As change accelerates, EY says insurers need profound transformation and the right talent
By Digital News Asia January 23, 2020
- Declining interest rates, changing customer expectations defining the future of insurance
- The Asia-Pacific region is a major contributor to future growth of the insurance industry
AS INSURANCE industry growth remains stagnant for another year due to low interest rates, the shifts in consumer demographics around the world coupled with heightened expectations for digital experiences present insurers with risks and opportunities.
The EY Insurance Outlook 2020 report – based on collective sector workshops with insurance leadership across the globe (Americas, Asia-Pacific and Europe) and a formal survey of EY insurance professionals and external analysts – reveals what life and non-life global insurers plan to prioritize in the year ahead to remain competitive in this new paradigm.
Insurers agree that talent is the “secret sauce” to maximise returns on investments in technology, digital transformation and new business models. But with the industry struggling to attract the right talent, the report finds that insurers need to either reposition themselves as technology firms or proactively communicate on why the industry matters, what value it brings to society and the overall appeal of an insurance career.
Isabelle Santenac, EY Global Insurance leader, says, “In an industry that impacts our lives every day – from natural catastrophes to cyber-risks to better health outcomes – and in an increasing digital world, being more customer-centric and improving the customer experience is an imperative.
“Considering the emergence of new risks, insurers should focus on risk prevention in addition to risk management. Attracting and retaining the right talent as well as reskilling the existing workforce will be essential in this transformational journey.”
Additional priorities for global life and non-life insurers according to the report include:
- Achieving operational excellence and cost efficiency
- Managing regulatory pressures
- Digitising distribution
- Mastering emerging and disruptive technology
- Navigating the risks and opportunities of climate change
While the industry fundamentals appear sound, regulatory and economic uncertainties, and country-specific issues are clouding the Asia-Pacific outlook and creating some challenges.
According to the report, insurers should leverage on the advantage of a relatively young and growing middle class by embracing new technologies.
This in turn, will reduce their cost base and modernise distribution by strengthening direct-to-consumer propositions and leveraging on regulatory change to streamline operations.
Grant Peters, EY Asia-Pacific Insurance leader, says, “The Asia-Pacific region is a major contributor to future growth of the insurance industry. The region is still riding a strong growth spurt, driven by China, but also buoyed by positive performance in South Korea.
“However, mature markets present challenges with an aging population and shifting consumer expectations. No other market is as diverse in terms of opportunity and maturity – which poses an exciting challenge for insurers in this region.”
The top 2020 trends for Americas insurers (both life and non-life) align with some of the global priorities: winning the war for talent, achieving operational excellence and cost efficiency. For non-life insurers, digitising distribution and developing the right strategies to collaborate – and compete – with new entrants (Insurtechs, big techs), remain a priority.
Ed Majkowski, EY Americas Insurance Advisory leader, says, “The current environment for Americas insurers is as much challenging as it is promising. Insurers who are able to innovate boldly, evolve their talent base and enhance customer experience, while remaining focused on operational efficiencies to reduce costs will be best positioned for future growth.”
Battling regulatory pressures such as IFRS 17 while reskilling talent and enabling digital transformation is proving to be a tricky balancing act for European insurers that are struggling for growth.
Non-life insurers must strike the right balance between human and digital distribution, navigating regulation and exploring the opportunity and threat of sustainability and climate change. At the same time, life insurers will look to become more cost efficient by exploring new propositions through connected devices and financial wellness offerings to tackle the challenge of extremely low interest rates.
The report finds that key actions for European insurers (both non-life and life) in 2020 include: managing persistent regulatory pressures, digitising sales and distribution and achieving cost efficiency.
Interestingly, the war for talent is a top priority for non-life, along with navigating sustainability and climate change, while life remains focused on navigating sustainability and climate change and leveraging the Internet of Things (IoT).
Peter Manchester, EY EMEIA Insurance leader, says, “With a high likelihood of the prolonged low interest rate environment continuing, European insurers need to continue reducing their dependency on investment income for profitability.
“They will also need to maintain a strong focus on cost efficiency, and selectively invest in digital transformation and talent reskilling to enable new business models and unlock sustainable growth.”
For more information and to download the report, visit EY Insurance Outlook 2020.