"If one word could sum up the focus of insurers in 2015, it is ‘technology.’ With the return of stable economic conditions, it makes sense for insurance companies to invest in digital solutions that widen margins and provide competitive differentiation."
Shaun Crawford, Global Insurance Leader
Improving macroeconomic conditions across much of the world bode well for international property-casualty and life-annuity insurance companies.
There are clear opportunities to connect to underserved consumer markets, the expanding middle class and high-net-worth clients with new and better products. Forward-looking insurers are targeting their growth strategies in those high-potential areas.
Of course, significant challenges remain:
- Intensifying competition
- Generally soft pricing conditions
- Tight profit margins
- Increasing threats to cybersecurity
Investing in technology and digital platforms will strengthen their relationships with customers across all product classifications and geographies, as well as:
- Improve front-end sales, distribution and customer service
- Enhance the shopping experience for businesses and consumers with products that are easier to understand and compare
- Improve back-end operational efficiency and expense management
Shifting customer preferences and new competitive pressures require that insurers respond with speed and agility. As a result, they are looking to simplify systems, processes and structures and achieve enterprise data excellence.
The rising demands of regulation and compliance also pose a challenge, most notably in global enterprise risk management and risk analytics.
Key challenges and opportunities by region
• Growth is favorable, particularly within expanding middle class and high-net-worth populations.
• Prospects for commercial lines remain strong, given the region’s elevated catastrophe risk and the rise in infrastructure and home building.
• Rising real estate and financial asset values are enabling insurers to produce higher premium volume from increased protection levels.
• A tech-savvy population is forcing insurers to invest in data analytics, modeling capabilities and other digital solutions.
• Regulations addressing insurer solvency, capital and risk management are now key issues.
• Data privacy, data security and other consumer protections are more important than ever.
2015 Asia-Pacific insurance outlook
• Constrained growth is giving way to opportunities in underserved consumer markets.
• Life insurance and annuity providers must make their products easier to understand, compare and purchase.
• Insurers need to develop more robust mobile technologies, data analytics and social media strategies.
• Solutions for absorbing the longevity risks of pension plan de-risking actions are a key opportunity.
• Intensifying regulatory pressures put the onus on life insurers to improve compliance, control and governance.
2015 Canada life-annuity insurance outlook
• Profit margins are challenged by continuing low interest rates, tepid growth, a volatile investment climate and increased infrastructure expenses.
• Greater transparency could help improve the industry’s low level of consumer trust.
• Robust data analytics and predictive modeling will help insurers pinpoint new opportunities, optimize claims outcomes, and reduce claims fraud.
• Insurers can improve customer connectivity by expanding distribution and customer service, transforming operations and investing in cloud computing, mobile solutions and business collaboration software.
• Regulatory pressures are forcing insurers to be more disciplined in their risk management, capital planning and operational oversight.
2015 Canada property-casualty insurance outlook
• Insurers face challenges on both sides of the balance sheet, as economic recovery in the region is overshadowed by low business investment rates, slower global growth and heightened competition.
• Insurers should tailor products to individual needs and improve digital capabilities to boost loyalty and brand awareness.
• Improved analytical capabilities enable insurers to extract meaningful insights at virtually every stage of the insurance lifecycle.
• Regulatory initiatives will require greater transparency with customers, changes to distributor relationships and increased governance and oversight over products.
• Finance is under pressure to add value in planning, budgeting and forecasting, while also responding to regulatory requirements and tax challenges.
2015 Europe insurance outlook
• Growth prospects are generally favorable, although demand for insurance products is evolving at different rates.
• Insurers are developing economies of scale and more robust infrastructures to meet the demands of maturing markets.
• Insurers are leveraging data analytics and predictive modeling techniques to improve underwriting and risk management.
• Modernizing operations and distribution models via digital is crucial, particularly for commercial lines where intermediaries retain control.
• Global regulatory standards for capital solvency and risk management are on different timetables, forcing insurers to continually monitor developments and react as needed.
2015 Latin America insurance outlook
• Growth prospects are promising as the economy improves, consumer wealth increases and interest rates creep higher.
• Competition is fierce from new capital entrants that are disrupting the market with fresh models and approaches.
• Insurers must expand their digital capabilities to empower customers and distributors, making products easier to understand, compare and buy.
• Insurers have a major opportunity to widen margins by leveraging big data and the cloud to transform back-office systems and processes.
• Improvements in annuity sales should persist, as credit rates continue to increase and customers return to simplified, tax-deferred products.
• Online advice and transactional models that compete with banking and investment services offer significant opportunities.
• Providers continue to be challenged by complex capital solvency and risk management regulations.
2015 US life-annuity insurance outlook
• Despite slow-to-rebound interest rates, insurers expect strong performance, with combined ratios returning to pre-crisis years.
• Low premium growth is being exacerbated by rising competition, an overabundance of capital and inexpensive reinsurance.
• Soft pricing is constraining margins, compelling insurers to reduce costs via technology upgrades, process optimization and selective offshoring.
• Market leaders achieve their position with investments in technology, distribution and risk management.
• In distribution, insurers will optimize the channel mix, adding outlets and expanding aggregator and direct-to-consumer models.
• To address increased regulation and compliance burdens, insurers must boost investments in risk management and data analytics.
2015 US property-casualty insurance outlook