2016. Source: Swiss Re; Business Monitor International; EY analysis, 2015. ... Several emerging trends will reshape the future of the global insurance landscape.
2015 megatrends Implications for the global insurance industry July 2015
Global insurers face a number of economic, demographic and regulatory issues which are affecting both top-line growth and profitability North America
Europe ►
► ► ►
► ► ►
Nonlife underwriting profitability impacted by negative pressure on premium rates Reduction in reserve releases limiting ability to smooth earnings volatility Continued regulatory uncertainty (Own Risk and Solvency Assessment or ORSA, capital reserves, systemically important financial institution) impacting strategic decisionmaking Share repurchases and dividends signaling limited reinvestment opportunities in nonlife Continued downward trend in ownership of life insurance Persistent low interest rates and strengthening dollar pressure earnings
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►
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Expansion of middle class and high net worth populations Uneven growth of nonlife and life products within markets driven by disparate economic conditions across the region Differing timetables to implement capital solvency and risk management regulations creating challenges for insurers operating across the region
Asia-Pacific ►
►
►
►
Middle East and Africa ►
►
Latin America ►
Ongoing slowdown in nonlife pricing momentum Continued uncertainty concerning Solvency II implementation details Intense price competition within the UK personal lines market Limited bank competition and recent product innovations (hybrid products) driving sales growth
►
Strong growth of Takaful, particularly in Saudi Arabia, Malaysia and the UAE Large population and current low penetration suggesting significant upside potential Political turmoil and lower oil prices constraining economic development
2015 megatrends: implications for the global insurance industry | July 2015
Growth of the middle class and high net worth populations fueling demand for insurance Rapid urbanization creating opportunities (increased demand) and challenges (high-loss costs) for domestic and foreign players Growth of newly emerging markets in Southeast Asia driven by new entrants (Japanese insurers) Increased regulatory activities addressing solvency, capital and risk management and market-based issues
Overall, the global insurance industry is currently experiencing a period of historically slow growth Worldwide insurance industry direct premiums written by region (US$ billion, percent)
Worldwide insurance industry direct premiums written by line (US$ trillion, percent) 2.4% 11–16 CAGR 4.3% 06–11 CAGR
5
4% 2011–16
8.6% 01–06 CAGR
4
Region n EMEA
2.8% 96–01 CAGR
3
37%
29%
2
CAGR 2.3
n North America
3.0
n Asia-Pacific
1.7
n Latin America
5.0
30% n *CAGR = compound annual growth rate
1 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Life
Nonlife
Select drivers of top-line growth ► Reduced consumer demand across mature markets driven by demographic (aging) and macroeconomic trends ► Soft market pricing as a result of price sensitivity (competition, household income) and excess industry capacity ► Product portfolio de-risking (less spread-based business) ► Divestitures and runoff of non-core or underperforming businesses Source: Swiss Re; Business Monitor International; EY analysis, 2015.
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2015 megatrends: implications for the global insurance industry | July 2015
The slowdown in premium growth across advanced economies has been offset by significant expansion across emerging markets Emerging markets direct premiums written – all lines share of world by region (percent)
Worldwide insurance direct premiums written – all lines share of world advanced versus emerging (percent)
100% 5
18
15
19
95%
32
90%
22
96-06
06-16
9
Central & Eastern Europe 14.7%
1.1%
20
Latin America
7.6%
8.9%
12
Middle East & Africa
8.6%
5.1%
59
Emerging Asia
16.1%
13.7%
18
85%
24 80%
41 29
75% 70% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Advanced
1996
2006
2016
Emerging
Source: Swiss Re; Business Monitor International; EY analysis, 2015.
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2015 megatrends: implications for the global insurance industry | July 2015
Several emerging trends will reshape the future of the global insurance landscape Select future predictions
1 Digital future
6
Entrepreneurship rising
Health reimagined
3
5
Resourceful planet
2
Global marketplace
4 Urban world
More interactive Less interactive
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Several key megatrends are converging to shape the future of the global insurance marketplace.
1 2 3 4 5
Adoption of sensor-based technologies will become widespread across personal lines (auto and home). Implementation of new underwriting techniques in life insurance will reduce or eliminate the requirement for medical exams for all but the largest cases. Asian insurers will account for a larger share of the North American insurance market. China and Brazil will be classified mature, as new emerging markets come into focus.
Evolution of new funding models will provide opportunities for new entrants into the health insurance market.
2015 megatrends: implications for the global insurance industry | July 2015
Digital future
►
The digital universe is doubling in size every two years. ► By 2020, the digital universe will equal 44 zettabytes. ► The volume of data derived from embedded systems is approaching the level of traditionally generated data. ► The level of data that has the potential to be analyzed to generate insights is expected to grow from 22% of all data generated today to 37% by 2020.
►
Innovations in digital technologies are having a significant impact on the insurance industry. ► Traditional risks (e.g., frequency of auto accidents) are steadily declining. ► New risks are emerging that present both opportunities (new coverages) and threats (cyber crime, liability). ► Business models are evolving, from product development (micro-insurance) to distribution (mobile and web) to pricing (micro-segmentation and telematics).
Global insurance industry IT spending on information management software 2013–18 (US$ million) 2,406 2,254 2,101 1,953 1,677 173 725
1,804 191 778
214 836
237
894
282 261
954
1,006
835
903
970
1,039
1,118
779
2013
2014
2015
2016
2017
2018
Enterprise Content Management Data Management
Business Intelligence
Source: Ovum; EY analysis, 2015
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2015 megatrends: implications for the global insurance industry | July 2015
Entrepreneurship rising
US commercial lines by account size 2007 versus 2009 (US$ billion, percent) Total
240.5
Large (1,000+ employees)
69.7 (29%)
Medium (50–999 employees)
77.0 (32%)
Small (
