Chaplin says insurers face a market of rapidly changing technology, new competitors and increased customer expectations, and navigating this ‘modern world’ while also facing larger, more complicated risks will be an ongoing challenge.
“Embracing the technology revolution and making a digital shift in its operations is one key driver for success for the insurance industry,” Chaplin said.
“A McKinsey report found the best-performing 20% of insurers captured almost 100% of the industry’s total profit. Those top performers have transformed their operations to automate significantly and optimise their processes in the face of strong consumer expectation, particularly in how they respond to COVID-19 and the increasing threat of natural catastrophes.”
“That future has its challenges for insurance, however,” he continued.
“The digital revolution has spawned a new set of man-made “ecosystems” linking different parts of the business world – ecosystems McKinsey estimates will generate US$60 trillion in revenue by 2025. That’s luring new competitors into the business, such as Zhong An, a digital insurer selling lifestyle consumption, consumer finance, health, cars and travel which formed out of Alibaba, Ping An and TenCent.”
Chaplin said that the role of insurance brokers is also undergoing a shift, and increasing consolidation in the industry means the lines between ‘traditional’ insurance roles are becoming more difficult to define.
“The traditional roles of players in the insurance value chain are also changing in the face of competition, tech change and shifts in customer demand,” Chaplin said.
“We’re seeing new players entering the market like insurtechs and a blurring of the traditional lines of demarcation between brokers, insurers, reinsurers and capital providers.”
“Brokers are continuing to consolidate, gaining greater market power and taking on greater underwriting responsibility, particularly for larger and more complex risks,” he added.
“Meanwhile, there’s something of a tug-of-war between insurers and reinsurers, with more of the latter providing direct cover, and we are also seeing an increase in the availability of alternative capital into the insurance market, beyond the historically catastrophe-related risks.”
Source: Insurance Business Magazine