8 minute read 28 Feb 2020
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Seven business models of the future for the insurance sector

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.

8 minute read 28 Feb 2020

Show resources

  • NextWave Insurance: Large commercial and reinsurance (pdf)

Large commercial insurers and reinsurers must revamp their offerings to better meet the needs of their customers.

The insurance industry continues to be an enabler of innovation. Since its creation three centuries ago, it has become an essential part of the global economy — providing security and resilience to businesses and individuals alike. But the fundamentals of how it operates have barely changed.

As we enter a new decade, the industry must reflect the reality of the needs of today’s businesses and society. Large commercial insurers and reinsurers in particular have an increasingly urgent imperative to realign their organizations and modify their offerings to include stronger preventive services against new and evolving threats, including climate change and cyber risk.

But there is also a huge opportunity. Our latest NextWave Insurance report (pdf) reveals that should the industry act now, an unprecedented growth and profitability spike is within reach. By 2030, we project that large commercial insurers and reinsurers could experience:

  • US$600b in revenue growth
  • 25%-35% improvements in combined operating ratios

To realize these gains, the industry must become more dynamic and agile.

A range of forces — from technology advancements to a dynamic value exchange — will propel the creation of new business models and the evolution of existing ones. 

We’ve identified seven business model trends already emerging across the industry that are pointing the way to what the future insurance ecosystem might look like:

1. Global composites

Market mainstays are evolving by leveraging strong balance sheets, strategic capital investments and new expertise to ignite growth across markets.

In the next decade, modernized technology will enable workers to re-skill while creating a new culture that places the customer, process efficiency and operational agility at the center of insurers’ business models.

On top of this, organizations will become much more data-driven and increasingly reliant on productive partnerships and collaborations. These capabilities will be necessary to offset competition from smaller players.

2. Specialty insurers

Boutiques are starting to protect their market share by writing risks others won’t.

In a highly specialized commercial reinsurance marketplace that generally demands either specialization or scale, the most successful boutiques may navigate competitive threats by targeting specific niches where they can operate profitably and few other firms are bold enough to tread. Their ability to survive will depend on the quality of their specialist expertise and a willingness to write risks others generally decline.

For these insurers, their strategic priorities for the next 10 years should revolve around expanding and enhancing business origination, loss prevention and other high-value services. They must become smarter and leaner in risk transfers and forge better relationships with partners and suppliers.

Today’s lean and tech-fueled organizations place more value on preventing losses than on transferring risks; they have different needs and expectations of insurance.
Peter Manchester
EY Global Insurance Solutions Leader

3. Global reinsurers

Innovative traditionalists are remixing their talent base and upgrading their technology to provide compelling risk-transfer solutions and access to secondary markets.

Future global reinsurers will devise innovative risk-transfer solutions with smaller teams. By creating partnerships with alternative capital providers, these reinsurers will increase product innovation and boost their market penetration rate. Additionally, they will diversify their offerings to include primary insurance products and new loss-prevention and ancillary services.

Advances in data mean they will employ more data scientists and fewer claims processors. Their ability to match different opportunities and new products for different risk appetites will help them provide access to secondary markets and engage with more stakeholders. 

To fully succeed, their strategies must prioritize growth opportunities and capital risk management capabilities. They must partner with alternative capital providers on product innovation, increase their access to big data and augment their analytical capabilities.

4. Underwriting agents

Future managing general agents (MGAs) are building momentum and capitalizing on market trends to create and capture profitable niches. 

Lean, agile and dynamic, tomorrow’s MGAs will build thriving niche businesses and grow profits faster and at a larger scale than the industry as a whole. Their sole purpose will be providing specialized underwriting services to portfolios and networks of investors and capital providers. Though specialization is key to success, “Mega MGAs” will emerge, reaching US$1b in revenue through consolidation or by duplicating their success across multiple market segments.

By leveraging defined products and targeted expertise to exploit distinct and profitable market niches, this subsegment may grow to US$150b in revenue, doubling the current revenue base. The largest may ultimately pivot to become insurers — a further threat to traditional business models.

