7 minute read 5 Dec 2019
Woman using laptop while relaxing on sofa home

How European insurers can seize opportunities to ignite future growth


Peter Manchester

EY Global Insurance Advisory Leader and EY EMEIA Insurance Leader

Leader in insurance transformation and strategy. Active interest in new entrants. Uses leading-edge technology to transform the customer experience and insurance landscape.

7 minute read 5 Dec 2019

Moving the needle on transformation will require European insurers to make bold business investments and focus their finite resources.

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

In the near-recessionary economic environment, European insurers are grappling with extraordinarily low interest rates and negative yield curves. This is uncharted territory, even for central bankers.

Rising customer expectations, aging populations and workforces, intensifying competition and closer regulatory scrutiny further complicate the industry outlook.

However, despite the formidable challenges, European insurers can still seize multiple opportunities to improve near-term returns and position for future success. Big, bold investments in new capabilities, new products and new talent are necessary to increase efficiency, ignite growth and enable transformation.  

The annual EY Europe Insurance Outlook (pdf) represents our organization’s perspective on the issues shaping the insurance industry in the next few years. This year’s reports were developed based on our deep sector knowledge, a survey of the entire EY Insurance practice across the globe 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.

A uniquely complex environment

The European insurance industry remains stuck in a low-growth mode. And geopolitical uncertainty, especially related to Brexit, isn’t helping. On a more positive note, pricing has improved in most European commercial markets and in some motor markets, most notably France and Italy.

Against this challenging backdrop, there is still much insurers can do to improve near-term financial results, even as they await better overall market conditions.

Persistent barriers to growth

European interest rates have been low for several years and are near or below zero in several key markets. Beyond interest rates, flat productivity, low inflation and varying saving levels are other structural drags on the industry’s long-term prospects.

Falling interest rates


The European Central Bank interest rate (deposit facility) in 2019, down from 3.25% in 2008.

Source: ECB

An imminent recession

With several markets on the brink of recession, there is a widespread lack of macroeconomic confidence. European insurance executives recognize that the industry is also vulnerable to a slowdown in other regions, including the US and China. An overall economic slowdown would be yet another significant drag on results.

Shifting demographics

Mass retirements and rising demand for healthcare place real pressure on social resources, as do high unemployment rates among younger generations. As governments pull back from providing pensions and trust in government falters, insurers have an opportunity to develop new products that can provide the security many consumers are looking for.

The inexorable rise in customer expectations

Insurers across European markets are conducting digital experiments to meet changing customer expectations. However, a material digital divide still exists between Northern and Southern Europe. Insurers need to recognize which expectations apply consistently across the region and which are specific to individual markets.

Scarce talent

Ideally, insurers can attract workers who are comfortable with advanced technologies and are capable of working faster and more flexibly, which will help to drive necessary culture change. Even more than their peers in other regions, European insurers must retrain current workers with the skills and talent they need for tomorrow.

The need for talent


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

Source: European Commission

Key trends: Non-life

The European non-life business has been stagnant for the last five years, and there’s a pervasive sense of the need to try new and different approaches. But insurers must adjust how they approach transformation initiatives, as past efforts have not sufficiently moved the needle on performance. Insurers must define clearer business cases focused on specific problems and performance improvement opportunities.

1. Digitize sales and distribution

By finding strong partners with complementary services, insurers can provide a holistic risk experience, with technology, tools and data designed to both prevent and manage risk. And with the growing emphasis on digital channels and customer-centric experiences, insurers must invest in digital tools that enable their sales teams, rather than just creating channels for direct customer interaction.

2. Win the war for talent

Beyond the matter of an aging workforce and large-scale retirements, the most pressing issue is filling large talent gaps, such as the need for more digitally savvy resources. Reskilling is critically important because of tight labor regulations, and the shortage of analytics professionals and data scientists. Insurers also must reassess their cultures, instilling a sense of purpose to attract new generations of talent.

