Growth. Transformation. Can you achieve either without risk?

By Isabelle Santenac

EY Global Insurance Leader

Passionate transformation insurance leader. Inspiring the next generation of female leaders. Proud mother of three. Trail runner. Golfer. Skier. Loves traveling and cooking.

7 minute read 5 Dec 2019

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  • Global insurance outlook report (pdf)

Innovation and growth present compelling reasons for insurers to refocus on fundamentals and master emerging and disruptive technologies.

This article is part of our 2020 Global Insurance Outlook series.

To paraphrase a famous line from literature, the insurance industry today faces both the best of times and worst of times. There are certainly significant challenges – historically low interest rates, little or no growth, the increasing frequency and cost of natural catastrophes, intensifying regulation and new competition from non-traditional players.

But at the same time, we see ample room for innovation and growth. There are compelling transformative opportunities across the business. To seize these opportunities, insurers will need to adjust their business models, use technology and data more effectively, and develop the new products that people, businesses and society need.

The annual EY Insurance Outlooks represent the organization’s perspective on the issues shaping the industry in the near term. This year’s report was developed based on our deep sector knowledge, a survey of the entire global insurance practice and a variety of inputs from global and regional insurance leadership, selected clients and external analysts. The global, regional and individual country reports complement the NextWave series, which takes a longer-term perspective (five years and beyond) and examines specific market scenarios that will shape the future of the industry.

The challenging context

This year’s Global Insurance Outlook (pdf) report highlights a unique moment for the industry. Never before have such significant risks and great potential existed side by side.

Low interest rates

Low interest rates, stagnant growth and the likelihood of a global recession place real pressure not only on insurers’ bottom lines, but also on their strategic plans and transformation programs. The days of relying on investment returns as the main source of profitability are over. Geopolitical uncertainty, trade tensions and decreasing penetration also complicate the industry’s prospects. Still, despite the cost pressures, insurers can’t afford to lose sight of the need for innovation and forward-looking investment.

The need for innovation and investments


of industry profits derived from investment incomes, 2014–2018.

Source: Credit Suisse

Shifting demographics

Aging populations and low birth-rates are a challenge across many markets. As older generations retire, and younger ones put off traditional milestones (e.g., marriage and home ownership), insurers must develop new value propositions. In contrast, growing middle classes in a number of developing markets, particularly in Asia, have been a boon to insurers. Looking to the future, regions with growing populations, such as Africa, may boost grow within new markets.

Rising customer expectations

Insurance customers now expect the digital and customized experiences that many industries offer. Some leaders have started “green field” brands to overcome the constraints of legacy systems. Others are engaging with InsurTechs and major tech players to strengthen digital capabilities. But insurers need to understand how customer expectations are changing and how to leverage new technologies to deliver products, services and experiences that match those expectations.

Customer expectations are changing


of Asia-Pacific consumers who believe they should be able to accomplish any financial task on a mobile device.

Source: Forrester

Six forces reshaping the industry

Ranked based on their likelihood and impact on the insurance industry during the next three years, the following trends were identified via a survey of EY insurance professionals across the globe, along with follow-up collaborative workshops with our global and regional insurance leaders.

1. Achieve operational excellence and cost efficiency

Given low interest rates, declining investment yields and limited top-line growth, insurers must continue to focus on cost efficiency. Insurers should prioritize improved loss ratios through a diverse set of measures, such as portfolio mix diversification and risk management.

But cost optimization can’t come at the expense of innovation. In the long run, shifting to a variable cost base requires artificial intelligence (AI), cloud migration and automation to be fully embedded into key functions and operations. They will also be critical to new operating models, which will feature more extensive partnering across the value chain than is common today.

2. Win the war for talent

Many forward-looking executives now view talent as the “secret sauce” for maximizing returns on all types of large-scale investments. Both life and non-life incumbents need specific technical resources (actuaries, data scientists and data analysts) and more “digital thinking” – particularly from younger generations.

But, insurers generally rank low in terms of where university graduates want to work. To attract the right talent in this competitive environment, insurers must define and communicate a clear sense of purpose – why the industry matters, its societal value and why it’s an appealing sector in which to develop a career.

The need for talent


The forecasted number of unfilled data skills positions in EU by 2020.

