IGH Insurance. For example, the introduction of Solvency II in 2016 in the European Union increased capital requirements for traditional life and annuity products, putting further pressure on profitability. Divestitures of business lines or books of business, an increasingly popular trend at the end of the 2010s, can unlock capital to focus on new opportunities. Insurance companies face an avalanche of disruption by digital innovation, climate change and their own inertia. This year, we have focused on the industry agenda with a specific nuance of … Reinvent your business. Currently, mortality underwriting suffers from two primary data gaps. Over the past five to seven years, some countries (such as France, Germany, the Netherlands, and Switzerland) saw new government bonds issued at negative yields. A radically different workforce, underpinned by skills of the future. To achieve these goals, we expect winning life insurance companies to outperform in three areas in the decade ahead: personalize every aspect of the customer experience Life insurance companies can also rely on acquisitions for tech enablement and capability building. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. crunchbase.com. Several trends show promise for the life insurance industry in the next decade. In future, lack of synergy with customers will affect the market share of insurers. Doing so dramatically reduces the need for invasive fluid and paramedical exams and results in near auto-issuance for the majority of policies. Please use UP and DOWN arrow keys to review autocomplete results. A lingering image of the life insurance industry involves a door-to-door salesman with marketing materials and a firm belief in his or her products. Cross-border transactions can provide access to faster-growing developing markets, such as those in Latin America, and emerging markets in Asia. Customers are increasingly willing to share their data in exchange for personalization; today, six in ten consumers globally are comfortable sharing personal details with their insurer in exchange for lower premiums. Thus, the challenge is to radically reduce costs, while at the same time improve customer service and support new initiatives. We believe the life insurance industry faces a pivotal, dual opportunity: the chance to fulfill growing customer needs while returning to profitability and growth. Collectively, traditional long-term, fixed-rate guaranteed products will undergo a paradigm shift in structure, from being rooted in guaranteed returns to offering upside potential with guaranteed downside protection. Life insurance premiums may decline 6% globally through the end of 2020 and by 8% in advanced economies, while a recovery of 3% growth is projected overall for 2021. Life insurers must respond by capturing more value from existing assets and pursuing targeted M&A. This was done to protect the interests of policyholders. Learn more about cookies, Opens in new 12. A digital transformation helps change the customer experience to better benefit policy holders in … At the same time, these agents were spending disproportionately more time on customer service and administration than before. Given global profitability challenges, insurers can increasingly optimize in-force and closed blocks as a source of value creation. collaboration with select social media and trusted analytics partners The fourth section, Life Insurer Balance Sheets, looks at financial performance of the life insurance industry over the last decade and provides an in-depth look at the 2011 numbers to give a World Population Ageing 2015: Highlights, United Nations, Department of Economic and Social Affairs, Population Division, 2015, un.org. The history of India’s insurance industry reflects the history of India’s economy. Foundation, 2012, theinstitutes.org. Susan Rupe is managing editor for InsuranceNewsNet. Interest rates have been globally depressed for a decade—and even longer for some economies, such as Germany and Japan. Insurers’ commitment to maintain their fiduciary duty is also under increasing scrutiny. Finally, winning companies will provide continuous “one-touch” underwriting, with dynamic adjustment based on customer behavior and suggested personalized actions to significantly drive healthier behavior (phase 4). a troubling sign for an industry in which 25 percent of employees believe themselves to be within five to ten years of retirement. 3 Challenges Global Insurance Industries Are Facing 1. Although life insurance is a mature industry, its mission is as relevant as ever: protecting individuals, families and businesses from life and retirement risks. Today, the attention given to in-force management is often not commensurate with its potential. That said, capital preservation is not free; whether in commissions, expense ratios, or yield, customers pay for it. Gross written premium grew from $661 billion in 2013 to … “Older People Projected to Outnumber Children for First Time in U.S. History,” US Census Bureau, March 13, 2018, census.gov. New products that help allay those concerns, as well as increase coverage and premium flexibility, will likely prove increasingly popular with consumers. How can insurers reverse this trend of low growth while dealing with new challenges like the emergence of fintech and climate change-related risks? tab, Engineering, Construction & Building Materials, McKinsey Institute for Black Economic Mobility. We'll email you when new articles are published on this topic. RBC Life Insurance John DelPozzo Ohio National Financial Services 2015 Forecast Participants Jimmy Atkins Legal & General America Key decision makers from a cross section of insurance industry companies participated in the 2015 forecast. 