Accenture: Insurance GWP to reach US$7.5trn by 2025
Titled ‘Insurance revenue landscape 2025: Innovate for resilience’, Accenture draws the conclusion that “gloomy” resonances of 2020 are likely to improve.
To demonstrate insurance’s resiliency, the company projects a 23% increase in gross written premiums (GWP) - from $6.1trn in 2020 to $7.5trn in 2025. Furthermore, as previously considered by Swiss Re, APAC markets such as China will boost the industry’s global CAGR.
“While this is good news for the industry overall, growth is not linear, and won’t follow the same proportions we see in today’s current revenue pools. Gaining ground against existing and new competitors will require innovation and scenario planning,” it warned.
Innovation against complacency
The encouraging initial findings of the report could give insurers the idea that “staying the course” will perpetuate success. However, Accenture states, doing so will prove to be the antithesis of profitability and sustainable growth.
Similar to the UK government’s Kalifa Fintech Review, innovation, both in a cultural and technological sense, is key. For an industry that has often erred on the side of caution and adopted a traditional stance to operations, this is a message that needs to be received:
“[I]nsurers can no longer rely on the familiar products, channels, and historic retention rates to drive profitability long-term. Rising costs, volatile markets, and increasing consumer demand for digital services show no sign of abating.”
Of the $1.4trn growth over the next five years, Accenture anticipates the following distribution:
- $200bn to originate from new product and service offerings
- $140bn from product innovation
- $140bn in shifting placement channels
Growing the insurance industry
Therefore, the tripartite strategy for insurance moving forwards should be focused on 1) new products, 2) services, and 3) new revenue streams.
Such a plan will be important not just to achieve growth but also to retain existing customers. An Accenture insurance consumer study found that 20% of consumers in mainland China intend to switch insurers in the next 12 months, a statistic that, if true, would significantly impact the region’s CAGR.
Insurers must also balance their appeal between generations: millennials are generally drawn to the digital experience offered by insurtechs, and neglecting to incorporate their preferences is to potentially alienate a key market.
“With traditional revenues slowly being replaced by innovation-led revenues that reflect the changing demands of our changing world, insurers need to move now to shift their business. The ‘future’ of revenues will become the present faster than most would expect,” concludes the report.
Read the full Accenture report here