Insurance companies have done well in recent years, thanks to property and casualty (P&C) rate increases and interest rate-driven annuity sales in the life sector, according to a new report from Bain & Company, entitled Bridging the Protection Gap: Affordability, Access, and Risk Prevention.
They say challenges have emerged, however, citing natural disasters, cyber hacks and the industry’s inability to match price-to-risk profitability. “Although many insurance stocks have performed well of late, investors are now skeptical about insurers’ prospects for future growth, but remain bullish on life insurers, especially in emerging markets,” the report’s researchers write. “With many customers finding P&C coverage too expensive and life coverage not relevant, insurers have to evolve their products, channels and business models.”
Prevention services
Opportunities for insurers include a notable protection gap: They say only one-quarter to one-third of the damage from natural disasters will be covered by insurance in 2030. “For mortality, it would be less than half,” they state. “The best ways to bridge protection gaps are by addressing affordability in P&C insurance and regaining relevance in life insurance through better access to and engagement with prospective customers. Prevention services also present a significant avenue for insurers to add value.” They add that prevention services encouraging better driving, property maintenance and health management allow insurers to enhance their relationships with policyholders.
The report goes on to look at customers’ shifting circumstances and priorities, at emerging risks that merit new product and more prevention, customer engagement, unstructured data and the use of AI, the industry’s “retirement cliff” of employees set to retire and the rise of alternative capital on insurer’s balance sheets.
They say to remain relevant with younger consumers, life insurers must introduce more flexible and portable protection options and retirement solutions to compete with wealth management firms. They add that firms will need to harness data and artificial intelligence (AI) to enhance affordability and access. “From call logs and product reviews to dashcam videos, an explosion of real-time data is fuelling AI-driven analytical workloads,” they write. They say AI can also help to reskill insurers’ workforces and address the industry’s aging and retiring employee base using AI-powered copilots and summarizers.
Looming retirement cliff
“Critical functions such as underwriting and claims could face severe disruptions as seasoned professionals retire in the coming years. Many of these experts have spent years learning to recognize patterns and make informed decisions – whether detecting fraudulent claims or identifying mispriced risks,” the report states. “To navigate the looming retirement cliff, insurers must emphasize technology literacy, relationship building and critical thinking.”
