Ey 2022 Global Insurance Outlook Report
Ey 2022 Global Insurance Outlook Report
Insurance
Outlook
Achieving growth through people,
purpose and technology
Contents
The 2022 edition of the annual EY Global Insurance Outlook nontraditional players and, potentially, big tech. And yes,
series reflects the dynamic and purpose-driven moment for significant disruptions — epic storms, pandemic outbreaks,
the industry. Our focus this year is on three of the biggest geopolitical strife, social unrest — must be factored into both
megatrends reshaping the industry: short- and long-term strategic plans.
1. Ecosystems and open insurance But all of those factors demonstrate why the insurance
industry is essential — not only to foster global economic
2. Workforce transformation
health and increased financial wellness, but also to protect
3. Sustainability and the greening of the global economy what people value most. They also highlight why there
As senior leaders seek to address these critical issues, we has never been a better or more interesting time to be in
believe urgency, creative thinking and bold action will be richly insurance. The risk-reward equation is uniquely compelling.
rewarded. The decisions and actions leaders take today can meaningfully
influence the future of the industry — and the lives and
After the dramatic developments of the last few years, the livelihoods of billions of people around the globe.
industry is ready for unexpected developments and major
changes. Certainly, insurers have shown they can undertake As much as insurers have accomplished since early 2020,
large-scale change at a faster pace than many industry they must strive to live their purpose every day if they are
veterans thought possible. Yes, macroeconomic and structural to meet the demands of 2022 and beyond. We welcome the
challenges — low interest rates and now inflation — remain opportunity to discuss your perspective on these issues and
daunting. Yes, competition is fierce, particularly from your company’s unique matrix of risks and opportunities.
We recognize that the following drivers are intricately Role of purpose: the insurance industry’s response to the
related with ecosystems, workforce transformation and COVID-19 pandemic demonstrated the power of purpose
sustainability. For instance, there will be no building and the industry’s capacity to live up to its most aspirational
successful ecosystems without transforming the workforce promises. Insurers had to be there for customers and undertook
with new skills and an enriched employee experience. Similarly, large-scale change quickly to make sure they could serve people
only by fully embracing and living their purpose and innovating in need.
their product offerings can insurers lead the way to a more
Looking ahead, purpose can — and should — inspire insurers as
sustainable economy. Gaining competitive advantage on any of
they seek to lead the transition to a greener economy; promote
these fronts requires insurers to optimize their cost structures
financial wellness and inclusion; and protect society against
and capital allocation strategies.
cybercrime, the next pandemic or other threats we can barely
Strong technology and data capabilities are another conceive of today.
unifying theme among the forces and trends we describe
throughout this paper. Beyond enabling connectivity and New competitive realities: As we highlight throughout
scalability, digitizing the core of the business and migrating this paper, the current competitive landscape is notable
to the cloud are necessary to compete successfully with new for its fragmentation, mix of nontraditional players and
product development or ecosystem business models (not widespread collaboration. “Co-opetition” (i.e., competing
to mention meet new reporting and accounting standards and collaborating at the same time) will become a mainstay
efficiently). of insurers’ strategies as they build ecosystems and deal
with convergence with other sectors. Consolidation among
Cost and capital allocation: the combination of low interest incumbents, some of which are associated with new entrants,
rates, thin margins, mostly flat premium growth and the need proliferating joint ventures, and private equity’s large and
to make big investments were pinching most insurers. However ongoing investments are also reshaping the landscape.
COVID-19 was clearly the biggest “protection event” in decades,
Banks, asset managers and credit card companies will offer
and a chance for the industry to demonstrate its relevance
more protection products and seek to differentiate on holistic
and value.
financial wellness value propositions, forcing insurers to
Some large life carriers have made strategic divestments, choose between collaboration or competition. Top automotive
exiting non-core businesses and geographies in seeking a brands, airlines, retailers and others are looking to enhance
tighter strategic focus. Such moves are often designed to free their customer relationships by embedding more insurance
funds for necessary large investments in digital transformation offerings, in multiple ways. For forward-looking insurers,
programs and to boost growth in core businesses. In this sense, there is no shortage of potential partnerships to explore.
innovation and cost efficiency support each other.
Carriers will look to partner with or acquire the most
In P&C lines, the perennial goal of cost optimization has promising InsurTechs, but some will grow too large too quickly;
fallen just behind growth on the C-suite agenda, thanks these “super apps” will become influential players in the
to a hardening market. Rising interest rates and inflation ecosystem landscape now taking shape. The same is true of
are a concern in some markets. But private equity and big tech platforms; even if they decide not to take on any risk,
other capital providers continue to make big bets across the they will be embedding insurance products in more transactions
insurance business. Plenty of capital is available, but it will and thus will need partners, either incumbents or InsurTechs.
demand strong returns, meaning insurers’ cost and capital
objectives remain closely intertwined.
