7 minute read 13 Sep 2019
Boat sea iceburg

How insurance changes can tackle some of the world’s biggest challenges

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 13 Sep 2019

Show resources

  • NextWave Insurance: Personal lines and small commercial (pdf)

The world is changing radically – from demographics and technology to the global climate. This changes insurance.

Technological and societal changes are progressing at a rapid rate and are presenting a range of new challenges for businesses, governments and individuals alike. 

An explosion of new connected technologies has created a hotbed for hackers to thrive in, creating a whole new way for criminals to exploit their victims, as well as a whole new genre of cybersecurity risks for insurers and their customers to consider.

Autonomous vehicles are set to revolutionize the way we get around, but also create new issues surrounding liability and pricing for insurers to grapple with. Meanwhile, the new ways of thinking from the digital natives of millennials and Generation Z are fundamentally changing the way businesses interact with their customers. And that’s not even considering the biggest challenge of all, climate change, which many see as a threat to our very existence on this planet.

But with each new challenge comes opportunity, and insurers need to make sure they think about these NextWave challenges so they are able to deliver solutions not just for the needs of their customers now, but also the next to emerge – and those that will come beyond. 

man phone connection airport
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Chapter 1

Cyber: threat, opportunity or both?

The systemic nature of cyber exposure is a huge risk for insurers, but it is also an area promising real growth.

In cyber insurance, a suite of new products is beginning to emerge as insurers jostle to provide the best solution for a market that not too long ago did not even exist.

This has opened up new revenue streams for insurers and, in several instances, whole new carriers have sprung up to try and fill the gap in the market as it grows.

The danger here, however, is that a lack of historical claims data – and the rapidly-evolving nature and potential magnitude of this risk, considering the growing importance of digital, makes it very difficult for insurers to fully understand the challenges they are facing. They may, therefore, be unaware of the systemic risks that are growing in their existing portfolios. 

Even determining liability sees goalposts constantly shifting as regulators redefine responsibilities and new types of risk emerge. If, say, a company has a smart toaster that gets infected by a botnet and is used in a broader cyber-attack on another organization, is it responsible for inadequate cybersecurity, or is this the fault of the manufacturer, or the software/firmware providers?

We have already seen a rise in litigation against insurers as clients disagree about what is and is not covered in their policies. Our report notes that some insurers may be more vulnerable to litigation and claims payouts than they realize. This is an area which will certainly require more focus in the future to better define the nature of the risk covered, especially with cyber-attacks on the rise – The Cyber Threat Report from Sonicwall found that 10.52 billion malware attacks were registered in 2018.

But this does not mean all is lost for cyber insurers.

The insurers that will have the biggest success when it comes to the cyber market are those that focus on risk mitigation and improving the risk profiles (and overall financial well-being) of their customers. It is these more proactive insurers that will have a better understanding of the risks they and their customers face – and consequently who will be in a better position to reduce their overall cyber exposure.

Those that get it right can be a valuable resource for their policyholders, protecting their assets against online fraud and theft, as well as safeguarding their reputations from the damage that comes with a high-profile cyber breach being laid bare in the press.


boy playing with wooden toy car
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Chapter 2

A driverless future

Autonomous vehicles are on their way, but insurers need to get ready now.

While cyber risks may already be widespread after a quarter of a century of online life, the age of the driverless car has not quite hit our roads just yet – although it is certainly on its way. On-road testing has already started in many countries across the world, and it is anticipated that self-driving vehicles – albeit with somewhat limited functionality – will be on the market in the next decade, while fully autonomous vehicles could be on the roads as soon as 2030.

This will create issues for insurers when it comes to liability. Will the motor policies of the future insure the owners of an autonomous vehicle, and will they provide liability cover for the manufacturer?

Despite much discussion, the industry still doesn’t know the answer to the question about the fundamental nature of insurance in a world with driverless cars – but this fundamental societal change will certainly lead to the creation of a new type of motor insurance policy. Indeed, some insurers have already developed policies for co-shared cars – and more models are certain to emerge in the coming years.

Many people think that these new policies are also likely to have a new breed of customer, and insurers keen to make the most of this emerging market need to start preparing now or risk being left behind.

The introduction of driverless cars is likely to coincide with a drop-off in vehicle ownership as autonomous fleets become the norm for individuals looking to get from A to B – an evolution of the recent shift towards ride-sharing and the rise of part-time taxi services using private vehicles.

This will mean that motor insurers will need to move further away from the commoditized mass market business model that has dominated the industry for years, and instead focus on insuring fleets of vehicles owned by mobility companies hiring out their vehicles on a per-trip basis.

This could require insurers to be much more accommodating of usage-based insurance that is sold on a subscription basis, rather than via an annual premium (more on that later).  Indeed, several insurers have already started co-insuring cars using co-sharing apps, and we can only expect to see more of these initiatives as driverless cars start to become the norm on our roads. Of course, before these fully autonomous cars become a reality, insurers will still have to deal with the semi-autonomous and connected cars that are already on the market.

Advanced Driver Assistance Systems (ADAS) are now the norm for all new cars, providing drivers with a suite of tools such as lane departure warnings and automatic braking to improve safety and reduce risk. Telematics technology, meanwhile, is already changing the way policies are underwritten with the additional data it provides on things like driving style, time of journey and driving location.