They must engage with the most suitable partners, such as capital providers and supporting vendors. They must also strike the right balance between growth and scale as they seek to duplicate success across multiple segments.

5. Capital providers

Lean and agile portfolio managers are driving capital returns by aggregating strong delegated authority and managing general agents/managing general underwriters (MGAs/MGUs) to find profitable niches.

By 2030, some carriers will shift their focus to become experts in capital deployment and management of third parties. These firms will operate with relatively few employees and exceptionally lean in-house models. They will hone in on well-defined market niches, customer segments and specific product types. These portfolio managers will excel in managing arrangements with multiple delegated authorities (DA) for underwriting, claims handling and other service providers, such as loss prevention specialists.

Their strategic priorities will comprise identifying and engaging the top performing DAs and improve their operations by strategic sourcing. Should they deploy capital flexibly and efficiently, they will have a greater opportunity to develop niche products for target customer segments. 

The traditional practice of pushing products into the market and seeking the right price point will no longer be sufficient to serve tomorrow’s platform-driven companies.
Grant A. Peters
EY Asia-Pacific & Oceania Insurance Sector Leader; Oceania Market Segment Leader, Financial Services

6. Self-insurers

Customers are beginning to compete with traditional insurers as “super-sized captives” and are developing in-house capabilities to self-insure more of their own risks.

Companies that formerly bought insurance are now more interested in selling risk, pushing traditional insurers into new roles and marginalizing some carriers. The absence of appropriate coverage for intangible and virtual assets will push large multinationals to deepen their commitment to self-insurance. They may also contribute to the rise of industry associations as they build out capabilities that can be sold on the open market.  

These companies need to get comfortable taking on more risk, as they learn to generate superior insights and develop tools for stronger loss prevention. Deep and granular analysis of their considerable data resources, as well as knowledge of their own operations, will match coverage to risk appetite and eliminate the need to place business on the open market. They will also develop the skills and knowledge to navigate increasingly complex regulatory and tax environments. 

Their main strategic priorities will need to include risk prevention, rather than risk protection only. They will need to consider product innovation to map coverage to existing needs, as well as develop new skill sets.

7. Global intermediaries

Brokers are repositioning as underwriting and risk advisors, boosting revenue and strengthening customer relationships. 

Risk placement will always be important to commercial insurance brokers, but in the future, it will no longer be their sole focus. Their placement teams will be considerably smaller after extensive re-skilling and the most successful firms will transform their models to expand and diversify their offerings to include underwriting and risk advisory services.

Of course, it will take considerable effort and significant investment to execute this transition. Brokers must overcome market skepticism about their ability to add value in a primarily digital world. They will also need new skill sets, higher-quality data and modernized technology. Those that transform successfully (and immediately) will be well positioned to lead the creation of industry ecosystems that connect industry players following variants of all these business models — a traditional strength of brokers. 

Their strategic priorities will consist of bringing in new skill sets to help develop new offerings. They will need to effectively utilize distribution networks to launch and refine services, along with use data comprehensively to identify opportunities to serve a broader range of customer needs.

The firms that transform most successfully will be those that drive near-term change urgently while simultaneously placing intelligent, long-term bets for the future.
Ed J. Majkowski
EY Americas Insurance Sector and Consulting Leader

An ever-evolving insurance ecosystem

Some of these changes are already underway, with organizations consciously pursuing business transformations that will enable successful future operations. Yet others are currently only in the early stages. Some will be easier to turn from vision to reality, while many will involve significant disruption to current ways of working.

As our previous NextWave personal lines and small commercial report (pdf) found, a business-as-usual operating approach is no longer an option. Changes are already impacting the industry now, and the early movers are seeking out competitive advantages that may become lasting as the insurance ecosystem is reshaped over the coming years.

We know what’s likely to come next — and picking the right business model to pursue will be key for insurers and reinsurers to effectively reposition for what’s to come.

Show resources

  • Download: NextWave Insurance large commercial and reinsurance


This is a time of both turbulence and opportunity for the large commercial insurance and reinsurance sector. Developing a new model of innovation and sustained growth requires insurance leaders to think originally about how to re-invent the status quo – but some effective new business models are already becoming clear. 

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.