2019_Insurance_Industry_Outlook_40页_3mb

2019 Insurance Outlook Summary

Core Content

The 2019 Insurance Outlook highlights the evolving landscape of the insurance industry, emphasizing the need for adaptation in response to economic, technological, regulatory, and societal changes. The report outlines key trends and challenges across various sectors, including property and casualty (P&C), life and annuity (L&A), and the broader implications of technology, talent, product development, mergers and acquisitions (M&A), and regulatory shifts.

Main Points

Economic Outlook

• Positive Growth in 2018: Sustained economic growth, rising interest rates, and higher investment income bolstered insurer results in 2018, leading to improved top- and bottom-line growth.
• Regional Differences: The US P&C sector saw significant growth (12.7% in 1H 2018), while the global growth was slower, with advanced markets growing at 1.9% and developing markets at 6.1%.
• Life Insurance Challenges: The US L&A sector faced difficulties, with minimal premium growth and declining net income. However, annuities showed brighter prospects due to rising interest rates and increased disposable income.
• Recession Risk: Concerns about a potential economic slowdown or recession by 2020 are raised due to factors like trade disputes, diminishing tax stimulus, and a flattening yield curve.

Technology Trends

• Cloud Adoption: Over 70% of insurers use cloud computing, and the trend is expected to continue with a focus on speed, flexibility, and scalability.
• Cloud Strategy: Insurers should develop a multiyear cloud strategy, prioritize cloud deployment for new applications, and phase the migration of legacy systems based on business value and criticality.
• Cybersecurity Concerns: As systems move to the cloud, cybersecurity becomes a critical issue, with regulators questioning the risk management implications.

Blockchain Trends

• Real-World Applications: 2019 is expected to see the launch of more blockchain-based insurance applications, with real-world examples in Asia and Europe.
• Collaboration and Consortia: Insurers are forming consortiums to share costs and enable cross-industry collaboration.
• Potential Impact: Blockchain is anticipated to transform insurance operations, setting the stage for wider adoption in 2020.

The Future of Work

• Talent Challenges: The insurance industry faces a tight labor market, especially for tech, data science, and actuarial roles.
• Workforce Transformation: Insurers are rethinking traditional roles, automation, and the need for a more flexible, virtual workforce.
• Employee Engagement: A shift towards open talent models and a focus on employee engagement and experience is expected.

Product Development Trends

• Personalization and Flexibility: Consumers are demanding more personalized and flexible insurance policies, driven by the sharing and gig economies.
• IoT and InsurTech: InsurTech is enabling more flexible coverage options, such as on-demand insurance for single items.
• Challenges with IoT: Implementation and compliance challenges, particularly around privacy, are cited as barriers to IoT adoption in insurance.

M&A Trends

• Mixed Signals: While large deals in 2018 set the stage for increased M&A activity, smaller transactions have not matched the scale.
• Market Pressure: Insurers are under pressure to grow and may consider M&A as a strategy, but rising interest rates and high valuations may temper activity in 2019.
• Focus Areas: M&A activity is expected to be concentrated in P&C and L&A sectors, with a significant YoY increase in deal value.

Regulatory Trends

• Focus on Market Conduct: Regulatory attention is shifting from solvency to market conduct, with a greater emphasis on transparency and consumer protection.
• Global Cyber Risk Regulations: Cyber risk regulations are expanding globally, requiring insurers to be more vigilant about data security and privacy.

Privacy Trends

• New Rules and Compliance: New privacy regulations are putting insurers under scrutiny, especially regarding data handling and security in cloud environments.

Tax Reform

• Positive Early Results: Early results from tax reform are positive, but long-term impacts remain uncertain.

Key Information

• 2018 P&C Growth: US P&C premiums grew 4.6% in 2017 and 12.7% in the first half of 2018.
• 2018 L&A Performance: US L&A saw virtually no growth in premiums and a 12% decline in net income.
• Annuity Forecast: US annuity sales are forecast to rise 5–10% in 2018 and another 5% in 2019.
• Cloud Migration: 26% of US insurers had fully deployed claims systems in the cloud by 2018.
• Blockchain Examples: AIA Hong Kong and AXA are leading in blockchain applications for insurance.
• M&A Activity: AIG and AXA made significant acquisitions in mid-2018, but smaller deals have not matched the scale.
• IoT Challenges: About one-third of CIOs cited cost and complexity as the main challenge with IoT, while 25% noted low consumer demand.

Conclusion

The insurance industry is at a crossroads in 2019, with opportunities for growth and innovation alongside significant challenges. Insurers must focus on technology transformation, talent development, product innovation, and strategic M&A to remain competitive. The report underscores that the industry's future will be shaped by how quickly and effectively insurers adapt to these changes.