57%
insurance products accelerating technology and
digital innovation
66%
customized rates in exchange for are key to delivering the functionality and personalization
more personal health data customers are looking for. The largest insurers have developed
APIs in some parts of their businesses, following the lead
Source: Global EY Insurance Consumer Survey 20211 of InsurTechs that use sophisticated APIs to get closer to
their customers. Strategies for microservices and APIs
(e.g., passive, active, opportunistic) are an important sub-
But most insurers struggle to develop and launch products component of ecosystem strategies because of the benefits
that new buyers can easily access and afford. Open insurance they can produce.
platforms can simplify product delivery and make it easier to
source solutions from other partners, which will help insurers
control distribution costs. Data sharing by consumers will give
insurers an edge in tailoring their offerings to suit consumer
needs and objectives at specific times in their lives.
1
The study, conducted between May and August 2021, surveyed 4,200 consumers in both developed (US, Canada, Japan, the Netherlands)
and emerging (Brazil, South Africa, the Philippines) markets.
2
The study is based on a global survey of over 300 chief executives, including 21 insurance CEOs of Forbes Global 2000 companies to understand their
perspectives on the DNA of the future enterprise.
2020
Who will be the best partners? In the ecosystem era,
competition for partners may be nearly as intense as
competition for customers. InsurTechs with effective solutions
in any part of the value chain (e.g., claims, distribution) are
being targeted for acquisition. Big tech firms will likely have
US$70.7 billion (projected)
1. Commit from the top: successful ecosystems are driven market opportunities. Given the nascent state of standards
by a consistent commitment at the highest levels in the around the world and the openness of regulators to inputs,
organization. Leadership advocacy will help mitigate the insurers have a unique opportunity to shape the dialogue
risk that insurers have to play catch-up as their financial and — ultimately — the rules of the game.
services peers and nontraditional competitors forge boldly
4. Prepare for organizational impact: new business models
ahead with ecosystems.
will struggle to succeed if legacy org charts, compensation
2. Think big, start small: once insurers identify the customers models and metrics remain in place. Reporting lines, P&L
they want to serve via ecosystems, they can identify structures and incentives will need restructuring to reflect
the use cases and products most suited to ecosystems. that top-performing ecosystems are designed exclusively
The experiences of first movers and early adopters can around creating value for customers, rather than aligned to
also provide valuable lessons about which initial steps traditional product lines or business units.
to take and how. Once a strong ecosystem foundation is
5. Build the tech and data foundation: in terms of ecosystem
established, insurers can think bigger — expanding their
success, the importance of strong data management
offerings with more complementary services and features
capabilities, consistent, high-quality data and integrated
(e.g., financial planning, behavioral tools). They should also
data infrastructures cannot be overstated. Seamless and
look to tighten operational integration across ecosystems.
secure data sharing is essential in everything from picking
3. Actively engage with regulators: rather than waiting for the right partners to personalizing customer offerings to
regulators to define the rules, insurers should engage to performance reporting.
achieve a level playing field. Further, they can see where
and how regulatory priorities map to their own strategic
A profound shift was underway before the COVID-19 that has emerged. The consensus among forward-looking
pandemic, with business leaders working to address skill gaps, executives is that human talent is every bit as important
update their talent practices and instill more dynamic and to future success as AI, machine learning and modernized
agile ways of working. Since the pandemic, competition has processing platforms.
intensified for the most talented workers, who are now more
However, within insurance, workforce transformation is not
empowered to work when, where and how they want. Insurers
necessarily atop the C-suite agenda. In the 2021 EY CEO
quicky adjusted to remote working and online collaboration
Imperative study, 26% of all participants said people and talent
when they were forced to do so.
were a top-three priority for change during the next three
But now organizations face new challenges as they seek years, versus fewer than 5% of insurance CEOs.
to strengthen their cultures and enhance the employee
Other factors are also causing the overhaul of talent
experience. Insurers are still negotiating a huge technology
strategies. The scarcity of key skills and the "Great
debt, which makes it more difficult to automate, integrate and
Resignation” mean that insurers must address the
optimize operations. Thus, they are adopting new strategies
traditional view of the industry as slow-moving and dull if
and tactics to make the most of their investments in both
they are to become employers of choice. They will have
human talent and advanced technology.
to take stronger positions on the social issues that matter
most to rising generations of workers (e.g., diversity and
inclusion, sustainability) and provide meaningful work, as
Solving for the complex well as enhance their benefits, performance recognition and
tech-talent dynamic compensation models. Developing innovative new products
and solutions to protect against climate risks and leading the
Not that long ago, the conventional wisdom in insurance held shift to a greener economy will also help elevate insurers’
that workers would lose their jobs as insurers adopted more reputation among younger workers.
technology and automated more processes. Direct digital sales
69%
would reduce the number of agents, and straight-through
of US employers with at least
processing would eliminate most claims positions.
