Nicosia, 28 January 2020
EY: As change accelerates, insurers need profound transformation and the right talent
- Declining interest rates, changing customer expectations and shifting demographics are defining the future of insurance
- Insurers must strike the right balance between achieving operational excellence and investing in technology-led innovation
As insurance industry growth remains stagnant for another year due to low interest rates, the shifts in consumer demographics around the world coupled with heightened expectations for digital experiences present insurers with risks and opportunities. The EY Insurance Outlook 2020 report – based on collective sector workshops with insurance leadership across the globe (Americas, Asia-Pacific and Europe) and a formal survey of EY insurance professionals and external analysts – reveals what life and non-life global insurers plan to prioritize in the year ahead to remain competitive in this new paradigm.
Insurers agree that talent is the “secret sauce” to maximize returns on investments in technology, digital transformation and new business models. But with the industry struggling to attract the right talent, the report finds that insurers need to either reposition themselves as technology firms or proactively communicate on why the industry matters, what value it brings to society and the overall appeal of an insurance career.
Additional priorities for global life and non-life insurers according to the report include:
- Achieving operational excellence and cost efficiency
- Managing regulatory pressures
- Digitizing distribution
- Mastering emerging and disruptive technology
- Navigating the risks and opportunities of climate change
Battling regulatory pressures such as IFRS 17 while reskilling talent and enabling digital transformation is proving to be a tricky balancing act for European insurers that are struggling for growth. Non-life insurers must strike the right balance between human and digital distribution, navigating regulation and exploring the opportunity and threat of sustainability and climate change. At the same time, life insurers will look to become more cost efficient by exploring new propositions through connected devices and financial wellness offerings to tackle the challenge of extremely low interest rates.
The report finds that key actions for European insurers (both non-life and life) in 2020 include: managing persistent regulatory pressures, digitizing sales and distribution and achieving cost efficiency. Interestingly, the war for talent is a top priority for non-life, along with navigating sustainability and climate change, while life remains focused on navigating sustainability and climate change and leveraging the Internet of Things (IoT).
Savvas Pentaris, Partner and Head of Financial Services of EY Cyprus comments: “The insurance industry is impacting our every-day lives, from natural catastrophes to cyber-risks to safeguarding our health. As new risks emerge, insurers should focus on risk prevention in addition to risk management. Meanwhile, becoming more customer-centric and improving the customer experience in an increasingly digital world will be an imperative. In this transformational journey, to be best positioned for future growth, they also need to attract and retain the right talent while reskilling the existing workforce.”
The top 2020 trends for Americas insurers (both life and non-life) align with some of the global priorities: winning the war for talent, achieving operational excellence and cost efficiency. For non-life insurers, digitizing distribution and developing the right strategies to collaborate – and compete – with new entrants (Insurtechs, big techs), remain a priority.
While the industry fundamentals appear sound, regulatory and economic uncertainties, and country-specific issues are clouding the Asia-Pacific outlook and creating some challenges. According to the report, insurers should leverage the advantage of a relatively young and growing middle class by embracing new technologies. This in turn, will reduce their cost base and modernize distribution by strengthening direct-to-consumer propositions and leveraging regulatory change to streamline operations.
For more information and to download the report, visit EY Insurance Outlook 2020.