6.2 Life Reinsurance Assumed (face amount) 61 Life Insurance 7.1 Life Insurance in the United States 66 7.2 Individual Life Insurance Purchases in the United States, by Plan Type, 2018 68 7.3 Life Insurance Purchases, by Participating Status 68 7.4 Voluntary Termination Rates for Life Insurance Policies, Calculated by Face Amount (percent) 69 1 If a full acquisition is not an option, hiring talent from insurtechs and other start-ups with greater digital and analytics capabilities is another possibility. In the future, we expect to see life insurance transition from the traditional “assess and service” model and shift toward “prescribe and prevent” (Exhibit 5). In addition, some Japanese life insurance companies are migrating to a “pay as you live” premium schedule with dynamic pricing. The Singapore insurance industry provides a broad range of life, health, general, commercial and reinsurance coverage to individuals and businesses. Continuous underwriting. and many are expected to outlive their retirement savings. The evolution toward continuous underwriting, made possible by increased data and device connectivity, will present further opportunity for personalization. Despite recent increases in online research for life insurance, spurred by COVID-19, the long-term decline of mortality risk is likely to continue. In the years since the financial crisis, U.S. life insurers have improved their risk management skills, de-risked their balance sheets and focused more sharply on cost and efficiency. The availability of data has skyrocketed, and insurers have made progress in advanced analytics and artificial intelligence. tab. As a result, life insurance companies can acquire their way to the forefront of disruptive innovation. New capital regulations accompanied the globally depressed rates. Developing economies—predominantly emerging markets in Asia that were formerly small contributors—have become global growth drivers and now account for more than half of global premium growth (Exhibit 1) and 84 percent of individual annuities growth (Exhibit 2). Not surprisingly, new insurance entrants have stepped in to bridge the gap to offer more complete coverage for sharing economy service providers. 2020 DXC insurance survey report: The voice of the US customer, dxc.technology. 2 life insurance industry. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Currently, insurers focus on automating the underwriting process to improve efficiency gains and reduce inconsistencies (phase 1). Try our corporate solution for free! Life insurance companies often use these funds to finance the transition of the closed blocks to a target platform, invest in digital and analytics, and wide-scale productivity transformations. “I think the life insurance industry is one of the best industries in the world, and I actually think it’s a pretty fun and great place to work. The proliferation of data and connected devices, particularly wearables, will continue to make it easier for life insurance companies to play an active role in shaping customer health—to everyone’s benefit. Joanna Glasner, “A record $2.5B went to U.S. insurance startup deals last year, and big insurers are in all the way,” Crunchbase, April 4, 2019, Such interactions have the ability to reduce customer acquisition costs by up to 50 percent, generate 5 to 10 percent of new premiums, and reduce customer churn by up to 30 percent. On top of all that, life insurers are losing talent to banks and asset managers, primarily due to compensation. Evidence shows that a higher proportion of consumers are willing to share data collected on their watches related to heart rate. To achieve these goals, we expect winning life insurance companies to outperform in three areas in the decade ahead: The influence of digital leaders in other industries has raised the bar in insurance as well. The insurance industry is undergoing a period of radical change, occasioned by the principal drivers of cost reduction, legislation, competition, and ever-increasing critical mass. ACLI represents approximately 290 legal reserve life insurer and fraternal benefit society member companies operating in the United States. While a significant portion of middle-class customers have not saved enough for retirement, the industry has fallen short in communicating the importance and value of its products. The cost of defending your enterprise network is not a child’s play. State Farm immediately pops into your head. cookies, McKinsey_Website_Accessibility@mckinsey.com, personalize every aspect of the customer experience, develop flexible product solutions suitable for a challenging regulatory and interest-rate environment, commercial effectiveness, including lapse management and cross-selling to policyholders, financial efficiencies, such as actuarial optimization and reinsurance, operational efficiencies, such as reduced administrative costs, transactions, such as partial or full sales of blocks of business. Annual disposable income of $3,600 and over; World Population Prospects, United Nations, Department of Economic and Social Affairs, un.org; Cityscope by McKinsey