1,000 employees plan to offer more
Today, that thinking has evolved significantly, reflecting the benefits in the next five years
more nuanced and interdependent human-tech dynamic Source: EY-LIMRA research, 20213
3
The study, conducted between June and September 2021, included surveys of employers and employees, as well as interviews with brokers, benefits
administration companies and technology providers.
Of course, to realize these benefits, insurers also need to find • Partnerships, joint ventures and collaborations with
and hire AI, machine learning and technology experts who InsurTechs, tech platforms and other groups
can re-engineer processes and connect data sources to enable • Digital innovation and increased automation
intelligent automation at scale. Access to such talent is an
increasingly important pillar in strategies for business model Insurers are not alone in needing to upskill their workforce. But
innovation (e.g., ecosystem development). The complicated given that very few employees work in digital roles, they need
interplay of these issues and opportunities is forcing insurance to move more urgently than other types of firms.
executives to think about them more systemically.
External collaborations are certainly going to be part of the
equation. EY market research has found that 44% of initiatives
Giving employees what they want of the top 20 global insurers were focused on collaboration
with technology firms, up by 2% from 2019.
EY research shows that employees within the insurance
sector are looking for flexibility and are willing to quit if
their needs are not met. According to our Work Reimagined
89%
say flexibility in when they work is move skills and resources around the organization as dictated
important by business needs and value creation opportunities. The
goal is to enhance the agility of core skills (e.g., data science,
user experience design, product development) that multiple
54%
business units or functional areas need.
are likely to quit if their preferences
for flexibility are not met
2.9
average number of days per week
they expect to work remotely
2.8
South America
2.7
North America,
2.6
Asia-Pacific
Middle East,
Europe, Africa,
India
45% Generation Z
39% Generation X
38% Millennials
4
The two-part global study surveyed 4,000 employers and employees in 2020 and 16,000 employees in 2021.
40%
engagement surveys and using metrics to determine the workers across industries
right model for hybrid working. will need to be reskilled
“We are dealing with an intense war for talent, and it Source: World Economic Forum
can be challenging to attract people into insurance.
However, we are using new approaches and finding very
8%
of full-time employees in insurance
good people who fit the Markel culture and the kind of
organization that we are,” says Sue Davies, Chief Human have digital roles
Resources Officer, Markel.
Source: Glassdoor
1. Assess demand — both current talent and future needs: protection and retirement savings gaps, promoting diversity
effective workforce transformation starts with the demand and protecting against climate change are all ways insurers
side. Leaders need clear and detailed understanding of the can live their purpose — and attract socially minded workers
skills and competencies they have today. They must also at the same time.
define “must-have” skills and capabilities for reshaping
product portfolios, launching new offerings and building 4. Identify opportunities to differentiate by combining
new business models in the future. The end goal is to define the human touch with high tech: mixing human touch
the size, shape and cost of the workforce and the friction and advanced tech in key processes can produce superior
points between the current and future operating models. customer experiences and business outcomes. Cross-
functional innovation teams should design new offerings
2. Master the supply side: insurers will build the right and experiences to take advantage of this powerful
future workforce by expanding internal capabilities in core combination, especially relative to moments that matter
areas, buying from external providers and borrowing via (e.g., certain types of claims, key life events where expert
collaborations with partners (e.g., InsurTechs, managed advice is valuable).
services providers). Increased automation and more
extensive use of AI will also be a source of “talent” — that is, 5. Rethink performance management and people metrics:
the ability and capacity to perform necessary work — while performance measurement and compensation and incentive
human resources focus on the highest-value activities. structures must account for increased emphasis on the
customer experience, hybrid working models and more
3. Understand the impact of purpose on talent strategies: collaborative ways of working. Policies should encourage
younger workers are looking for more purposeful work, the sharing of skills and talent across the organizational
which gives an advantage to insurers that can articulate chart. Leading practices and insights from customer-centric
a clear story about how their products and services sectors (e.g., retail and consumer goods) can provide
benefit society as a whole. Helping address the worldwide applicable lessons for insurers.
Climate change and sustainability have re-emerged atop Previous discussions about sustainability were largely
board and C-suite agendas as the direct impacts of the theoretical and centered on making public pledges of support.
