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Short insights on topics of interest to leaders in the global insurance industry.

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Note to the CEO: Our perspective on the European life insurance closed-book market

The profitability of European life insurers is under pressure. Major challenges involve shrinking investment returns from an ultra-low interest environment, increased capital requirements from Solvency II on traditional (guaranteed) products, and unaddressed structural cost challenges. Life insurance carriers must consider all levers to address these challenges. Especially for those trapped in a position of idle growth, one promising strategy is to transfer unprofitable closed books to ...

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IFRS 17: Insurers should plan for strategic challenges now

Insurers subject to the International Financial Reporting Standards (IFRS) are preparing to implement IFRS 17, which will replace IFRS 4 in January 2022. As a result, the entire organization beyond the finance function will be affected by the new standard’s far-reaching strategic implications. Insurers will need to review their strategies to ensure they are adapted to the post–Solvency II world. Areas of focus should include the product and investment portfolio, asset and liability ...

The how of digital and analytics in insurance

Insurance executives are acutely aware of the need to imbue their company with digital and analytics capabilities. They know why they need to pursue digital capabilities, and most of them have also started figuring out what they need to do, but how to do so—that’s the rub. Do they embark on a sweeping digital transformation from the top down? Develop digital or analytics use case pilots that build into a tidal wave of change? Pursue a new digital attacker business model? Do they ...

Direct insurance was set to disrupt the industry: What went wrong?

Direct insurers evolved their sales approach from purely mail- and phone-based to online purchasing in just a few decades. In Europe, direct premiums sharply increased to about €15 billion in sales by 2009. This momentum led to high expectations that direct insurers would capture a large percentage of premiums and substantially disrupt the industry. But ten years later, the reality is different: the share of all direct premiums represents only a single-digit percentage of the market. We ...

Gender parity is still a problem in insurance: Here’s what leaders can do

Women are still underrepresented in insurance company leadership positions. Yet most men, and a surprising number of women, don’t believe gender parity in leadership is an issue. According to the 2018 McKinsey and LeanIn.Org study on Women in the Workplace, 33 percent of women and nearly 50 percent of men across industries believe that 1 in 10 women in a senior leadership team is pretty good representation1 But having fewer women in top positions means insurers are missing out on critical ...

Five themes from InsureTech Connect 2019

Following the annual three-day gathering of approximately 7,000 insurance industry leaders last week at InsureTech Connect in Las Vegas, we reflect on what we heard. Five themes were clearly top of mind for most attendees. 1. Leveraging digital and analytics to reduce costs and streamline current operations. Freeing up capital to invest in growth, customer and agent experience, and other priorities gives carriers the flexibility to strengthen their long-term relevance. As a result, many carriers ...

A note to the CEO: It’s time to cut through the noise on productivity

Many insurers have failed to benefit fully from the decade-long global economic expansion. In recent McKinsey research, insurers in the second, third, and fourth quintiles of economic performance may be on slippery ground, generating only about $26 million in economic profit from 2013 to 2017. Meanwhile, a typical carrier in the bottom quintile destroyed nearly a billion dollars in value every year. But some insurers are highly profitable—a carrier in the top quintile created an ...

InsureTech Connect 2019 overview: Today’s pivotal insurance topics

InsureTech Connect, the annual gathering of thousands of leaders from insurance carriers, insurtechs, and venture capital firms, provides a great opportunity to explore the industry’s most pivotal topics, such as how new technologies and capabilities are transforming all aspects of the industry. I have attended InsureTech Connect since the inaugural conference in 2016. In the first few years of ITC, attendees tried to determine if the industry was making significant progress on the ...

Accelerate—it’s time for insurers to move swiftly and decisively

For a long time, the traditional insurance business model proved remarkably resilient. A robust regulatory environment, limited consumer interest, and large balance sheets safeguarded the competitive advantage against early digital attackers. But the picture today is different. Digital technologies are putting pressure on profit pools, and competition is intensifying as traditional industry borders blur and players from adjacent markets shake up the traditional insurance value chain to ...

The looming tipping point: Is the insurance data moat still a competitive advantage?

But all the time, if you’ve got a wonderful castle, there are people out there who are going to try and attack it, and take it away from you. ... I want a castle with a moat around it. —Warren Buffett (University of Florida, 2007) Twenty-five years ago, insurers controlled 95 percent of the data they had on their customers—their data moat. And the industry has always been protective of this data. When consolidated or shared, data is within industry-controlled cooperatives, ...

Insurance M&A: The future is bright for continued investment

Over the past decade, insurance has been a steady, core component of transactions in the financial services sector. Aside from a slight dip in 2017, both the number and total value of insurance deals in the United States has steadily gone up—thanks in large part to the soaring number of insurtechs disrupting the value chain. However, with an economic slowdown likely approaching, many private equity firms and principal investors are worried about a corresponding slowdown in investment. ...

E-scooters—hype or hope? Impact on European insurance carriers along the value chain

E-scooters have populated streets and sidewalks across major European cities seemingly overnight, echoing last year’s spread throughout cities in the United States. As the industry expands and matures, more European countries are passing legislation that makes insurance for e-scooters mandatory, creating a large opportunity for insurers. With an expected market size of €90 billion for micromobility by 2030, forward-thinking insurers across Europe stand to profit from developing ...

Three burning questions for P&C insurers

The P&C insurance industry is riding a wave. According to McKinsey’s 2019 Global Insurance Pools, the industry’s gross written premiums hit €1.4 trillion in 2017, up 5.1 percent from the year before. And despite the steady onslaught of natural catastrophes, carriers are still awash in cash. Insurance executives, far from sitting still, have been reassessing their current strategies and building resilience to withstand a changing landscape. The impact of digital technologies ...

Live from DIA Amsterdam 2019: The three megatrends and one global shift driving insurtech innovation

Attendees at this year’s Digital Insurance Agenda (DIA) operate at the heart of the insurance industry—particularly when it comes to insurtech innovation. While the expected massive disruption in the industry remains to be seen at full scale, it’s clear that the insurtech space is maturing and that the impact in the industry is accelerating. Three insurance megatrends—and one all-encompassing global shift—reveal the direction the industry is heading and suggest ...

Ten years of change in direct insurance

In June, we celebrated our tenth annual Direct Forum in Barcelona. The Forum is an opportunity for direct players across Europe and beyond to discuss the market, trends, and new innovations. This year, it was also a great opportunity to look back at the past ten years of change in the direct market and discuss where the road will lead next. Strong growth, but stronger expectations According to McKinsey analysis, the direct channel has made great strides in the past ten years, growing from a ...