Global Institute. • Insurance industry dominated by non-life insurance (74%) • Life insurance industry dominated by foreign companies (79% in 2015) Soruces: ‘Annual Report on the UAE Insurance Sector 2015’ by Insurance Authority UAE for GWP, ‘The Annual Economic Report 2015’ by Ministry of Economy UAE, World Bank and others *Organization for Economic Co-operation and Development View Guidelines. will increasingly depend on robust wealth- and asset-management solutions, particularly in markets such as China, where the industry is evolving rapidly. Cyber Security Title Quarter Ending; Insurance Industry Performance - HMO: As of 31 December 2018: Insurance Industry Performance - Life, Non-Life and MBA: As of 31 December 2018 Personalized, omnichannel customer journeys. Ultimately, earnings potential will be shaped by not only customer demand but also companies’ abilities to upskill distribution talent and develop unique economic solutions for distributors. today, six in ten consumers globally are comfortable sharing personal details with their insurer in exchange for lower premiums. Several areas offer opportunities for personalization that can strengthen customer relationships. Globally depressed interest rates curtailed investment portfolio returns. Emerging trends in the Insurance industry are a combination of business and technology themes, most of which are likely to become mainstream in the near to long term. Further, noncommunicable diseases—those more closely linked to lifestyle and behavior, such as diabetes, heart disease, and lung cancer—will account for 71 percent of all annual deaths globally and represent an increasing proportion of mortality risk. In the war for digital talent, life insurance companies are at a disadvantage. per an industry estimate, digitisation can reduce around 20–30% of the cost of non-life insurance products and 15–20% of the cost of life insurance. 2. A prominent example is New York-based Slice, which offers homeowners in 20 states an on-demand insurance solution for their home-sharing rental properties. From 2015 to 2019, unit-linked premiums rose $76 billion globally, with European life insurance companies accounting for two-thirds of global growth (Exhibit 8). Global penetration fell to 3 percent, and premium growth within most developed markets, hovering just below 2 percent per year, struggled to match GDP. Such services give insurers access to fee-based earnings, an alternative revenue stream that could be rewarded by investors. The path to growth in the next decade will require new talent and bolder strategies. © Entire contents copyright 2020 by InsuranceNewsNet.com Inc. All rights reserved. Customer demand is at an all-time high. our use of cookies, and The only data available at that point are past morbidity and behavioral data on the customer. Much of this work is being steered by the Principles for Sustainable Insurance (PSI) initiative, launched by the UN Environment Programme Finance Initiative (UNEP FI) … No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com. Learn about Reinsurers face highest risks from coronavirus, says A.M. Best 31st January 2020 - Author: Matt Sheehan Analysts at AM Best believe that reinsurers could face higher levels of risk related to the ongoing Coronavirus outbreak than their primary life & health counterparts. The life insurance market in Asia has rapidly grown over the past few years. Life insurance companies can direct leads to the channel or agent that best serves each customer’s needs. Economic and demographic trends will also offer tailwinds. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. For customers concerned with the cost of living in retirement, life insurance companies in Asia and the United Kingdom are replacing financial payouts with guaranteed placement in senior living communities. Digital and mobile advances have raised the bar on transparency and service quality: customers can now file claims and access agents, insurance quotes, and policy information with a few taps on a screen. That’s hard to pull off; it’s a very hard pivot.”. Integrated Annual Report 2019, Discovery, 2019, discovery.co.za. FIND CLARITY IN THE CHAOS Insurance companies in India were nationalised during pre-liberalisation. We strive to provide individuals with disabilities equal access to our website. Subscribed to {PRACTICE_NAME} email alerts. By 2030, the number of people aged 60 and older will grow by more than 50 percent, from 900 million in 2015 to 1.4 billion. 9. The financial-services industry trails other sectors in volume of digital and tech talent. Select topics and stay current with our latest insights, The future of life insurance: Reimagining the industry for the decade ahead. divorce rates continue to rise, and job insecurity, spurred by technological advancements, can create uncertainty for consumers. Business. Meanwhile, others (such as the United States and Japan) continue to combat near zero interest rates. Insurers will then graduate to microsegmentation and personalization, for which individualized offers are generated using comprehensive internal and external data sets with enhanced accuracy (phase 3). Growth within existing markets will be challenging; life insurance companies can use acquisitions to enter new geographies, adjacencies, and products. Together, this four-phase evolution flips the underwriting approach on its head, with environment, health, and lifestyle becoming primary inputs and medical data providing only one part of the picture (Exhibit 7). The U.S. life insurance industry is still feeling the effects of a low-growth decade, according to EY’s 2020 US and Americas Insurance Outlook. According to our research, more than 90 percent of new business in China historically has been generated through face-to-face interactions. 