluate how those forecasts held up. From the surge in E&S insurance to the push for financial tech talent, we’re here to reveal what we nailed, where we missed the mark and what surprised us.

AI will enhance recruitment – but a human touch is crucial

What the prediction said: Artificial intelligence (AI) will revolutionize talent acquisition (TA), enabling predictive analytics, proactive candidate sourcing, unbiased evaluations and better candidate experiences (CX). But human expertise will remain critical.

Were we right? Partially. FS firms took a cautious approach to AI in TA. While Oleeo found that 65% of firms using it reported reduced hiring costs, 61% reported improved quality of hire and there was a 62% improvement in CX, still only 15% of FS organizations had fully embraced AI for recruitment in 2024. There’s a long journey ahead before AI’s true impact on recruitment is realized. With 34% of TA leaders saying AI makes the CX less human, balancing this technology with human touch remains crucial for broader adoption.

Financial institutions will be more open to hiring senior tech talent from other sectors

What the prediction said: Financial institutions will tap into the tech talent pool from other industries to accelerate digital transformation.

Were we right? Yes, but with some caveats. The push to hire tech talent from non-financial sectors did gain momentum in 2024. But financial firms struggled with retention, with 40% of organizations reporting high turnover among their new tech hires. Tech professionals often faced culture clashes in the transition, revealing that simply hiring talent isn’t enough; firms must also adapt their environments to retain these experts.

New opportunities in wealth management and private banking

What the prediction said: Gaps in the wealth management (WM) and private banking market will create opportunities for growth, particularly for firms that can innovate and hire diverse talent to fill new roles.

Were we right? Yes, largely. WM firms capitalized on market disruptions in 2024, especially in private banking. Private equity firms expanded their WM teams to attract high-net-worth clients, JPMorgan expanded its European footprint and Citigroup offered enhanced bonuses to recruit top advisors. But these gains were tempered by economic headwinds. Firms that thrived prioritized innovation and agile hiring to secure talent capable of driving growth.

The fallout of the regional banking crisis will create a positive upheaval

What the prediction said: The 2023 regional banking crisis will spur new entrants and shake up the market, leading to consolidations and new talent dynamics, especially in private banking.

Were we right? Mostly. The crisis did catalyze M&A activity, with larger banks absorbing smaller entities. For instance, in April 2024, Wintrust Financial acquired Macatawa Bank for $512.4 million. However, the predicted influx of new entrants was slower than expected. Instead, it was the movement of senior leaders from consolidating firms to agile institutions that had the greatest impact on market dynamics, as these veterans brought their expertise to emerging players.

There’ll be a further shift away from large banking firms to RIAs

What the prediction said: There would be a continued shift from large wirehouse firms to Registered Investment Advisors (RIAs) as they offer more personalized and client-centric services.

Were we right? Yes. The trend toward RIAs continued in 2024, driven by clients seeking tailored advice and transparency, as well as financial advisors seeking independence and freedom to grow their practice. By 2027, Cerulli projects that independent and hybrid RIAs will control nearly one-third of intermediary asset market share, showing that the trend of advisors and assets moving to these channels won’t be short-lived.

Insurance companies will hire more specialized and senior roles as they expand product lines

What the prediction said: As insurance firms diversify into emerging areas, like cyber risks and renewable energy, they will need to hire senior talent with niche expertise to develop and navigate new product lines.

Were we right? Partly. Insurance firms did expand their product lines. Notably, the US insurance sector saw a 6% rise in job postings in Q2 2024, underscoring the hunt for specialized roles. However, the tight labor market in 2024 made it challenging for firms to attract and secure the experts they needed. The firms that succeeded were those that invested in upskilling existing staff rather than solely relying on external hires.

Insurance companies will invest more in talent to protect against risks

What the prediction said: In 2024, insurance firms will prioritize talent acquisition and retention to navigate increasingly complex risk environments. With a looming talent gap, investing in skilled professionals will be key to ensuring future resilience.

Were we right? Yes. In 2024, US insurance firms doubled down on talent acquisition and retention to navigate complex risks. But a significant talent shortage, particularly in areas like cybersecurity and data analytics, slowed progress. With 50% of the insurance workforce set to retire over the next 15 years, firms are investing heavily in training programs to bridge the skills gap. This focus on talent development will be crucial for maintaining resilience.

The E&S insurance market will experience significant growth

What the prediction said: The Excess and Surplus (E&S) insurance market will see strong growth in 2024, driven by high-risk businesses shifting to non-admitted markets. But this will present challenges, demanding specialized talent in underwriting and risk management.

Were we right? Absolutely. The E&S market saw robust growth throughout 2024, with direct premiums written reaching $86.47 billion, a 14.5% increase from 2022. This surge was largely driven by heightened demand for non-standard coverage in high-risk areas like climate-related disasters. However, firms faced challenges in scaling operations due to a shortage of underwriters and actuaries with specialized skills.

The 2024 State of Pricing Report highlighted 86% of actuaries and 74% of underwriters are concerned about not having the right technical skills for the future. This talent gap underscores the need for targeted recruitment and training initiatives to support the E&S market’s continued expansion.

Despite some setbacks, 2024 proved to be a transformative year for financial services. Keep an eye out for our 2025 predictions on what the coming year holds for the industry.