The COVID-19 pandemic continues to cause upheavals in our business and personal lives in North America and around the world. Although there is still great uncertainty about how the pandemic will continue to develop, insurance companies must continue to look ahead and plan for the future. They want to consider the outlook for the industry over the next five years and determine if their current revenue strategies are in line with future opportunities.
Insurance industry premiums are expected to increase over the next four years
Accenture research proposes that the insurance industry is expected to grow from $ 6.1
While emerging markets in Asia and the Pacific – particularly China (mainland) – to increase the global average, the United States will take a huge share of absolute growth. In fact, between them, the United States and China are expected to account for more than two-thirds (67%) of growth.
Why is innovation an important part of this outlook?
Of the $ 7.5 trillion in GWP, nearly half a trillion dollars ($ 480 billion or 7%) are likely to be severely affected by innovation. We anticipate that GWP will be affected by new risks, product offerings and services, product innovation and changing investment channels. With hundreds of billions of dollars at stake, North American insurance companies must identify which innovations provide the greatest opportunities for revenue growth – and take maximum advantage of them.
Four innovation areas offer the most potential for revenue growth
When I talk to our insurance customers, I recommend four innovation areas that I believe will be particularly beneficial over the next five years and beyond.
1. Health / well-being and food and services . With $ 120 billion in insurance revenue revenue, innovations focused on smart health products, products and services for the aging population, and direct life and wealth management products are worth considering.
By 2030, 20% of US citizens will be 65 or older. Add to that the increase in average life expectancy, which is now almost 79 years, and the United States is about to see a strong demand for healthcare and escalating costs. But smart health products, such as those that enable remote monitoring of patients, will allow people to stay in their homes longer and should reduce the need for expensive care. Of course, portable technology is not just for the aging population. Trends suggest that devices that help us monitor our health and keep us safe will remain a priority.
In addition to preventive measures, the aging population also needs innovative insurance products that address their healthcare management and financial security issues. The 2019 Security Act aims to expand the opportunities for pension savings and increase access to annuities in 401 (k) plans. So this is another important area of interest for insurers.
2. Sharing economics, climate change and cyber threats . These three risks mean that potential insurance revenues reach $ 115 billion. For example, in sharing economy people opt out of ownership, which means reduced premiums for fewer assets. But instead, leading insurance companies are taking advantage of the market with offers that fit newly formalized sharing arrangements.
An example of this is insurance for short-term rentals. Through Airbnb and other similar services, people rent out one or more rooms, or their entire home, to vacationers. To reduce the risk of doing this, rental property owners buy insurance. Coverage can include compensation costs for the property and contents, damages caused by a guest and loss of rental income if there is an insured property loss.
When it comes to climate change we have all seen an increase in catastrophic storms and forest fires. According to the National Centers for Environmental Information, 2020 set a new annual record with 22 severe weather events in the United States – and all forest fires are counted as a single event. In addition, 2020 was the sixth year in a row of $ 10 billion or more in weather and climate disasters. There is potential here for insurers to work with reinsurance companies to cover new and developing risks in connection with the climate. and counseling after the incident. I see this as an area where the massive disruption in the value chain will continue, where insurers, reinsurance companies and brokers are immersing themselves strongly in advisory and risk management solutions. Read about the types of cyber threats expected here.
3. Technology integration in traditional products . As technology is increasingly integrated with traditional products, insurers can expect revenue opportunities worth $ 120 billion. In this area, I recommend that insurance companies focus on smart cars, smart homes and smart manufacturing and building.
In-line water shut-off devices are just one example of a smart device that can save homeowners and insurance companies money by reducing the severity of damage from water leaks. As my Accenture colleague Markus Hayek said recently, smart sensors integrated into a manufacturing production line and real-time analysis can save companies (and their insurance companies) millions of dollars.
With access to more data from connected entities, insurance companies will be able to further adjust the coverage they offer based on the actual risk. But in order to really benefit from this innovation, insurance companies must be sure that they have the right data, that they use relevant external data sets and that their data is cleaned and harmonized. Data quality is crucial. In addition, they need a robust analytics capability to gain insights from data. This is an area where I believe that insurance companies should not skimp if they want to take opportunities for growth.
4. Shift to alternative distribution . This latest area of innovation could provide revenue opportunities for $ 125 billion in varying premiums. New players in the market, including non-insurance companies such as Tesla, are starting to offer insurance products and familiarize themselves with the insurance value chain.
Here is an opportunity for insurers to prove to be simple ecosystem partners. By doing this and by offering use (servicing) and behavioral offers, they are more likely to retain existing customers and attract new ones. They also have an opportunity for additional sales opportunities, vehicle-home integrations and revenue generation.
Where should insurance companies start?
For insurers who are wondering which of these innovation areas to address first, I suggest you start with areas that you have already focused on. It is easiest to build momentum on existing initiatives and then branch out into new areas. Also, remember that your geographic location makes a difference. Not all global trends will apply to your market and legal requirements vary considerably. This can make some opportunities a higher priority for your business.
If you want to talk through your own scenario and explore how you can take advantage of any of these opportunities, please feel free to contact me directly. We have a modeling tool for strategic resilience, specially designed for insurance companies, that can help you pressure test and refine strategic investments and measure total opportunities.
Or, if you want to learn more about where we see the insurance revenue landscape heading, read the report: Insurance Revenue Landscape 2025: Innovate for Resilience
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