The connected nature of these systems gives insurers access to a stream of real-time data that can be analyzed automatically by artificial intelligence and machine learning. Insurers can then send tailored feedback to their drivers on how to improve their driving performance.

This means that insurers can directly influence the risk profile of their customers, driving down costs and improving road safety. Not only does this make that particular driver a much safer risk to insure, it can also allow insurers to offer policyholders premium discounts or special offers at affiliated businesses as a reward for safer driving.

This is not only a great tool for building brand loyalty, these incentive schemes are also a great way of changing driver behavior and improving the overall risk profiles of both customers and insurers. Such technology can also be used in the claims arena to automate processes and streamline the user journey

Things like automatically choosing the best garage to carry out an auto-repair and keeping customers constantly updated with the process of their claim may not seem like game-changers, but for consumers looking for a faster and more on-the-go claims process the benefits can be great.

Woman using laptop in england
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Chapter 3

New ways of thinking – and working

Demographic shifts and the rise of new ways of living and working mean changing customer needs. Insurers need to change to reflect this.

Driverless cars may be set to shake-up the vehicle ownership model, but the changing attitudes of millennials and Generation Z are already changing the way insurers are expected to do business. Digitally native, they expect the speed and flexibility they have become used to online to extend to every part of their lives – and that includes insurance.

These new generations are not content with an annual premium bought on a price comparison website focused purely on cost. They want to buy insurance from a service provider that makes their lives easier and lessens the stresses associated with modern life – their focus is on value and benefit, not just money.

But it’s not just younger generations who have shifting expectations. Older people are also increasingly demanding flexibility to meet their shifting needs, as jobs for life (and potentially even retirement) become a thing of the past, life expectancy increases, and everyone has to think about ways to make their money and possessions last longer.

Insurers that succeed with this growing market will be those that are able to offer policies that start when they are needed and stop when they are no longer required, meaning mid-term adjustments will become a thing of the past.

These insurers will also make the most of technology to automate processes and create a user journey that puts the customer first and eases the stresses usually associated with buying insurance. This will help insurance move from being a grudge purchase to one of convenience; a tool that helps policyholders perform the activities they want to, rather than an activity carried out once a year.

For insurers, creating a service that meets the needs of these new customers is essential for their future success. Not only will automation allow insurers to reduce their cost base, the higher levels of customer service that such technology can offer will also boost brand loyalty and help insurers position themselves as a lifelong partner offering support for all major financial decisions.

woman fetching water bucket lake
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Chapter 4

Climate change: the risk redefining our world

Climate change is creating new and more dangerous weather patterns, but insurance can help mitigate the risks.

Climate change is arguably the biggest challenge facing humanity today. For insurers, it also presents an array of new uncertainties that make pricing risk harder than ever.

Our report discusses how shifting global weather patterns have already led to an increase in the frequency and severity of extreme weather events. From 2017- 2018, the combined global losses from natural disasters was $219 billion. Even shifts in milder weather patterns – such as reduced (or increased) rainfall impacting agricultural output – can have a significant impact on business and society, increasing demand for insurance to mitigate the impact.

But the unknowns about exactly how the climate is changing and what impact this may have are making it harder for insurers to project claims into the future and estimate the risks they may be facing when underwriting a policy. How can you estimate the impact of natural catastrophes next year when the data you have for the last decade is not representative of that future risk?

This is a challenge that insurers are working hard to overcome, but it will take time for them to grapple with the complexities. The first to break through and understand complex climate-related risks in ways others can’t – likely via a combination of real-time data and Artificial Intelligence-led analytics – will gain a significant competitive advantage.

In the meantime, many insurers are already finding success in driving down the cost of claims by delivering better risk mitigation services when their policyholders are faced with real-life claims events.

Continuous real-time data can allow insurers to warn their policyholders of approaching natural disasters, whether that be hurricanes, forest fires or possible flood risks.

And the rise in the popularity of connected devices such as home assistants, smartwatches and smartphones has made this job even easier for insurers to get these messages out quickly and in the most efficient way. This grants policyholders more time to put mitigative measures in place, whether that is placing sandbags to help prevent a flood or evacuating an area if the risk to life is high.

While there are obvious benefits here for policyholders, the business case for insurers is also clear, as any mitigative measures that can be deployed should also help reduce the cost of claims – and so boost insurer profits.

This presents huge opportunities for insurers to think and act differently and so meet the needs of a whole new market of customers. These are the underserved and dissatisfied: those who are looking for something different from their insurer – whether that be new products, new services or a new experience.

And ultimately this is what the next wave of insurance is all about – insurers using technology, real-time insight and deeper customer engagement not only to improve their own financial performance, but to improve the lives of their customers, and the resilience of society and the planet as a whole.

Show resources

  • Download our report to find out how insurance is changing.


In today’s fast-moving world, insurers are presented with a multitude of threats and opportunities, with everything from new technologies to shifting demographics to global climate change opening up new avenues insurers for pursuing. But to seize the upside of this disruption, insurers themselves will need to change and evolve, otherwise they could be left chasing the NextWave insurers forging the way ahead.

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.