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Insurers will need to accelerate their evolution: S&P

16th November 2021 - Author: Katie Baker

According to the 2022 Insurance Industry Outlook Report from S&P Global Market Intelligence, insurance companies will need to accelerate the evolution of everything from distribution and pricing to customer and investor relations.

S&P Global RatingsAnalysts at S&P reported several key themes for the insurance industry that include emerging perils, the evolving nature of globalisation, balance sheet rationalisation and the permeation of technology in all aspects of the insurance value chain.

The report argues that a growing number of insurers will need to rethink their operating models to address significant structural changes in the competitive environment and rapid evolution in the macroeconomic landscape.

Tim Zawacki, principal research analyst at S&P Global Market Intelligence said: “The very essence of what it means to be an insurance company is changing in front of our eyes.

“Reliance on data and analytics in underwriting, pricing and risk-modelling took on increased importance since the onset of COVID-19.

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“And it will only grow as the industry takes a leading role in the global response to climate change, preparing for future pandemics and providing protection against financial fallout from cyber-attacks.”

S&P reported that there needs to be an improvement within the responses to the threats posed by economic inflation in the form of rising prices for goods and services as well as social inflation, a trend towards larger jury verdicts and legal settlements, in both pricing and underwriting.

The report also predicts the continued digitalisation of underwriting and distribution functions particularly in commoditised product lines, fueled by greater access to data and analytics, the success of insurtech disruptors and strategic shifts by carriers to more channel-agnostic approaches to selling insurance.

It’s been forecasted that a continued active investment by established carriers and venture capital providers, in emerging insurance markets in Southeast Asia, will have a particular emphasis on insurtechs.

China and India, which are collectively home to nearly half of private insurtech companies in the Asia-Pacific region, has been predicted continue to attract the lion’s share of investor interest.

S&P expects more M&A activity across international borders, as some sellers may continue to trade out of non-core geographies while buyers seek opportunities in business lines and geographies characterised by favourable economics and demographics.

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