How much is the global insurance market worth? It’s hard to give precise figures, but we can start with a report from the Insurance Information Institute, which found that the global value of the Insurance premium was $6.3 trillion in 2020.
In short, we are talking about one of the most important sectors of the world economy. We’re also talking about a sector that is experiencing a phase of major expansion. There are many indicators pointing in this direction; according to recent Accenture estimates, the global value of the insurance market could rise to $7.5 trillion by 2025.
So, we’re talking about an increase in the number of insureds, growth in global revenues, and great expansion of the market in general. But that’s not all!
In fact, the Insurance Industry is undergoing a phase of great internal change, evolution, and in some ways, a true revolution. The impetus behind all this is, of course, technological in nature. And it’s a drive that’s constantly being renewed and has much yet to offer: we’re referring to Digital Transformation.
The Insurance Industry has taken longer to embrace the digital revolution than other sectors. This slowness derives from the mammoth structure of the sector, from a series of delicate legislative issues, and from the weight of a bureaucracy that is often very stringent. But now, all these impediments have been absorbed, and the insurance sector has fully embraced digital transformation. And it’s now time to pay close attention to new trends in the insurance sector.
Those who can take advantage of these trends before the competition will guarantee themselves a fundamental competitive advantage.
That’s why we’ll be focusing on the 5 most important trends in this post. We’ll talk about the market opening to new risk categories, the great driving force of Insurtech, the challenges of retention and those of personalization, all the way up to BtoE.
First insurance market trend: The expanding market and changing risk categories
As we said above, the insurance market is in an expansionary phase. In Western countries (but not only there), the main trend is one of liberalization and fluidity, which is transformed into the possibility for customers to quickly and easily move to a competitor, in some cases with just a few clicks.
But it’s good to focus attention to the east, in particular to China, starting with this data: the value of the first Chinese insurance companies, in 2009, was equal to 1113 billion yuan (about $174 billion); at the end of 2020 this figure has more than tripled, reaching 4525 billion yuan (about $707 billion). (source: Statista)
This surge depends on the improved economic conditions of Chinese citizens, who have now begun to embrace a lifestyle characterized by greater individual well-being, with all the consequences in terms of the need to safeguard against the unexpected and potential loss of money.
It is estimated that by now, 8% of the global life and health insurance market is located in China (Source: Bain)
This is precisely what drives interest from the large Insurance multinationals. Therefore, one of the most powerful trends in the insurance market is the expansion towards China, with all the enormous difficulties of a closed and protective economic system.
This is an extremely complex challenge, of course: but one that cannot be ignored.
The other huge challenge we all face is that of climate change, which in the field of insurance translates into the transformation of risk types. Think of the disastrous floods in Germany or the unprecedented heatwaves in the USA and Canada. Here, we’re talking about two recent global events which, unfortunately, are destined to multiply, given the change in climatic conditions.
According to Swiss Re, global economic losses from natural disasters between 2011 and 2020 were about $2 trillion. And, of these, only 35% were covered by insurance policies. It is clear, in short, that there is a long way to go. And that the clock is ticking.
The Insurtech revolution
The term Insurtech derives from the combination of Insurance and Technology.As the label says, it refers to everything that concerns technological and digital innovation for the insurance sector.
Many insurance market trends, of course, are collected here.
From the now common and widespread smartphone apps, to wearable devices for health and fitness. From IoT, which for many will be a real game changer in the industry, to blockchain, which multiplies its possible secure and decentralized applications every day.
The Insurtech revolution was initially born from innovative start-ups, which were able to take advantage of the opening of the market and implement new digital technologies in a much more agile way than big companies.
Now, however, the picture has changed. Industry giants have learned from startups. In many cases, they have pursued acquisitions or solid, beneficial partnerships.
In any case, the whole sector has put technology at the center, with a momentum that is stronger every day.
We have dedicated a post on our blog to the theme of Insurtech, focusing on document dematerialization, the sharing economy, micro-insurance, IoT, Artificial Intelligence, and Blockchain.
Customer Retention: an increasingly complicated challenge
Let’s open this paragraph with some data:
- The Insurance Industry is the sector with the third highest rate of planned churn. If in 2018 this rate was 19.5%, now we are at 22.5%. (Source: Callminer)
- In the UK alone, unplanned churn costs insurance companies as much as £312 million. (Source: Callminer)
And let’s continue with this other well-known statistic:
- According to Bain & Co., it costs 6 to 7 times more to win over a new customer than to retain one through a satisfying customer experience (inc.com)
The real challenge for the future of the Insurance Industry is all about the ability of companies in the sector to retain their policyholders. It’s not something that can be done through coercion, penalties, or other methods that are now relegated to the past, and today counterproductive.
The challenge is won by trying to establish a new closeness with your customers, building a path that starts with transparency, passes through the stimulation of engagement, and arrives at loyalty.
However, it’s good to focus in on a decisive point: policy costs still play an important role in the decision to cancel a policy. But, more and more, the reasons are linked to “emotional” aspects and transparency in the treatment. To put it another way: the reasons for moving to a competitor concern the quality of the Customer Experience.
And it is precisely on this that we continue in the next paragraph.
From data-driven customer service to personalization
Here we are facing one of the most important trends in the insurance market.
If, as we’ve seen above, everything will increasingly revolve around Customer Retention, the path to achieving this ambitious goal starts with data collection and ends with the creation of a new relationship with individual customers.
Let us explain.
The most effective way to create engagement and closeness with your policyholders is to set up a tailor-made dialog based on individual risk profiles, of course, but also on the characteristics, needs, and desires of the individual.
And how is it possible to do this when you have audiences of thousands or even millions of customers in front of you?
The answer lies in the collection, analysis, and interpretation of data.
On this basis, companies can have a very accurate picture of their audience and zoom in, with precision. At this point, there are two ways, and they are not mutually exclusive.
The first is segmentation: that is, dividing the target into many micro-targets that share homogeneous characteristics (for example, think of all the possible needs for a health policy based on age or gender), to automatically produce, personalized and segmented communications and Customer Journeys.
The second, and even more effective, is to go beyond segmentation, to make your target coincide with each individual person, initiating a truly one-to-one dialog. This is what companies like Doxee, who is specialized in Customer Communications Management and personalization services, do.
In this regard, we invite you to download this free case study, which talks about the collaboration between Doxee and the insurance company AXA for creating personalized videos. The goal? Reducing the churn rate.
The last insurance market trend: Business to Employee.
Let’s conclude with a final insurance market trend, one that is very important but not so well known.
We have seen how important it is to treat every single insured in a differentiated and personalized way, to try – among other things – to lower the rate of cancellation.
Well, the same path of proximity and personalization should also be taken with one’s employees, contractors, and stakeholders.
To put it very simply: the market has liberalized for customers, certainly. But the labor market itself is also increasingly fluid. And, as a result, the challenge of retaining talent and attracting it to one’s own company is increasingly complex.
But how to win it?
By turning to B2E (Business to employee): an approach that focuses attention on employees, covering the recruiting and onboarding phases, team building, and training strategies, sharing values, stimulating advocacy, but also providing flexible hours, bonuses, and various benefits.
This topic is also very broad. For an overview, we refer you to our post that defines the key points you need to know for creating an effective B2E strategy.
Just one thing in conclusion: according to a study by Korn Ferry, companies with a high rate of employee engagement produce, on average, 4.5 times more revenue than their competitors. So: restart with technology, but above all from the point of view of people, at all levels!