4 minute read 13 Oct 2020
Three men sitting by lake

Six megatrends defining the next wave of life insurance and retirement

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.

4 minute read 13 Oct 2020

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  • ey-nextwave-insurance-life-insurance-and-retirement.pdf

With unique challenges and opportunities defining the decade ahead, tomorrow’s winners are taking bold action now.

In brief
  • The COVID-19 pandemic, climate change, uneven economic recovery and other forces are calling attention to insurers’ purpose.
  • In the face of these unprecedented threats, insurers can provide vital protections to people, businesses and communities. 
  • How insurers fulfill their purpose – and promote consumers’ financial well-being – will change dramatically in the next decade.

For centuries, the insurance industry has offered protection against the most serious threats faced by individuals, families, businesses, and society at large. Today, a combination of economic, technological, competitive, demographic, and societal shifts – plus the COVID-19 pandemic, climate change, and racial inequality – have made the industry’s purpose more relevant and important than ever.

All types of insurance require a clear purpose and strong protections. But the life and retirement industry faces a unique set of challenges and opportunities. With vastly underfunded government-sponsored retirement programs and rising insecurity about the future, more people are looking for protection and income solutions. But to meet the moment, life insurers must navigate persistently low-interest rates, as well as modernize technology, update their product and service offerings, refine distribution models and retool the workforce. There are multiple challenges to be managed at once.

However, the potential upside is compelling for those companies that can master the many moving parts of the transformation. The projected US$240 trillion retirement and US$160 trillion protection gaps in 2030 point to the industry’s growth potential – and its ability to make a huge contribution to the overall well-being of society.

A protection gap

$240 trillion

global retirement protection gap projected in 2030.

Success in the next decade and beyond requires creative and thoughtful action now, as highlighted by our whitepaper NextWave Life Insurance and Retirement (pdf). Like the others in our NextWave Insurance series, this paper describes the major forces reshaping the market, how they will play out during the next 10 years and the key questions that executives need to answer to successfully manage this transformation. 

Protecting people against risk will remain at the core of the industry. But how companies fulfill that purpose will look vastly different, thanks to six megatrends that are already reshaping the market and will continue to drive change through 2030. Underpinned by changing consumer needs and preferences and intensifying pressure on government pension schemes, we believe that these forces will spark the largest transformation investments, most significant innovations, and most ambitious new business models.

1. Financial health and wellness

Financial well-being – or having the ability to control day-to-day finances, the capacity to absorb a financial shock and the confidence to meet financial goals – has become increasingly important to more consumers around the world. With state pension and retirement plans looking less viable, such security will be harder to achieve. 

For insurers and retirement planning companies, value propositions will highlight how they can help people live the lives they want, with high degrees of financial security and physical and mental health. Offerings will be more flexible, forward-looking and “goals-based,” with an emphasis on proactive prevention over downside protection. They will also reflect that more people work for themselves or participate in the gig economy. 

Advice needed


of millennials and Gen Z consumers expect financial, health and wellness guidance from their insurer.

However, insurers must be more transparent in defining and prompting necessary consumer behaviors to achieve those goals, rather than guaranteeing outcomes, as in the past. Retirement savings products will be more holistic and offer more options and flexibility as consumers’ needs change. That’s how they’ll enable individuals to follow non-linear career paths and take non-traditional retirements, based on alternating phases of asset accumulation and decumulation.

2. Long-term value 

As the purpose of the insurance industry remains in the spotlight coming out of the pandemic, it is critical for insurers to think in terms of delivering long-term value to customers, employees and society, as well as shareholders. Investors and analysts are expanding their valuation approaches to include more holistic, long-term metrics, rather than only short-term financial measures. Intangible assets, such as intellectual property; talent; brand reputation; innovation; and environmental, social and governance (ESG) impacts, now carry greater weight. The shift toward inclusive, or stakeholder, capitalism will be essential to help build trust with younger generations and spark broader public-private collaboration to address societal issues, including the cost of future environmental damage or social injustice. 

Determining investment decisions


of institutional investors evaluate a company’s stance on global challenges and societal issues when making investment decisions.

