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In my previous post, I talked about the potential for growth resulting from the current disruption in the market. For insurers that transform themselves into living businesses—agile, relevant and able to respond effectively to changing customer needs and preferences—Accenture’s analysis of growth opportunities worldwide has identified a host of plausible opportunities for new revenue across P&C, life and commercial lines of business.
Most carriers are familiar with the impact autonomous vehicles and ridesharing are likely to have on auto insurers’ revenues. Forecasts predict there will be as many as 23 million driverless vehicles on US roads by 2035, resulting in a $25 billion drop in premiums. In the United Kingdom, the Bank of England has predicted as much as a 41 percent drop in premiums for British auto insurers by 2040, amounting to a £4.8 billion (US$6.6 billion) decline.
But it’s not all bad news. Approximately $75 billion in new revenue is available for personal lines insurers to pursue, primarily through a more effective reach into shifting markets. Personal insurers have the opportunity to partner with insurtechs and plug into ecosystems—such as those of the GAFAs (Google, Amazon, Facebook and Apple, and other online businesses)—to connect with consumers who are already taking advantage of their platforms. Examples of insurers that have already done this include AXA and Alibaba, Munich Re and Trōv, and State Farm and Openbay.
A smaller, but important growth opportunity for personal lines is the market for large-volume, small-premium, basic-benefit coverages, called small-ticket insurance in developed markets and microinsurance in emerging markets. Insurtechs such as Neosurance, Trōv and Lemonade are already using artificial intelligence and other digital technologies to simply and cost-effectively claim a share of this market. Traditional carriers such as Allianz, AIG, Prudential and Munich Re, among others, have also pioneered innovative models for servicing small businesses and farmers in emerging markets. Together they offer a wide range of niche products, from pet, travel and event cancellation insurance in mature markets to small business and crop insurance in developing markets. They facilitate quick and easy purchasing, often using online and mobile channels.
Two other businesses projected to take off are:
Life insurers must harness the power of analytics and big data
Emerging technologies are creating opportunities for life carriers to explore a number of potential revenue streams. Three, however, hold the greatest promise of profitable growth:
The greatest growth opportunities for commercial insurers tend to be customer-segment-specific. New technologies are enabling some insurers to target the small enterprise market, thanks to e-broker, online-direct, aggregator or other models. Additionally, as middle and large commercial clients continue to integrate instruments within their businesses—whether it be manufacturing processes and machinery, worker safety instrumentation or commercial fleets—carriers that have invested in digital capabilities to digest data, understand exposures, and underwrite and price more accurately will enjoy a decisive advantage over legacy commercial carriers.
However, new risks abound. Barely a month passes without a major cyber breach making global headlines. In addition to the inevitable trust and reputational damage, these attacks can disable the organization temporarily and force it to pay a ransom to regain control of its data and systems. And regulators are taking an increasingly hard line on companies that fail to protect customer information.
All of this creates an opportunity for insurers to offer both risk protection services to reduce the likelihood of a successful attack and compensation for the damage caused. Cyber insurance is just the most obvious of a raft of new-risk opportunities for commercial carriers.
Value-added services are another option for commercial insurers looking to achieve growth. The Internet of Things and other digital technologies are likely to transform insurance by replacing pooled, historical data with individual, real-time data for risk assessment and pricing. They also create the opportunity to use this data for other services—services that large commercial customers have been willing to pay for and that insurers are now able offer affordably to medium and smaller customers. From preventive maintenance reminders and keeping track of connected workers on large, dangerous work sites, to surveillance alerts and input for precision agriculture, the opportunities are as diverse as the data itself.
In my next post, I’ll look at five key areas of transformation for insurers wanting to become a living business.
To learn more, read “Insurance as a Living Business: Explosive Growth”
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