- Digital transformation critical to optimize costs, innovate and drive agility
- Digital and direct distribution channels imperative for growth
- Life insurers must address all aspects of financial wellness
Global insurance sector growth is expected to remain weak, and companies must focus on technology and innovative initiatives that optimize costs, drive wider distribution and market reach and explore local niche market segments, to spur growth reveals EY Insurance Outlook 2019. The latest editions of EY insurance outlook series ‒ covering the three regions, Americas, Asia-Pacific and Europe ‒ are the result of several think tank sessions of EY industrial and functional professionals as well as strategists and technologists, and cover the major trends, disruptions and innovations that are impacting the global insurance industry.
David Hollander, EY Global Insurance Leader, says:
“We are at an exciting and opportune time as insurers are investing more than ever to transform their business models to take advantage of subtly different growth opportunities around the world. The EY teams are energized by the possibilities that exist for insurance ‒ deliver better ways of working, drive a clearer sense of purpose, adopt more effective use of technology and leverage our industry’s distinctive ability to promote financial wellness.”
Life versus P&C insurance outlook 2019
While global life and property and casualty (P&C) insurance show sluggish growth overall, non-life/P&C insurance has shown considerably higher performance in Americas and Asia- Pacific markets. Life insurers are facing growth challenges globally due to regulatory issues, outdated distribution and lack of relevant products to the changing customer needs. To address these challenges the EY Insurance Outlook 2019 report lays out specific strategic and tactical actions that include expanding the product value proposition toward financial wellness, partnering with InsurTech companies for wider reach, innovating and developing new products rather than just regulatory compliance and digital transformation to support innovation and speed to market.
Non-life/P&C sector has shown considerable growth; however, it can face headwinds due to projected prolonged economic slowdown. To navigate these, the report identifies key opportunities that include using advanced technologies like artificial intelligence (AI) and Internet of Things (IoT) for accurate analytics, adapting to rising customer expectations, partnering with InsurTech for innovation and routes to market, and exploiting fast-growing niche segments like health and cyber in Asia-Pacific.
The EY Insurance Outlook 2019 has, among others, recommended the following top imperatives for companies in the sector to facilitate growth and profitability:
1. Digital transformation is no longer optional, but necessary to optimize costs and invest in relevant, innovative areas
Today’s intense margin pressures mean that cost efficiency, a perpetual goal of all insurers, is more important than ever. Across all regions, insurers should carefully design operating models and deploy technologies that can deliver short- and long-term cost and performance improvements. The report identifies the top technologies for insurers to think about in terms of their transformation programs:
- Blockchain for authentication, underwriting and claims attribution
- IoT for accurately underwriting policies using real-time data and reducing or eliminating claims using allied services
- AI for enhancing customer experience cost-efficiently and streamlining claims management, especially for simpler cases (e.g., auto damage)
2. Distribution: think human and digital – not human or digital
Spurred by experiences in other industries, customers expect to increase their transactions with insurers through direct and online channels that have the advantages of increased transparency and improved experience. Further, the research reveals that customers seek advice from experts before making substantial investment decisions. In the Americas and Europe many insurers are investing in InsurTech as a way to improve distribution and optimize costs. The additional complexity of the Asia-Pacific region comes from the critical importance of agents and bancassurance partners in the value chain.
With often deeply historic roots, insurers often find themselves grappling with the challenge of what role to play in an emerging technology-driven ecosystem and how to work with InsurTechs. The report finds that an imperative for insurers is to make the critical decision about what capabilities they should own and manage themselves and what to outsource. Further, insurers must digitize their antiquated customer experiences and develop a streamlined, omnichannel proposition, supplemented by new advisory services that will build trust and further cement customer loyalty.
3. Life insurers key value proposition: financial wellness, not just insurance
It’s clear that today’s consumers are buying less life insurance and fewer annuities than in the past. Shifting customer preferences are the key determinants to these changes – with millennials, for example being less inclined to maximize wealth (e.g., through investing in insurance), instead preferring to invest in experiences such as travel and recreation.
The report suggests that to remain viable, life insurance products must dramatically change and become something consumers understand, want and value. To address this shift in generational views requires a multipronged strategy focused on holistic financial wellness for example, new affordable and relevant products must be developed that cater to all aspects of financial wellness including protection, retirement and health, and even provide the means to manage day-to-day finances. Further effective communication and education are imperative to build traction.
Hollander says: “In the future, digital trust will be the bedrock on which business value will be created for consumer-focused businesses. To achieve that, insurers must move beyond ”thinking about digital” and start ”thinking digital.” This will give insurers the agility to seize emerging opportunities and adapt to rising customer expectations.”
For more information and to download the report, visit EY Insurance Outlook 2019
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