German non-life insurers that are successful in their digital evolution will likely benefit from higher growth, better policyholder retention, and ultimately long-term success, A.M. Best believes.
Despite a stable outlook on the German non-life sector, where Germany’s robust economy continues to drive growth in the non-life insurance market, it is widely believed that adaptability to future technologies will be vital to their continued success. Such advancements include enhanced underwriting analytics, superior claims management and mitigation, and cyber insurance.
Traditionally known more for caution than for spearheading innovation, changing customer behaviour and technological advancements are playing an increasingly bigger role in German carriers’ commitment to the development of their digital capabilities. This shift in landscape has led to an expectation that German insurance carriers will gradually adjust their business models and strategies in order to take advantage of evolution in technology and data, according to ratings agency A.M. Best.
The contrast between strong tied agent distribution – something that has traditionally dominated the market – and the kind of internal process simplification and improved policyholder satisfaction that digital transformation in the German market is currently focused on, is seen as both an opportunity and a challenge. A key obstacle to overcome includes embedding technological advancements into the agent’s interaction with customers.
The acceleration of emerging technologies’ impact on the non-life sector, and companies’ potential for adaptability, will be an important driver of future performance, says A.M. Best.
There are long-term questions over smaller companies’ ability to maintain pace as larger market players invest heavily in an attempt to pursue target leanness and complexity reduction. Conversely, larger companies’ responsiveness and adaptability to developments is set to be tested, as failure to embrace developing market dynamics is considered a significant risk for all insurers over the long-term, the ratings agency warns.
