Emerging risks and changing customer behavior are changing the revenue landscape for insurance companies. These trends require changes in the products and services that insurance companies bring to market.
Historically, insurers have relied on risk models and actuarial tables to know how to develop and price their products. In recent years, we have seen many of the once reliable risk models postponed.
For example, catastrophic events linked to climate change have forced changes for P&C insurance companies. They have responded to record losses with new products and prices. At the same time, the rapidly aging population and the rising costs of elderly care have limited what insurers can offer long-term care products.
Although insurers have seen these effects come for decades, new new risks require more urgent changes. Accenture's global risk management study 2021
1. Increasing sophistication and frequency of cyber threats
In addition to the economic and operational challenges that cyber incidents pose to insurance companies themselves, they also drive customers' demands for protection. More insurance risk managers identify the trend in cyber threats as an urgent need than any other trend.
Insurance companies' urgency can largely be driven by the increase in ransomware attacks. Cybercriminals have been known to make redemption claims based on the victim's insurance coverage.
In our Insurance Revenue Landscape 2025 report, we estimate the global revenue potential of cyber threats at $ 25 billion. It is not limited to cyber insurance per se, but also includes advice before and after the incident. This is an area where continued disruptions in the value chain will cause insurers, reinsurance companies and brokers to delve deeper into advice and risk management.
2. Increased consumer demand for accompanying insurance and non-insurance services
Against the background of increased uncertainty, there are new opportunities for insurance companies to combine risk solutions and collaborate with related industries to meet all customer needs. Personal lines consumers seek holistic protection against all forms of controllable adversity. They have largely stopped distinguishing between P&C, health, fitness / wellness and wealth management products. In our insurance consumer study 2021, 83% say that they would be willing to share data with their insurers about discounts on non-insurance products or services.
3. Increased consumer demand for digital service
Such industry and product convergences create questions for insurers about how to present offers to existing customers and how they will present and sign offers for new products and services. It also challenges insurers to decide where to compete and where they will collaborate with other players in the ecosystem.
For example, the race is about owning vehicle platforms with car manufacturers and technology giants as challengers. Those who advance in that race will be looking for insurance companies that can help create a seamless car buying experience with a smooth digital guarantee. Insurance companies that succeed as platform partners pave the way for AI-led claims, vehicle-to-home integrations and use- and behavior-based insurance offerings.
4. Growth of technology adaptation among customers
Demand for digitally activated products and services is across personal and commercial industries. As operations in a virtual world become increasingly a matter of survival for many companies, they may be exposed to new risk areas and be underinsured. For example, the growing adoption of cloud storage and insights based on customer data among SMEs may exceed the user's understanding of the accompanying threats.
5. The emergence of new competitors and platforms
Insurance companies continue to experience pressure disturbances. They are squeezed into parts with high capital and low returns in the value chain. At the same time, new players are finding ways to reap higher, service-based returns from areas such as distribution, new connected products and convergence games in health.
Insurance risk managers see the need to imagine how insurers provide and sell insurance. Otherwise, insurers will continue on the path to compression disruption while new players enter into the crime with customers.
6. Increasing social and political unrest
In addition to the effects of climate change and COVID-19, business interruptions related to civil unrest further drive the underlying change in the risk-adjusted cost of capital. The insurance companies pull all the levers to maintain economic resilience and the capital reserves needed to continue subscribing.
7. The growth of the gaming / freelance economy
The gaming or freelance economy breaks traditional boundaries between small businesses and personal risk. As more workers move to freelance work either full-time or part-time, their homes and cars begin to be used for business purposes. Insurance companies have the opportunity to compensate for premium reductions from fewer owned assets with increased income from more use of assets in a growing sharing economy. As we reported in our Insurance Revenue Landscape 2025 report, we estimate that global revenue from the sharing economy will grow by $ 40 billion.
Risk models still play a role
Almost 90% of the risk management managers we surveyed say that revenue generation of risk data and models constitutes a revenue opportunity for insurance companies. We agree and are bullish on what value risk models provide. With robust data, predictable and prescriptive analysis and AI solutions, the models can be developed to reduce and manage risks in a changing revenue landscape.
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