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January 28, 2019

Focus Areas for Insurers in 2019

Summary:

A lot is possible, but, without bold action now, insurers will face pressures in 2019 and beyond.

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No or slow growth in revenues. Intense profit pressures. Constant flux from technology advancements and rising customer expectations. That’s what insurers have experienced in the recent past. Without bold action now, they risk seeing more of the same in 2019 and beyond.

Yet a lot is possible for insurance — better ways of working, a clearer sense of purpose, more effective use of emerging technologies and ecosystems as well as our industry’s unique ability to promote financial wellness, provide protection and enable insurance customers to better manage risks.

Here’s where insurance leaders should focus to take advantage of opportunities in 2019:

The Life Market

The Americas life insurance market has remained weak for years, though recent developments look promising. Improved financial markets, an uptick in growth, rising interest rates and aging populations are expected to drive demand for life insurance products.

See also: ‘Organic Insurance’: Back to Basics  

Life insurers should not simply wait for these fundamentals to work in their favor as they have in the past. To make the most of the growth opportunities, they must drive the agenda, develop the long-term resilience and “futurize” the organization. The focus must be on:

  1. Developing comprehensive new value propositions for holistic financial wellness that are aligned to evolving customer expectations and the needs of aging populations across the region
  2. Improving distribution through direct channels and empowered agents
  3. Collaborating with insurtechs, new entrants and other incumbents on ecosystems
  4. Optimizing value chain “basics” to promote sustainability

To achieve these ambitious goals, successful insurers will need to undertake digital transformation. In these transformation journeys, life insurers should seek to optimize the policyholder life cycle by catering to specific needs for specific types of customers, such as overall wellness for aging populations and rewarding experiences for millennials. By meeting these customers’ needs, insurers will enhance their own bottom lines by reducing costs, improving conversion rates and retaining more customers.

Property Casualty

Low, single-digit growth has been the rule in the non-life sector, thanks to a mix of favorable and adverse trends. Improved pricing in motor and health in North America has been largely offset by weak economic growth in Latin America. Of greater concern is falling profitability for the region’s P&C insurers. The causes include higher underwriting losses and weak pricing environment in commercial lines.

To manage through this low-growth, low-profitability conundrum, non-life insurers have focused on innovation and disruption, demonstrating a strong interest in new technological developments including telematics, the Internet of Things (IoT) and blockchain. To demonstrate the value of these investments, insurers must move the needle on business outcomes. The focus must be on:

  1. Driving cost efficiencies to fund continuing investment in digital transformation
  2. Strengthening direct channels to gradually reduce dependency on agents and brokers, particularly in personal and small commercial lines
  3. Preparing for the market entry of tech giants
  4. Exploring insurtech partnerships and acquisitions to leverage relevant capabilities
  5. Accelerating time-to-market to take advantage of new opportunities

With improved economic conditions in the U.S. buoying their growth prospects, P&C carriers must launch multiple change initiatives so that they establish long-term sustainable operating models.

See also: How AI Is Redefining Insurance Industry  

What’s Next

The world’s largest insurance market, like most developed markets, has seen tepid growth in recent years. Life insurance lost favor with U.S. consumers due to low interest rates and heightened competition. P&C insurance has grown at low single-digit rates, fueled largely by auto lines. Health has continued to grow. The commercial sector struggles with a weak pricing environment and persistently low margins. Despite these challenges, insurers can reignite and sustain growth by strengthening the core value propositions and embracing new technology.

See the full report for more.

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About the Author

Ed Majkowski is EY’s insurance sector leader for the Americas and is responsible for EY’s consulting businesses, markets and clients in this region.

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About the Author

Dave Hollander is EY’s global insurance advisory leader and Americas co-sector lead for insurance. He has more than 30 years of experience in the insurance industry, with broad business and IT strategy as well as hands-on leadership and implementation of major operational change programs.

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