COVID-19 pandemic have receded. Certainly, COP26 Today, however, leading insurers are taking tangible steps
refocused the minds of insurance leaders and emphasized and adopting hard metrics as they seek to address the full
necessary steps for the transition to a lower-carbon economy. range of environmental, social and governance (ESG) issues
Leading insurers and reinsurers announced at COP26 the and opportunities. These steps are necessary because
formation of the Net-Zero Insurance Alliance, with the goal sustainability will have significant impacts across all operations
of transitioning their underwriting portfolios to net-zero and the entire insurance value chain. EY market research in
emissions by 2050. Germany demonstrates how rapidly those impacts will evolve.
US$354 billion
insured climate-related losses globally, 2017–20
Source: Swiss Re
US$93 billion
estimated natural catastrophe loss, 1H2021
Source: Aon Benfield
34% Europe
12% Asia
Source: Swiss Re
But whatever their primary motivations, insurers should act Source of high or significant stakeholder
with urgency on several fronts.
pressure regarding sustainability
• Reporting regimes: with reporting standards emerging
48%
from the Task Force on Climate-Related Financial Disclosures
(TCFD), COP26 and other groups, insurers will soon be legislators/regulators
making more detailed disclosures. With both regulators and
investors looking for deeper and more detailed metrics than
27%
insurers have reported to date, insurers face a high bar for
compliance. At COP26, the IFRS Foundation launched the investors
International Sustainability Standards Board with the aim
to create a comprehensive global baseline for disclosures.
26%
The first draft set of standards is expected to be released for
comment in Q1 2022, a major step forward in sustainability ratings agencies
reporting.
51%
act to fulfill their commitments and meet the goals outlined availability of products aligned to
by various initiatives.
investment objectives
• Underwriting policies: insurers must account for a wide
range of risks, considerable uncertainty and indirect ESG
Source: Goldman Sachs survey, 2020
implications as they determine what kinds of products
and incentives they offer. Intelligent use of emerging tech
and new risk modeling techniques will play a critical role
going forward, given the lack of historical information for
underwriting.
79%
with most still working to define or refine their strategies. consider insurers’ commitments to
While a handful of insurers have gone “all-in” on ESG, the environmental issues in purchasing
industry as a whole is lagging other sectors. Insurers must decisions
work to raise their ESG ratings and secure inclusion in rapidly
59%
growing index funds, despite their legitimate concerns about know their insurers' stance on CSR at
their proliferation and underlying methodologies.
least somewhat well
Consider that, according to EY analysis:
56%
took some CSR-related action involving
• Fifty out of 66 insurers in the MSCI World are excluded from
insurance or other financial products
the MSCI World SRI due to low ESG ratings.
25%
the S&P 500 ESG due to an average ESG score of 18.
have chosen one insurance brand over
another due to its CSR reputation
• In some markets (e.g., Europe), greater sensitivity toward
ESG considerations has given insurers a head start in Source: EY Global Insurance Consumer Survey, 2021
formulating and executing ESG strategies. EY analysis shows
that European insurers have a greater proportion of leaders
in the MSCI ESG index (40%) versus Asia-Pacific (27%) and
Americas (12%).
Zurich designs and executes its
It is still too early to assume a direct correlation between ESG
ratings, inclusion in ESG indices and total shareholder return
sustainability strategy
(TSR). But, historically, index participation has a profound Zurich Insurance Group has a bold agenda when it comes
impact on share price over time. Thus, boards and senior to sustainability. Beyond its goal to be one of the most
leaders must closely monitor institutional investors’ appetite responsible businesses in the world, its three corporate
for and attitude toward unrated companies. In some cases, strategic priorities are climate change, work sustainability
companies with poor or no ESG ratings may find themselves and confidence in a digital society. It reports detailed KPIs
on “banned” or “do not invest” lists. on each of these pillars annually. The company has also
launched new offerings to help all types of customers
The consumer and brand impacts of ESG should not be
adjust to climate-related risks and transition to net zero.
overlooked. Consumers are expressing their preference
for doing business with greener companies, which helps Zurich Resilience Solutions provides a range of climate-
outline how insurers can differentiate and gain competitive related services, alongside cyber and supply chain
advantage by demonstrating leadership in sustainability. offerings. The data-driven solutions can predict threats
That perspective extends to the full range of ESG and and evaluate the vulnerability of different types of sites
corporate social responsibility (CSR) issues. EY research shows and facilities. They also bundle investment products
that consumers — and younger generations in particular — are for companies planning to “green” their operations.
increasingly aware of companies’ purpose and commitments The company has updated its underwriting guidelines
relative to diversity and inclusion and income inequality, in and added exclusions for certain types of high-carbon
addition to climate change. Thus, insurers have an opportunity businesses. It also plans to grow its renewable energy
to engage a socially active, energized audience by amplifying business.
their CSR efforts. Ultimately, insurers can do well by doing
“There is no disconnect between our sustainability
good, standing behind great values and great products.
ambitions, our strategic priorities and the products and
services we deliver,” says Linda Freiner, Group Head
of Sustainability, Zurich Insurance Group. “Thus, there
is opportunity for Zurich to modify existing solutions
with features and incentives that help drive change and
encourage sustainable behaviors.”
