The persistence of the hard market, the emerging risks, the competition from new players, an increasingly stringent regulatory environment: the European insurance sector is in a "perfect storm". And digitalization will be - as in other sectors - a key factor for survival.
The insurance sector was one of the most exposed during the pandemic. According to Insurance Europe, the premiums volume in European countries fell by almost two thirds in 2020, and losses for insurers are estimated between 41 and 82 billion euros. In the first half of 2021, also due to a rebound effect, there was a strong recovery. To give some examples: the four major reinsurers (Munich Re, Swiss Re, Hannover Re and SCOR) recorded aggregate profit of 3.6 billion euros between January and June compared to 200 million in the previous year, operating profit of Zurich rose 60% to € 2.7 billion, while Allianz achieved 82% of its forecasted operating profit for 2021 already in the first nine months. At the end of 2021 we will probably see a compensation of this high profitability due to the high number of claims resulting from the heavy floods in Europe and China and from civil unrest in Africa.
ISG, a research and consulting company, for the second consecutive year has conducted a survey of over 200 professionals in the private and technological insurance sector, to understand how aspects such as customer experience, data management, optimization of operations will evolve. These are the main results.
The pandemic has changed the purchasing habits of consumers, including the insurance once. Policyholders and potential customers expect a quick and easy customer journey and fast and efficient claims handling. Most are looking for customized solutions at a competitive price, and to do so they use tools they are familiar with, especially targeting digital channels. Consequently, the companies are modifying operations and the offer according to a strategy that favors online, using the network as a direct sales channel, digital payment methods and smart contracts. 43% of respondents already use the internet as a direct sales channel and 35% report an increase in direct sales in the last year, with the highest percentages in Austria, the United Kingdom and the Nordic countries.
The Solvency II and IFRS 17 regulations, the evolution of working methods and the drive towards customer acquisition and loyalty will lead to an increase in operating costs for insurers over the next two years. Consequently, efforts will be aimed at making business models more efficient. Already, companies are moving away from traditional systems, rationalizing portfolios and simplifying products, implementing cloud-based solutions and digital native platforms, with huge investments. The percentage of turnover invested in digitization by the insurance sector is higher than most other sectors, settling on average at 3.5%, with peaks of 10.4%.
Automation, artificial intelligence, embedded analytics, platform-based services are strongly changing the profile of the insurance sector. The primary driver of digital transformation is improving the customer experience, a top priority for 87% of respondents. Retention is very strategic considering that the cost of acquiring a new customer is generally between seven and nine times higher than the cost of maintaining an existing customer. The other main drivers of digital transformation are the creation of a datadriven business and the simplification of internal operations. The largest companies are focusing on simplifying contract management, creating mobile apps and embedded analytics applied to customer management. Medium-sized insurers, on the other hand, are prioritizing the creation of thematic platforms, while smaller ones are giving priority to the proposal of mobile apps.
In the digital transformation process, the first criticality (46%) reported by insurers is finding qualified talents. As companies invest in the technology training of existing resources, companies are primarily looking for data scientists who can build models that focus on customer data. 40% are implementing a different strategy, acquiring the necessary skills in the digital field through the acquisition / incorporation of technological partners.
