Emerging risks and changing customer behavior are shifting the revenue landscape for insurers. These trends call for change in the products and services insurance companies bring to market.
Historically, insurers have relied on risk models and actuarial tables to know how to develop and price their products. In recent years, we saw many of those once reliable risk models upended.
For example, catastrophic events linked to climate change have forced changes for P&C insurers. They have responded to record losses with new products and pricing. Meanwhile, the rapidly aging population and increasing cost of eldercare have constrained what insurers can offer in long-term care products.
While insurers have seen these impacts coming for decades, new emerging risks call for more urgent changes. Accenture’s 2021 Global Risk Management Study included interviews with 91 senior risk management executives from the insurance industry. These executives identify the trends their companies need to address in their product portfolios with urgency.
1. Increasing sophistication and frequency of cyber threats
In addition to the financial and operational challenges cyber incidents pose for insurers themselves, they are also driving customer demand for protection. More insurance risk managers identify the trend in cyber threats as an urgent need than any other trend.
The urgency for insurers may be driven in large part by the surge in ransomware attacks. Cyber criminals have been known to set ransom demands based on the victim’s insurance coverage.
In our Insurance Revenue Landscape 2025 report, we estimate the global revenue opportunity to arise from cyber threats at $25 billion. That’s not limited to cyber insurance per se, but also includes pre- and post-incident advisory servicing. This is an area where continued disruption in the value chain will have insurers, reinsurers, and brokers delving more into advisory and risk management.
2. Increased consumer demand for bundled insurance and non-insurance services
In light of elevated uncertainty, there is new opportunity for insurers in bundling risk solutions and partnering with adjacent industries to serve the full range of customer needs. Personal lines consumers are looking for holistic protection from all forms of controllable adversity. They have largely stopped differentiating between P&C, health, fitness/wellness, and wealth management products. In our Insurance Consumer Study 2021, 83% say they would be willing to share data with their insurers in relation to discounts on non-insurance products or services.
3. Increased consumer demand for digital servicing
Such industry and product convergences create questions for insurers on how they will present offers to existing customers and how they will present and underwrite offers for new products and services. It also challenges insurers to decide where they will compete and where they will partner with other players in the ecosystem.
For example, the race to own in-vehicle platforms is on with automakers and tech giants as contenders. Whoever comes out ahead in that race will look for insurers who can help create a seamless car-buying experience with smooth digital underwriting. The insurers who succeed as platform partners pave the road to AI-led claims, vehicle-to-home integrations, and usage- and behavior-based insurance offers.
4. Growth of technology adoption among customers
Demand for digitally enabled products and services crosses personal and commercial lines of business. As operating in a virtual world increasingly becomes a matter of survival for many businesses, they may be exposed to new areas of risk and underinsured. For example, the growing adoption of cloud storage and insights built on customer data among small- and mid-size businesses may be outpacing user understanding of the accompanying, emerging threats.
5. The emergence of new competitors and platforms
Insurers continue to experience compressive disruption. They are being pushed to high-capital, low-return portions of the value chain. Meanwhile new entrants are finding ways to claim higher, service-based returns from areas like distribution, new connected products, and convergence plays in health.
Insurance risk managers see the need to reimagine the way insurers provide and sell insurance. Otherwise, insurers will continue down the path of compressive disruption while new entrants step into the breach with customers.
6. Increasing social and political unrest
In addition to the impacts of climate change and COVID-19, business interruption linked to civil unrest further drives underlying change in the risk-adjusted cost of capital. Insurers are pulling all the levers to maintain financial resilience and the capital reserves needed to continue underwriting.
7. Growth of the gig/freelance economy
The gig or freelance economy is shattering traditional boundaries between small business and personal risk. As more workers move to freelance work either full- or part-time, their homes and automobiles are getting used for business purposes. Insurers have opportunity to offset premium reductions from fewer owned assets with increased revenues from more usage of assets in a growing sharing economy. As we reported in our Insurance Revenue Landscape 2025 report, we anticipate global revenues from the sharing economy to grow by $40 billion.
Risk models still matter
Almost 90% percent of risk management executives we surveyed say the monetization of risk data and models represent a revenue opportunity for insurers. We agree and are bullish on the value risk models bring. With robust data, predictive and prescriptive analytics, and AI solutions, the models can evolve to help mitigate and manage risk in a shifting revenue landscape.