Dying, Surviving or Thriving
The Swiss insurance market has grown steadily over the last few years with cash flow and returns developing favorably. And the sector managed to ride out the financial crisis without major setbacks, which would explain its unwavering optimism. This same confidence can be seen in insurers’ current growth forecasts, which by far exceed expected market trends.
But this stands in strong contrast with reality. The market environment is deteriorating just as new competitors prepare to make their entry. The sector faces turbulent times, and we expect most likely 45 per cent of Swiss insurers to be squeezed out of the market by 2030.
In view of this disconnect between ambition and reality we conducted an in-depth analysis of the insurance market to identify looming threats and opportunities.
Life and non-life insurers are confronted by different problems than health insurers, but we decided not to differentiate by segment in this study. Instead, we focused on the changes and threats all insurers must tackle. This allows us to address specific challenges in forthcoming publications.
The Swiss market is stagnating, and individual segments are already shrinking. Undeterred, however, most major insurers have their sights fixed on growth, as their latest annual reports show. But the mobile phone industry provides an example of what a stagnating industry can expect: painful consolidation and the entry of new attackers.
Our analysis shows we can expect most likely 45 per cent of Swiss insurers to be squeezed out of the market by 2030. If new providers penetrate the market, as many as 70 per cent of the established companies will disappear.
Yamin Gröninger, Insurance Sector Director EY
Dying, surviving or thriving
Companies have three strategic options:
- sit back and wait – and perish.
- evolve business models, seek out alliances – and survive.
- revolutionize business models, prevail over disruptive companies – and thrive.
Now is the time to act
Swiss insurers need to act now. They have to grow in order to improve efficiency and push others out of the market. Or they can break with the past and hold disruptive attackers at bay. Both strategies require a sharpened focus on a core strength. The first entails companies undergoing a steady evolution, the second a business model revolution.
We see individual players taking action to innovate and compete against disruptors. However, most of these are not based on awareness of their established strengths. Instead of blindly following a “me too” strategy, we recommend Swiss insurers first focus on well-established strengths, and then decide where to expand and how radically to evolve or innovate their business model.