Faced with challenges amidst rising costs and inflation, the non-life insurance industry finds itself at a crossroads. How to overcome these challenges and which path to take?
As mentioned in the previous text, embracing innovations in products, operations, and client engagement strategies can enable insurers to navigate the currently uncertain market and position themselves for long-term profitable growth. Failure to adapt, on the other hand, can lead to stagnation or even a decline in relation to the market dynamics and evolving consumer expectations.
Global Perspective
The global non-life insurance market is experiencing continuous growth. Forecasts suggest that this market will reach a size of €5.03 trillion in gross annual premiums by 2024. In the same year, the European market is expected to reach a total gross premium of €628.6 billion.
Per capita, non-life insurance in the European region, translated into average consumption, amounts to €744.8, which simultaneously indicates a promising future for the industry in the region and the importance of insurance among individuals. The non-life insurance market in Europe is following a stable growth rate. It is estimated that the compound annual growth rate (CAGR) will be 2.74% between 2024 and 2028. This further indicates that the market volume will reach an impressive €700.4 billion by 2028. On a global level, the United States is expected to take the leading position with the highest gross annual premium of €3,126 trillion in 2024.
The European non-life insurance market stands out with great potential for growth and development in the coming years. In the European region, Germany is a country experiencing increased demand for non-life insurance, with a focus on car insurance.
An overview of gross billed premiums for non-life insurance from 2017 with predictions up to 2028. The data is based on the current exchange rate and market impact.
The non-life insurance industry is in the midst of a whirlwind of changes. While premiums are on the rise, driven by increasing prices across various lines of business, growing loss costs are eating into profits. This challenging environment, which some call “the hardest market in a generation”, presents both dangers and opportunities for insurers.
Under the Shadow of Rising Costs
Insurers are grappling with relentless increases in loss costs, driven by inflation, supply chain disruptions, and the growing complexity of modern technology. Repair and replacement costs are skyrocketing, especially in property and automobile insurance, putting a strain on insurers' operations.
Disaster Losses - A Threat
The increasing frequency and severity of weather-related disasters, such as wildfires, windstorms, and floods, are wreaking havoc on the industry. These events drive up reinsurance costs and force insurers to raise premiums for property owners, raising concerns about affordability and potential coverage gaps.
Consumer Reaction - A Cause for Concern
Rising insurance costs are significantly impacting consumers, leading some to forgo coverage altogether or switch providers more frequently. This trend undermines customer loyalty and pressures insurers to find ways to balance profitability and affordability.
A Glimmer of Hope - Navigating Through the Storm
Despite the challenges, there is a glimmer of hope for insurers willing to adapt and innovate. Factors such as higher interest rates and slowing inflation are expected to contribute to a gradual improvement in profitability in the coming years.
Embracing Innovation - The Path to Growth
Insurers who can embrace innovation and adapt to the changing landscape will be well-positioned for long-term growth. This includes exploring new trends such as embedded insurance, parametric coverage, and the integration of artificial intelligence.
New Trends
Seamless Protection
Embedded insurance (Integrated policies) is an innovation that enables purchasing insurance directly with the product or service you are already using. It involves seamless integration of insurance products into third-party transactions and is a rapidly growing market segment. Auto insurers are likely to be the most affected, requiring strategic partnerships with product and service providers.
Simplifying Claims
Parametric insurance introduces an innovative approach to risk mitigation, eliminating tedious damage assessment processes and replacing them with a transparent "trigger" for payout. The "trigger" consists of an objectively measurable parameter that, when exceeding a predefined threshold, automatically initiates the payout of an agreed-upon compensation. The core feature of this model is the establishment of the parameter and its threshold in a transparent manner, with mutual agreement. The measurement of the parameter is conducted by an independent third party, ensuring maximum objectivity and efficiency. Parametric insurance is an ideal solution for companies in industries (such as agriculture, energy, and tourism) that are exposed to and dependent on changing weather conditions, as it provides quick financial protection in the event of adverse weather conditions.
AI Integration – Dual Power
Artificial intelligence (AI) can play a dual role in the non-life insurance industry: providing coverage for AI-related risks and helping clients identify and mitigate potential losses. AI inevitably has the potential to transform non-life insurance policies from a reactive protection mechanism into a proactive risk management tool.
Focus on Sustainability - A Winning Strategy
Insurers who embrace sustainability initiatives and expand coverage in renewable energy projects can enhance their brand image and attract environmentally conscious clients. This results in good corporate practices and represents a wise business strategy for insurers.
Growth Niche
The specialty insurance market, which includes niche areas such as cyber and parametric coverage, is expected to experience significant growth in the coming years, presenting opportunities for insurers with specialized expertise.
The insurance industry stands at an important crossroads. By bridging the gap between its social impact and public perception, we have the opportunity to redefine the role of insurers. Through proactive transformation, we can not only mitigate risk but also empower individuals, strengthen communities, and contribute to a more sustainable future.
It’s not just about changing perceptions; it’s about unlocking the full potential of the industry to become a true catalyst for positive change.