Tag Archives: insurance outlook

2020 Outlook for U.S., Americas

The past decade’s low growth rates, lack of trust in institutions and declining policy sales are forcing insurers to redefine their value propositions to stay relevant for new generations of consumers. Optimizing costs while investing in the right technologies and talent are also top agenda items. The willingness to take bold action will separate the leaders from the laggards. It will also enable some insurers to convert significant opportunity today into significant value tomorrow.

The unique mix of risk and opportunity is at the heart of the annual EY US and Americas Insurance Outlook. The report represents EY’s perspectives on the issues shaping the US and Americas insurance industry in the near term (next 3-5 years).

A complex environment and challenging fundamentals

The insurance industry is still feeling the effects of a low-growth decade. Economic inequality coupled with lack of trust in institutions is driving more lawsuits, larger jury awards and broader definitions of corporate negligence. For insurers, that translates to more claims, higher loss ratios and the need to raise premiums. It’s not surprising, then, that the number of policies sold has fallen.

Rising expectations for better customer experiences

Consumers expect intuitive, personalized experiences. But many insurers are still playing catch-up compared with digital leaders. Innovative firms will develop full customer lifecycle journeys by incorporating better data and richer insights and applying lessons learned from the most successful tech companies.

Shifting demographics

Though populations are not changing in the Americas as dramatically as in other parts of the globe, insurers are still susceptible to large-scale socioeconomic change. Mass retirements are looming. And insurers can’t take for granted that younger generations will automatically purchase conventional insurance products – particularly as they delay traditional milestones like marriage and home ownership.

See also: Innovation — or Just Innovative Thinking?  

Persistent barriers to growth

Low interest rates remain a big challenge, especially for life insurers. Flat productivity, low inflation and low savings propensity are also dragging down the industry’s prospects. New value propositions, such as those related to financial wellness, and a shift toward fee-based products are two ways insurers should respond.

A looming recession

The current fear of recession and lack of overall macroeconomic confidence threaten the recent run of successful results. A slowdown will affect life insurers as ROI dries up and consumer saving falls. Non-life insurers will be hit as government and private spending drops, affecting trade, consumption and overall economic activity.

Scarce talent

Both life and non-life insurers need more “digital people” – that is, those who know how to use advanced technology. Forward-looking executives recognize that the right talent and skills are necessary to generate strong returns on investments in technology and transformation.

See also: Insurtech 2020: Trends That Offer Growth  

How insurers should move forward

Insurers have understandably focused on upgrading technology in response to continuing margin pressures. But, technology is just one variable in the equation for successful long-term change.

A more holistic approach incorporates talent and cultural factors, as well as the emphasis on product innovation and new business models. Tomorrow’s market leaders will be technology-enabled, data-driven and operationally efficient – but also people-powered and purpose-led, with strong cultures that are adaptive, engaged and capable of rapid change.

You can read the full report here.

2016 Latin America Insurance Outlook

Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright. The rollout of new insurance products and distribution approaches at a time of low market penetration should drive strong growth for insurers. Insurance premium growth is expected to rise by around 6% to 7% in 2016 and possibly beyond should the economic environment improve as expected. At the same time, the emergence of end-to-end digital capabilities is transforming the Latin American insurance market. This digital market disruption will force insurers to make rapid revisions to existing business models to stay competitive and build market share.

Customer expectations rising

Commercial customers will continue to require more sophisticated insurance solutions in 2016, including coverage for business interruption, cyber security, civil unrest and errors and omissions. Latin American consumers, many of whom are young, cosmopolitan and tech-savvy, will continue to push for new insurance channels and services that fit their lifestyle. To respond, insurers will need to simplify and adapt products for Millennials and sharpen their focus on mobile and social media interactions. Evolving customer needs throughout the region are compelling insurance companies to rethink their strategies, processes and services. The rise of financial technology, or fintech, companies is causing insurers, particularly in the consumer insurance sector, to reconsider their business models and increase their investment in new digital technologies. Despite a desire to avoid conflicts with legacy models, insurers realize that flexibility, efficiency and innovation are critical for success in a more demanding marketplace

Competition heating up

The liberalization of industry regulation across Latin America has opened insurance markets to wider competition. The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region to local insurers looking to expand cross country to entrenched insurers defending their turf. These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property.

Pockets of premium increases can be found in areas of instability, such as Venezuela. However, insurance capacity is very limited for Venezuelan political risk, with most risks dependent on the international reinsurance market.

As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry to the private sector in Mexico, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil, where only a few insurers offer such liability coverage.

Read our Market Outlook for LATAM Insurance in 2016 to understand more about the dynamics facing the South America Market here.