How insurance companies create value for their customers has changed rapidly over the past year, which means that the basis for how an insurance company generates revenue has changed. If you want to gain an advantage as an insurer, it's time to listen to the changing market and renew yourself accordingly.
The insurance outlook for Europe
Despite a challenging year of recession and disturbed risk models, Accenture's analyzes predict a significant growth for the insurance market over the next five years. Within this growth, we expect a change in the revenue pools. As we can see in the figure below, the global economy is showing signs of strengthening after the pandemic, and the insurance industry is showing its resilience.
Source: Accenture Insurance Revenue Landscape 2025
A good measure of the expected activity in the insurance industry is to look at the expected GDP. Insurance is directly linked to increased asset ownership and use. For this reason, our $ 1.4 trillion forecast in global industrial growth is in line with projected increases in global GDP. As shown in the figure below, however, the emerging markets in Asia and the Pacific are expected to achieve the highest growth (7.1 percent), with Western Europe's estimated growth of 1.8 percent. There is no doubt about it, the growth of industry is a priority and the best way to drive that growth is through innovation.
Source: Accenture Insurance Revenue Landscape 2025
To ensure long-term profitability, insurers need a new strategy. They can no longer rely on familiar products, channels and historical storage rates in the rapidly changing context of rising costs, volatile markets and increased consumer demand for digital services. Accenture predicts that nearly half a trillion dollars ($ 480 billion) of the $ 7.5 trillion in GWP expected in five years, or about 7 percent, would be severely affected by innovation.
It's time to innovate for growth 15 percent ($ 200 billion) of the expected growth of $ 1.4 trillion would come from new risks, products and services. This would include new product innovation ($ 160 billion) and revenue generation of value-added services ($ 40 billion). If insurers want a chance to compete for this innovation-driven income, they need to create new products, services and revenue streams that both grow and retain their customer base.
Innovating for growth
Think of the case of Verti, a car insurance company that creates products that respond directly to what customers are looking for. After analyzing the information they collected, Verti discovered that users are encouraged by discounts on their insurance rates. This led them to launch the Verti Driver app, which uses phone sensors and GPS to determine exactly how the driver follows the road rules given the location they are in. Based on the data collected, Verti Driver generates a score, making certain discounts available to driver, depending on their performance. Insurers can also react proactively to the unique risks associated with today's environment. For example, Beazley Insurance has introduced a contingency policy that offers compensation for live virtual events that are interrupted or disrupted due to a transmission failure. Includes everything from large conferences, exhibitions, theater performances, concerts and sporting events, this virtual event insurance is extremely relevant in connection with the pandemic. And while live streaming is not new in itself, social distancing rules have caused many major events to be canceled, postponed, or relocated online. The policy covers first-party losses including organizational costs, expenses or gross income from advertising and ticket sales.
Innovate for retention
Insurers can not assume that they will retain their customers or expect historical retention to continue. Although the current insurance retentions are at 85 percent for most insurance companies, we already see signs that personal lines remain. Accenture's latest consumer study finds that $ 2.0 billion of current revenue in traditional insurance distribution in Spain could be displaced by insurance companies offering digital distribution experiences, as customers buy insurance on digital channels and third-party platforms. In addition, we expect nearly 5 percent of global premiums – about $ 280 billion – to be affected by product innovations ($ 140 billion) and shifts to third-party digital platforms ($ 140 billion). With this type of shift, insurers can see that the storage rate drops if they neglect to defend existing revenues through product and distribution innovation. Thankfully, many European insurance companies are responding to the call to renew their client retention strategy.
For example, Generali has created a digital, multi-channel and personal experience to drive renewal. The engaging, tailored experience is delivered across several channels. Then, in terms of renewal time, a customized email is sent to each client explaining their policy and coverage. At the end of the video, the agent calls the client for renewal approval and the updated policy is emailed to the client.
Pega has launched its customer service and customer decision hub is a tool to help insurers proactively offer storage measures before a cancellation request is generated. Pega continuously adapts storage strategies and customer engagement to support customer needs and immediately shows empathy in every customer interaction. This is offered via an omnichannel tool, which makes it possible to create journeys from end to end and distribute them in the various channels, so that they are available in the customer's desired channel.
As you can see above, leading insurance companies use innovation to drive growth and create new revenue opportunities. In the next blog in this series, I will discuss the most important trends that affect insurance revenues.
For further insights read the report Insurance Income Landscape 2025:
Get in touch to discuss your innovation strategy.