3. Achieve cost efficiency

While weak financial performance and lack of growth make the focus on cost cutting understandable, insurers can’t afford to overlook high-impact investments. Process optimization, both through partnerships and tech transformations, particularly with the cloud, is becoming more common among forward-thinking insurers.

4. Manage persistent regulatory pressures

The regulatory agenda remains full for European insurers. Brexit, IFRS 17 and tax reforms in the US are among the initiatives insurers must prepare for. The growing interest in data privacy and cyber security will raise the bar even higher.

5. Navigate sustainability and climate change

While it’s extraordinarily difficult to manage aggregate climate risks across the portfolio, the industry is uniquely positioned to help families, businesses and communities protect themselves. Of course, insurers must be able to accurately model and price the risk associated with climate change if they are to take advantage of the potential upside of increased premiums and convert it into bottom-line value.

Key trends: Life

Traditional life products are no longer very attractive to consumers, given the lack of returns. That means life insurers must prioritize cost management strategies and clients’ migration to fee-based products. Future success depends on insurers’ ability to develop innovative products and services, improve the customer experience and increase operational efficiency through modern technology.

1. Manage persistent regulatory pressures

Initial regulations are being managed primarily as a compliance exercise. But newly defined key performance indicators will require insurers to articulate new storylines to better explain their performance to investors. The most forward-looking insurers will use new regulatory requirements to inform and influence product design and differentiation.

2. Digitize sales and distribution

Current life insurance products are generally not digitally enabled. As a result, customer needs are not yet reflected in the product pipeline or in product development processes. The digitization journey is inevitable, but some sort of interpersonal or face-to-face interaction will be necessary because of the complexity of life insurance products.

3. Achieve cost efficiency

Most insurers are already on their second or third major cost reduction initiative. But with no investment yields, high dividends leave little funding for investing in modernizing legacy systems. And many life insurers are still outsourcing. Insurers must think carefully and critically about how to integrate cost-cutting into a holistic business development strategy.

4. Leverage IoT and connected insurance

Life and health insurers recognize the need to adopt innovative technologies to get closer to their customers. The Internet of Things (IoT) and connected sensors are among the top-priority technologies, particularly as they allow insurers to apply concepts from behavioral economics to help people reduce risks and make better decisions.

5. Promote financial wellness

European consumers have shown much interest in digital aggregators and seem to prefer more direct product recommendations. Retirement planning programs are mostly state-sponsored, but given the decreasing role of the state, life insurers need to modify their value propositions and expand their offerings to address changing customer needs and fill the gap.

Changing customer needs


European retirees unable to maintain their pre-retirement standard of living.

Source: ING

How insurers can move forward

Bottom-line pressures have forced insurers to explore creative options to cut costs and upgrade technology – from acquisitions of InsurTechs for ecosystem development to "green-field" deployments to cloud migrations. But the key to delivering real results is focusing on specific business issues and performance improvement opportunities.

As they look to prioritize their investments and focus their finite resources, insurers must:

  1. Define their primary fields of play.
  2. Identify specific business problems to address when deploying technologies.
  3. Determine necessary skill sets and build the right talent base.
  4. Devise overall strategies based on a holistic assessment of customer needs and expectations.

For more in-depth insights, read our Europe insurance outlook report (pdf) which includes country outlook snapshots of France (pdf), Germany (pdf), Italy (pdf) and UK (pdf).


EY 2020 Europe Insurance Outlook offers a perspective on the key trends and forces shaping the insurance industry over the next few years. Despite economic and geopolitical uncertainty, European insurers can still seize the opportunity to invest in new capabilities, talent and technology that will enable transformation. This European report focuses on imperatives that will help insurers shape their strategic plans.

About this article


Peter Manchester

EY Global Insurance Advisory Leader and EY EMEIA Insurance Leader

Leader in insurance transformation and strategy. Active interest in new entrants. Uses leading-edge technology to transform the customer experience and insurance landscape.