The COVID-19 pandemic continues to trigger upheaval in our enterprise and private lives in North America and world wide. Whereas there may be nonetheless appreciable uncertainty round how the pandemic will proceed to evolve, insurers have to proceed to look ahead and plan for the longer term. They’ll wish to take into account the outlook for the trade over the subsequent 5 years and decide if their present income methods are aligned with the approaching alternatives.
Insurance coverage trade premiums are anticipated to develop over the subsequent 4 years
Accenture analysis means that the insurance coverage trade is predicted to develop from $6.1 trillion in gross written premium (GWP) initially of 2020 to $7.5 trillion by the top of 2025. This contains $800 billion in US healthcare payer premiums. Whereas managed healthcare plans haven’t historically been counted as a part of the insurance coverage sector, they’re now thought of materials attributable to blurring boundaries between digital well being services and products.
Whereas rising markets in Asia Pacific—most notably China (mainland)—are driving up the worldwide common, the US is ready to take up an enormous proportion of absolute development. In actual fact, between them, the US and China are anticipated to account for greater than two-thirds (67%) of development.
Why is innovation an necessary a part of this outlook?
Of that $7.5 trillion in GWP, nearly half a trillion {dollars} ($480 billion or 7%) is prone to be closely impacted by innovation. We anticipate seeing GWP affected by new dangers, product choices and providers, product innovation and shifting placement channels. With tons of of billions of {dollars} at stake, North American insurers have to establish which improvements supply the best alternatives for income development—and take most benefit of them.
4 areas of innovation supply probably the most potential for income development
Once I speak with our insurance coverage purchasers, I like to recommend 4 areas of innovation that I believe will likely be notably advantageous within the subsequent 5 years and past.
1. Well being/wellness and life services and products. With a income alternative for insurers value $120 billion, improvements that concentrate on good well being merchandise, services and products for getting old populations, and direct life and wealth administration merchandise are value contemplating.
By 2030, 20% of US residents will likely be 65 or older. Add to that the rise in common life expectancy, which now stands at nearly 79 years, and the US is on observe to see a surge in demand for healthcare and escalating prices. However good well being merchandise, comparable to people who allow distant affected person monitoring, will let folks keep of their houses longer and may reduce their want for costly care. In fact, wearable know-how isn’t only for the getting old inhabitants. Tendencies counsel that units that assist us monitor our well being and maintain us protected will stay a precedence.
Past preventative measures, the getting old inhabitants additionally wants modern insurance coverage merchandise that tackle their care administration and monetary safety considerations. The 2019 Safe Act goals to increase retirement financial savings alternatives and develop entry to annuities in 401(okay) plans. So, that is one other key space of curiosity for insurers.
2. Sharing economic system, local weather change and cyber threats. These three dangers current potential insurance coverage income reaching $115 billion. As an example, within the sharing economic system, individuals are opting out of asset possession, which implies lowered premiums for fewer property. Nevertheless, rather than this, main insurers are tapping into the market with choices that match with newly formalized sharing preparations.
One instance of that is insurance coverage for short-term leases. Via Airbnb and different comparable providers, folks lease out a number of rooms, or their whole residence, to vacationers. To mitigate towards the chance of doing this, rental property house owners buy insurance coverage. Protection may embrace substitute prices for the property and contents, injury brought on by a visitor and lack of rental revenue if there’s an insured property loss.
Relating to local weather change, we’ve all seen the rise in catastrophic storms and wildfires. Based on the Nationwide Facilities for Environmental Info, 2020 set a brand new annual report with 22 extreme climate occasions within the US—and that counts all of the wildfires as a single occasion. Moreover, 2020 was the sixth consecutive 12 months with 10, or extra, billion-dollar climate and local weather catastrophe occasions. There’s potential right here for insurers to collaborate with reinsurers to cowl new and evolving dangers related to the local weather.
Cyber threats additionally supply insurers new alternatives, not simply when it comes to cyber insurance coverage, but additionally round pre- and post-incident advisory servicing. I see this as an space the place the huge disruption within the worth chain will proceed, with insurers, reinsurers and brokers delving closely into advisory and danger administration options. Examine what forms of cyber threats are anticipated right here.
3. Expertise integration inside conventional merchandise. As know-how is more and more built-in with conventional merchandise, insurers can anticipate income alternatives value $120 billion. On this space, I like to recommend insurers concentrate on good auto, good residence and good manufacturing and constructing.
In-line water shutoff units are only one instance of a wise system that may save owners and insurers cash by lowering the severity of harm from water leaks. Additionally, as my Accenture colleague Markus Hayek mentioned just lately, good sensors built-in into a producing manufacturing line and real-time analytics might save corporations (and their insurers) tens of millions of {dollars}.
With entry to extra knowledge from linked units, insurers will have the ability to additional customise the protection they provide based mostly on precise danger. However to essentially reap the benefits of this innovation, insurers have to make certain that they’ve the correct knowledge, that they’re leveraging related exterior knowledge units and that their knowledge is cleansed and harmonized. High quality of knowledge is vital. Plus, they want a strong analytics functionality to glean insights from the info. That is one space the place I consider insurers shouldn’t skimp in the event that they wish to seize alternatives for development.
4. Shift to various distribution. This closing space of innovation might see income alternatives value $125 billion in shifting premiums. New entrants to the market, together with non-insurance corporations like Tesla, are starting to supply insurance coverage merchandise and insert themselves into the insurance coverage worth chain.
There’s a possibility right here for insurers to point out themselves to be straightforward ecosystem companions. By doing this, and by providing usage- (servitization) and behavior-based gives, they’re extra prone to retain present clients and entice new ones. Additionally they have an avenue to extra gross sales alternatives, vehicle-to-home integrations and knowledge monetization.
Expertise Imaginative and prescient for Insurance coverage 2021: We define 5 rising know-how tendencies that may affect the insurance coverage trade in 2021 and past.
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The place ought to insurers begin?
For insurers questioning which of those areas of innovation to handle first, I counsel beginning in areas you’ve already targeted some effort. It’s best to construct on the momentum of present initiatives, after which department into new areas. Bear in mind too, that your geographic location makes a distinction. Not each international pattern will likely be relevant in your market and regulatory necessities fluctuate considerably. This may make some alternatives the next precedence for your corporation.
Should you’d like to speak by means of your individual situation and discover how one can reap the benefits of any of those alternatives, please be at liberty to succeed in out to me immediately. Now we have a Strategic Resilience modeling instrument, designed particularly for insurers, that may assist you strain take a look at and refine strategic investments and measure complete alternative.
Or, for those who’d wish to study extra about the place we see the insurance coverage income panorama headed, learn the report: Insurance coverage Income Panorama 2025: Innovate for Resilience
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