A global insurance outlook from consultancy EY outlines strategies for growth in a softening market, as industry players look to maintain positive momentum.

Climate and cyber protection gaps are widening, and EY says insurers can target these areas as “potentially huge growth opportunities”.

However, it won’t be easy – “bold, creative and purposeful action” will be needed.

“No matter the region, line of business or level of growth ambition, insurers will need to refresh core offerings and enrich the product and service portfolio in line with shifting customer behaviour and evolving market demand,” the report says.

This means moving away from traditional boundaries to prioritise features that drive the outcomes customers want. 

“More personalised offerings and smarter engagement strategies will help reduce protection gaps by strengthening protections for all kinds of customers,” EY says.

Transformative growth will also require change within the business to build efficiency and effectiveness.

“Insurers need lean, flexible and highly automated operating environments. Such models help reduce costs. More importantly, they make it easier to scale low-margin products, connect to partners and ecosystems, and integrate acquisitions.”

Distribution will continue to evolve, the report says, as insurers look to access new customer segments and increase options for current customers.

“Carriers must ensure their technology environment is sufficiently modernised to easily connect and participate in ecosystems and deliver embedded products via existing partnerships or new channels.”

For commercial insurers and reinsurers, EY says cyber presents a “massive growth opportunity”.

Recent improvements in modelling and pricing should dampen concerns about insurability, and the underinsured SME market should be a priority.

“Closing the cyber protection gap won’t be easy, but the upside opportunities are as great as any the industry has had in decades,” the report says.

More frequent natural catastrophes are straining capacity and forcing up premiums, and EY urges insurers to “rethink traditional approaches”.

They should also anticipate “potential regulatory or government mandates” that could require them to cover high-risk areas and events.

“That should be a sufficient prompt to develop sustainable solutions and coverage options.”

Commercial insurers and reinsurers are looking at parametric solutions as the range of use cases grows, the report says.

In personal lines, EY believes the path to growth starts with simpler and more flexible products, and increased personalisation.

“In digitising the customer journey, carriers must resist the temptation to prioritise cost savings over service enhancements.”

The report says “true digital leadership” requires insurers to enrich their core value proposition with “ancillary services”.

It gives an example of European carriers adding safety training to motor coverage for younger drivers, and says smarter homes will need smarter insurance, with Internet of Things-connected sensors “providing real-time data streams that alert customers and insurers to changing conditions that could lead to claims”.

“Firms that meet customers where they are will be best positioned for breakthrough growth, but will have to rethink value propositions and distribution networks.

“Embedded insurance will continue to gain ground in personal lines, too, as more routine retail purchases and big-ticket expenses [such as travel] are automatically covered.”

Click here to read the report.