The EY-led Embankment Project for Inclusive Capitalism has been instrumental in developing a long-term value framework that is gaining traction with C-suite leaders in a range of industries. EY has also participated in efforts led by the World Economic Forum to develop metrics for ESG reporting. The combined impacts of climate change, COVID-19 and economic inequality contribute to the urgency for businesses to embrace long-term, sustainable value creation and prioritize the needs of people and planet along with broad-based economic prosperity.

3. Collaboration with governments and regulators

Difficult macroeconomic conditions, underfunded government retirement programs and intense regulatory scrutiny (especially around consumers’ best interests and data privacy) will force insurers to collaborate with public authorities on multiple fronts. There is huge opportunity for the industry to work together with governments to develop and promote solutions consumers want and need.

Influence of industry-government


increase in consumer adoption of retirement policies in 2019 in Singapore following formal industry-government encouragement.

Priorities will include increasing financial education, facilitating product innovation, influencing public policies, including tax incentives and issuing long-term bonds. More robust consumer protections and data privacy standards, as well as financial reporting frameworks, will be designed to promote financial stability. 

Forming alliances


annuity, advisory and investment firms in the US are forming alliances for education on lifetime income.

4. Ecosystems and omnichannel engagement 

Ecosystems will continue to grow and mature, becoming a primary method that companies use to engage consumers across channels. Technology advancements – particularly in the realm of application programming interfaces (APIs), microservices and data fabrics – hold the key by enabling rapid integration and smooth data sharing. 

Formula for success


of insurers view platform-based business models and ecosystems as critical to success.

Insurers will create their own networks of partners to offer complementary services. They will also engage in those orchestrated by others. Ecosystems will allow insurers to focus on their specific strengths (e.g., offering particular services to niche segments) or innovate more broadly (e.g., with subscription models). They also suit insurers looking to modernize their distribution and shift to hybrid advisory models that balance robo-advice with human interaction. Partnerships being formed today will set the stage for future ecosystem success.

The need for digital


of Asia-Pacific customers consider end-to-end online policy processing when selecting an insurer, post the onset of COVID-19.

5. Capital optimization and convergence 

Beyond the near-existential threat of low interest rates, macroeconomic and competitive factors are driving the quest for higher levels of capital efficiency. Mergers and acquisitions (M&A) and reinsurance are key variables in the equation. 

Growth in M&A activity


compound annual growth rate in the number of M&A transactions in the insurance industry, 2017-2020.

With more capital available from a wider range of sources and increasing clarity about the need for well-being, sector convergence will accelerate among life and health insurance, retirement planning and wealth and asset management. Capital efficiency will be a key design principle for future business models, largely because it will be necessary for survival. 

6. Commoditization and customization

There are many reasons that life insurance and retirement products have become commoditized, including conduct regulation, competition from asset management, and increasing customer preference for simplicity, transparency and comparability. Increasingly, consumers perceive value through rich experiences and trust-based relationships. That’s why flexibility and customization are imperative. Insurers can use technology to combine simpler components into personalized solutions, provided that they have the necessary digital and analytics capabilities.

Untapped opportunities

US$3 trillion

investable assets to which a US insurance and annuity leader gained access to a new digital engagement model and robo-advice tool (Source: EY analysis)

The bottom line: profitability through purpose

Our interactions with executives from leading insurance companies around the world confirm that there is a substantial need for operational, organizational and technology transformation. The rapid shift to remote working and all-digital customer touchpoints revealed how quickly companies could adapt to changing circumstances. They also clarified what could be improved going forward. 

The upside growth potential for the industry is enormous, especially given the clear opportunity that insurers have to live up to their purpose, strengthen customer trust and take advantage of the opportunities that COVID-19 has provided. Addressing critical societal issues, starting with the protection and retirement savings gaps, is how insurers can do well by doing good. It will also encourage innovation and transformation, as well as new forms of collaboration. The insurance industry is well positioned to deliver the security that so many consumers need and want, and we believe the path to growth and profitability runs through purpose, with the emphasis on providing long-term value to customers, stakeholders and societies.  


The core purpose of life insurance has never been more relevant than it is today, but how insurers fulfill that purpose will change dramatically by 2030. A clear purpose, an updated product portfolio, modernized technology, different collaboration models and new talent hold the keys to provide long-term value to customers, stakeholders and society as a whole.

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.