7. May 5, 2015, blogs.imf.org. Follow her on Twitter @INNsusan. • The general insurance industry earned $23.1billion from consumer-oriented insurance products in 2017. Cyber risk is something that cannot be fully mitigated but can be prevented as hackers are always moving and adapting much quicker than the defenses on ground. Regulatory issues continue to pressure life insurers, the report said. The goal here is this: You decide one day that you’re ready to buy life insurance. Multiple studies have found that there is a considerable life insurance coverage gap for Americans. Though perhaps outdated, the notion is not unfounded – the industry has long-relied on captive and independent agents to sell and retain customers. Life insurance companies will have to significantly invest in digital infrastructure and place analytics at the core of distribution. permission. Please click "Accept" to help us improve its usefulness with additional cookies. Movement draws the eye, and this photo bridges the gap between video and photo – it’s well chosen. “Customers expect an omnichannel experience where they are able to go online to call your call center or talk to an individual and kind of feel the same message. 5 But young people coming out of school would rather work for some of the big technology firms out there. 7 4. 8. Seventy-five percent of global executives agree that upskilling and reskilling employees must account for at least half of their skills gap solution. Life insurance companies that prioritize those efforts and develop operating models capable of responding to changing demands will distinguish themselves from peers and position themselves at the forefront of “future-proofing” their workforces. Since the onset of the pandemic, insurance companies have been forced to adopt digital-hybrid solutions by incorporating robo-advisors, video conferencing, and web chats. Johnny Wood, “Retirees will outlive their savings by a decade,” World Economic Forum, June 13, 2019, weforum.org. Such products may offer customers upside potential coupled with downside protection (as high as 100 percent). Get breaking news, exclusive stories, and money- making insights straight into your inbox. The recent crisis has depressed valuations for start-ups, providing insurers an opportunity to acquire capabilities more cost effectively. Having said all of that, lets quickly dive deep. In recent months, life insurance companies have relied on more detailed questions and medical records instead of in-person physical exams, which have not been possible with physical distancing. Pierre-Ignace Bernard is a senior partner in McKinsey’s Paris office; Kweilin Ellingrud is a senior partner in the Minneapolis office; Jonathan Godsall is a partner in the New York office, where Andrew Reich is a consultant; and Bernhard Kotanko is a senior partner in the Hong Kong office. “The Changing Face of Indian Insurance: In Pursuit of Profitable and Sustainable Growth”, we had shared a 14-point action agenda for the Indian insurers to drive sustainable and profitable growth. Life insurance companies, which are competing with not only their peers but also industry alternatives such as pure wealth and asset managers, will increasingly seek to differentiate themselves through value-added services and nonmonetary benefits, particularly as life and health coverage continue to converge. COVID-19 has accelerated many of the digital and omnichannel elements that were in their early stages. At the same time, fee-based earnings introduce more complexity vis-à-vis sales and after-sales support. Report: Barclays Warns Investors Of A Warren Presidency, New Jersey Gov Signs Bill To Protect Seniors From Financial Exploitation. A strong regulatory environment and entry of a number of global companies and brokers has seen Singapore established as a key regional centre for insurance and reinsurance, and domestically the penetration of life and health products continues to … “Noncommunicable diseases,” World Health Organization, June 1, 2018, who.int. Find out how you can submit content for publishing on our website. However, these workforce shifts will not eliminate jobs—our research indicates net new jobs will be created due to advances in automation—but instead change the nature of the work. Discover how the Credit Suisse Ravenpack AI Index could help your clients today! The life insurance industry continues to grow, with gross policy revenue increasing by 6.3% over the past year to $24.7 billion, and reinsurance playing The life insurance industry is engaged in providing Filipinos with financial security as well as … We believe the life insurance industry faces a pivotal, dual opportunity: the chance to fulfill growing customer needs while returning to profitability and growth. health management, and telemedicine. The NAIC does not endorse any analysis or These member companies represent 95 percent of industry assets, 93 percent of life insurance premiums, Some insurers have advanced to accelerated underwriting, for which applications are submitted digitally (phase 2).