Deloitte: How a 'Predict & Prevent' Approach Boosts Revenues
“The days of assessing risk through the rearview mirror are fading fast.”
This is the future direction of the insurance sector, according to Deloitte’s latest industry-wide predictions forecast.
Deloitte’s reflection revealed that property and casualty insurers across the US are preparing for a fundamental shift away from their traditional business model of assessing risk retrospectively.
Deloitte forecasts that P&C insurers will surge from an estimated US$21.6bn in 2023 to US$49.5bn by 2030, representing a compound annual growth rate (CAGR) of 12.55%.
These projections come as a result of insurers seeking sustainable growth beyond the recent strategy of raising premiums to return to profitability.
How technology is driving preventative measures
One thing helping the insurance sector currently is the shift towards predictive risk management, enabled by advances in AI and IoT technologies.
According to Deloitte, recent events like the wildfires in Los Angeles have helped to highlight the effectiveness of preventative measures, demonstrating how “building more resilient homes and monitoring the electrical grid in real time could have helped minimise the devastation”.
Smart home devices are already proving their worth, with automatic water leak detection and shut-off systems shown to “reduce up to 93% of insurance claims”.
Currently, many insurers offer risk management services without monetising them, hoping that reduced claims will offset the costs of providing these services.
The opportunity
Today's fee-based offerings focus predominantly on commercial insurance, where contracts are naturally more complex and higher in value.
Typically, these services aim to help clients prevent and recover from on-site risk inspections to virtual educational tools designed to help companies operate more safely.
However, this is a competitive space, where insurers have to wrestle with insurance brokers and risk management consultants for supremacy
But Deloitte believes that doubling down on these services could be hugely beneficial to insurers.
Recently, Arthur J. Gallagher & Co. has shown the potential in this approach, with approximately 93% of its risk management services revenue coming from non-brokerage clients.
Investing in defences
Personal insurance risks are becoming increasingly complex, from autonomous vehicles to severe weather events.
Some insurers are already exploring innovative approaches, with certain companies contracting private firms to provide “wildfire defence services” to help policyholders prepare for and respond to fires.
Deloitte suggests that “investing US$3.35bn to bring US homes up to code could reduce losses by US$37bn by 2030”.
The consultancy proposes that insurers could guide customers in building with resilient materials, finding contractors and installing new technologies, with costs and savings shared between insurers and customers.
The days of assessing risk through the rearview mirror are fading fast.
How partnerships are reshaping the insurance market
Major insurers are already experimenting with new operating models.
AXA XL's construction insurance offering provides contractor clients with access to more than 30 technology providers to reduce risk.
In 2023, Chubb launched a global climate business offering “risk management and resiliency services” for those managing climate change impacts.
Deloitte warns that timing may be critical for insurers’ success in this transition.
“Insurance brokers, who also have vast amounts of data and expertise in loss prevention services, are a natural competitor,” the report states.
Technology companies building risk management platforms for businesses and consumers also pose competitive threats, though they could potentially become partners under the right circumstances.
Needless to say, it appears as though a sea change is underway in the insurance sector.
“Rearview-mirror insuring is increasingly relegated to the archives that house typewriters and fax machines,” says Deloitte.
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