Industry groups are working to address the widespread estimated annual investment through 2050 for the
concerns about inconsistent taxonomies and frameworks for energy industry to achieve net zero
ESG ratings. During COP26, the G20 Sustainable Finance Source: Bloomberg
Working Group adopted the G20 sustainable finance road
map to identify institutional and market barriers to green
0.4%
finance. The road map is designed to help mobilize private annual increase to global GDP from
capital for green investment by improving the comparability,
investments in clean energy
interpretability and consistency of sustainability disclosures
and, ultimately, ESG ratings. Specifically, the road map
proposes a set of common principles, voluntary use of a
4%
common taxonomy and collaboration between ESG rating
growth in global GDP by 2030 under
providers.
a net-zero pathway
Standardized disclosures will allow insurers to tell a clear
and persuasive story to capital markets and the general Source: International Energy Agency, International Monetary Fund
1. Connect sustainability to overall purpose and business 3. Engage to be part of the solution: insurers must work
strategy: insurers have leaned into their purpose during the with their peers in other sectors, as well as regulators, to
last few years, and leading on sustainability is another way find holistic solutions for uninsurable risks and smooth the
they deliver value beyond their own bottom lines. Mapping path to a greener economy. The greater the collaboration
action plans to specific targets and establishing quantifiable across industries and between businesses and regulators,
performance metrics relative to sustainability are two ways the faster and smoother the transition to a greener
insurers can live their purpose. Such alignment is essential economy will be.
in allowing companies to tell a consistent story about
4. Define the metrics, embrace transparency and
sustainability, whether they are speaking to capital markets,
benchmark continuously: when it comes to ESG, what
regulators or the general public.
gets measured will be what gets managed. In tracking
2. Define a road map: within a broader ESG strategy, insurers performance against sustainability targets, insurers should
must identify priority focus areas, clarify why they are monitor risk exposures, value creation and progress
allocating resources to them, and determine what benefits toward specific goals. As reporting and disclosures become
they expect to achieve. A clear road map must include standardized, the most transparent companies will benefit
both short-term and mid-term milestones, and reflect the from easier access to capital, increased customer loyalty
impacts on different parts of the business. Specifically, and better share price performance. They should also
it should spell out how ESG strategies will be executed in monitor external developments and other sectors with an
terms of underwriting policies, investment and portfolio aim to adopt leading practices.
management strategies, and within internal operations.
5. Improve ESG ratings and secure index inclusion: senior
leaders and boards must understand the criteria behind the
ratings being developed by different agencies, as well as the
requirements for inclusion in ESG funds. The criteria may be
complex and inconsistent, but, given their critical impact on
access to capital and stock prices, insurers must do what it
takes to improve ratings and secure inclusion.
Isabelle Santenac
EY Global Insurance Leader Anna Hurynovich Ed Majkowski Peter Manchester Bernhard Klein
[email protected] EY Global Insurance EY Americas Insurance EY EMEIA Insurance Wassink
Lead Analyst Co-Leader Leader EY Global Insurance
Customer and Growth
Leader
Janice Deganis
Jason Whyte
EY EMEIA Financial Services Markets Leader James Maher
EY refersEYGM
© 2022 to theLimited.
global organization, and may refer to one or more, of the
member firms of Ernst & Young Global Limited, each of which is a separate
All Rights Reserved.
legal entity. Ernst & Young Global Limited, a UK company limited by
EYG no. 000039-22Gbl
guarantee, does not provide services to clients. Information about how EY
collects and uses personal data and a description of the rights individuals
BMC Agency
have under data protection legislation are available via ey.com/privacy. EY
GA 131618832
member firms do not practice law where prohibited by local laws. For more
information about our organization, please visit ey.com.
ED None
IIn line with EY’s commitment to minimize its impact on the environment, this
document has been printed on paper with a high recycled content.
This material has been prepared for general informational purposes only and is not intended to be
relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for
specific advice.
ey.com/en_gl/insurance