For many of us, calling in the new year means making promises for better health and well-being. Whether we are in business or in our private lives, we need to consider the scenarios that may threaten or enable our success. The insurance industry is no different.
This time last year, the world was anxious for the covid-19 vaccine to end the pandemic and the need for physical distance and travel restrictions. While we saw some relief, new variants have emerged that require our continued vigilance to control the spread of the virus.
Despite the continued uncertainty, the economic recovery continues with global GDP is expected to grow 4.9% in 2022. This GDP growth would indicate that major demand for insurance products and services was ahead.
As we said this spring Insurance income landscape 2025 report, we expect the global insurance industry’s revenue to grow to $ 7.5 trillion by the end of 2025. Here are five scenarios that insurance companies wishing to take a share of this revenue in 2022 must consider.
1. Electric vehicles will emerge as a growth segment for insurance companies
The global the market for electric vehicles is expected to grow from $ 171 billion in 2020 to $ 725 billion in 2026 – a CAGR of more than 27%. In 2030, we estimate that it will be 115 million electric vehicles globally. These cars, trucks and vans are entering the global insurance market just as the growth rate of existing car premiums is slowing down in major markets such as the US, UK, Germany and China.
This is an opportunity for growth – not just a replacement game for declines in traditional car premiums! Customers with electric vehicles will have additional needs, such as charging options in the home and quick access to charging stations when they are away from home. Innovative, customer-centric insurance companies presenting this type of value-added products and services will have a competitive advantage – in a risk sector high on most sustainability and ESG agendas!
2. Risk of sustainable supply chain and inventory management will accelerate the reinvention of products
The supply chain disruption caused by covid-19 is likely to continue well into 2022. However, the associated disruptions to companies and the frustrations they cause may subside with the reinvention of traditional freight and freight insurance products. The digitalisation of cross-border trade and the spread of sensors and other IoT and connected technology across supply chains enable real-time access to risk data. Advanced analysis and AI now make it possible for insurers to offer risk-reducing and management solutions and to automate the payment of receivables when needed.
Such insurance offers accelerated 2021 when valuable shipments of covid-19 vaccines traveled around the world. In 2022, you can expect more insurers to apply these innovations more widely and go beyond compensation to help their customers manage core business risks.
3. A property pricing and profitability bill comes
Inflationary pressures are now exacerbating the more systemic problems with increased risk models and increasing capital requirements that have already pushed up the prices of property insurance. United States annual inflation rate reached 6.8% in November, the highest in four decades. The next two decades are expected to lead to sharp increases in both premiums and risk concentration from catastrophic events linked to climate change and increased urbanization in emerging markets. 2022 is the year for pricing and profitability accounting within the property.
4. Insurance models will adapt to seismic changes
The insurance industry is now operating on the fault line of two tectonic plates: COVID-19 and the great resignation. In 2022, the pressure and the changes they create will force insurance companies to disrupt long-term apprenticeship models that the industry has relied on to be able to train in important functions such as claims and insurance. They also exacerbate the ongoing struggle to attract and retain talent in crucial roles conversion of insurance staff as technology, analysis and actuarial. Insurance companies will always need people. But with fewer workers, they increasingly need people who are activated by machines, which changes the way work is done, regardless of who does it or where.
5. Restore the issue workflow
Insurance companies are ready to see their digital transformation and cloud platform investments of the last two years pays off in the form of cost reductions and new business. In 2022, we will see transformation programs that aim to reduce cost ratios and increase profitability through increased process efficiency and decision efficiency in underwriting. Although efficient and effective insurance processes and decisions are crucial, most insurance companies’ insurance platforms cannot handle the volume and complexity of the data required. As my colleague Michael Reilly put it, “We need a third generation of emission guarantee platforms… essentially an emissions-tailored big data platform. ”
Build endurance 2022
We greet the coming year with hope. But hope is not a strategy.
The risk landscape is changing. Specific effects will vary for insurance companies based on their business book and market positioning. But scenario-based planning is crucial to making your business strategy resilient to uncertainty in 2022 and beyond.
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Disclaimer: This content is provided for general information purposes only and is not intended to be used in consultation with our professional advisors.