Source: European Commission

3. Manage regulatory pressures

Regulators everywhere are more active in addressing issues ranging from financial reporting, tax matters and capital standards to anti-money laundering, consumer protections and data privacy. IFRS 17 is a primary concern; new key performance indicators and reporting metrics will require insurers to articulate new storylines in explaining their performance to investors.

Whether they are dealing with local or international regulations, insurers should aim to find those areas where compliance investments can deliver capital efficiency, customer satisfaction and competitive advantage.

4. Digitize distribution

Insurers everywhere are still seeking to master distribution in a predominantly digital world. A strong digital distribution platform is essential to delivering the intuitive and personalized experiences consumers expect, as well as to reducing acquisition costs, increasing efficiency and – ultimately – selling more products.

The key is making the human touch conveniently available when and how consumers want it, even as most interactions happen through digital channels. The digitization journey is critical for insurers to fulfill their longer-term transformation plans, to drive innovation and to form and participate in industry ecosystems.

5. Master emerging and disruptive technology

Emerging and disruptive technologies will continue to shape the global insurance industry, allowing insurers to generate real-time risk insights and proactively meet customer needs. Adoption of the Internet of Things (IoT), drones and connected insurance models is mostly in the experimentation stage, though a few early adopters have already seen promising results.

Blockchain has begun to make inroads as an enabler of increased transparency and more efficient data sharing. Robotic process automation is more deeply embedded in claims and basic administrative processes. The effective use of advanced tech is necessary for insurers to develop new value propositions and business models that can strengthen customer relationships.

The future of technology


Forecasted premiums underwritten by AI in 2024 – a sharp increase from an estimated US$1.3bn in 2019.

Source: Juniper Research

6. Navigate the risks and opportunities of climate change

The impact of climate change on insurers will be measured in the hundreds of billions, even trillions, of dollars. While there are serious downside risks to be managed, the potential upside in terms of premium growth is huge.

Insurers are uniquely positioned to help people, companies and communities recognize the need for more protection and to close the massive protection gap that currently exists relative to climate change. In addition to risk coverage, insurers can provide both preventive and recovery services.

In the near-term, senior insurance leaders should be assessing the impacts and planning to take the initial steps in developing risk models and policy frameworks. Climate change has become a major strategic issue for the industry in the last few years; the next few years will only see its importance increase, in terms of both risk profiles and revenue streams.

The risk and opportunities of climate change


Global protection gap for natural catastrophe risks, 2018.

Source: Swiss Re

Three ways insurers can move forward

The insurance industry has a critical role in helping the world navigate a range of powerful forces and megatrends – from globalization and demographic shifts to climate change and cyber-crime. However, to strengthen their ability to provide societal leadership, insurers need to improve their financial performance and manage through harsh economic conditions. They must embrace disruptive technology and new data to develop the new business models, value propositions and product offerings necessary to re-ignite growth.

1. Keep pushing on digital with a focus on experimenting to scale.

In the immediate term, insurers should keep experimenting with digital – including automation, AI and the cloud – at specific points in the value chain. They must also be prepared to rapidly scale what works and extend their digital capabilities in the context of connected products, propositions and ecosystems, while remaining cognizant of their core purpose when implementing these new technologies.

2. Prepare for new risks and liabilities with new products and business models.

New data, advanced analytics and sophisticated models may make unprecedented risk manageable and present significant market opportunity. Innovative products and services for the sharing economy, usage-based insurance and subscription models are all viable responses to shifts in the industry and changing consumer expectations. Even new regulation may open doors, offering upside in terms of engaging customers in strong, trust-based relationships.

3. Focus on the fundamentals, including stronger cultures and better storytelling.

The top insurers of the future will be those that are able to attract a diverse talent pool to create cultures that are digital-first, committed to agility and open to risk taking. Insurers must offer a clear purpose to a new generation of workers and persuasively communicate why the industry is an attractive place to work. The insurance industry needs to articulate its purpose at a societal level, which can help restore trust in the industry, as well as increase its relevance and profitability.


Framing a dynamic market landscape, EY’s 2020 Global Insurance Outlook report analyzes the key trends and forces shaping the insurance industry for the next few years, with a focus on the most compelling opportunities and most significant risks. It also presents imperatives for insurers to consider as they shape strategic plans and prioritize investments in talent, technology and transformation.

About this article

By Isabelle Santenac

EY Global Insurance Leader

Passionate transformation insurance leader. Inspiring the next generation of female leaders. Proud mother of three. Trail runner. Golfer. Skier. Loves traveling and cooking.