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How insurers can accelerate value creation from gaps to gains

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6 minute read 30 Jan 2025
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Financial services
Sustainability

Wherever there’s a protection gap, there are opportunities for insurers to innovate purposefully and unlock growth.

In brief
  • Despite many challenges, global insurers have delivered strong performance recently and are poised for steady gains in both mature and emerging economies.
  • Rising demand for core protections and value-add services, plus new possibilities in risk assessment and pricing, are cause for optimism about the future.
  • Directing today’s innovation investments toward protection gaps will position insurers for market leadership tomorrow.

Even as shifting global dynamics challenge insurers, the 2025 Global Insurance Outlook (pdf) shows there have never been more viable paths to innovation-led growth across the industry. Indeed, the huge gaps in protections against cyber and climate threats – with 99% of losses from cyberattacks and 60% from natural disasters uninsured – plus the massive shortfall in retirement savings present compelling value creation opportunities. Strategically orienting the enterprise around richer data and fully modernized technology is one critical step.

Uninsured losses

of losses from cyberattacks are uninsured
of losses from natural catastrophes are uninsured

Source: Munich Re Cyber Survey 2024

Source: Swiss Re Sigma

The 2025 Global Insurance Outlook

Driving growth through advanced technology and data capabilities.

Download the report

But whether insurers prioritize new product development, M&A or geographic expansion in their growth strategies, a few key actions can unlock growth through innovation.

1. Design purposeful products

The biggest protection gaps – retirement savings and climate – are poised to get even bigger. The global retirement savings gap is set to grow from US$106 trillion in 2022 to US$483 trillion in 2025. Thanks to longer lifespans and aging populations worldwide, there is greater need for products that deliver income for older citizens. That’s how insurers can promote financial security across society.

The “silver tsunami” – the huge demographic wave of Baby Boomers reaching retirement age – will cause a spike in demand for financial estate planning services as well as life and health insurance augmented with wellness programs. In the US alone, those aged 65 and over will grow from 58 million in 2023 to 82 million in 2050. Leading insurers will need to position themselves for the coming transfer of assets by demonstrating clear value propositions.

Global retirement savings gaps

Gap in 2022 (in USD)
Projected gap in 2050 (in USD)

Source: Swiss Re

Purpose can also provide the motivation to deliver climate solutions with more robust coverages and tailored prevention services for the huge populations – over 40% worldwide, according to Geneva Association – that live in high-risk areas. Strengthening climate protections necessitates rethinking traditional approaches to risk management, pricing and claims modeling. Purpose can also fuel positive collaborations and partnerships with governments and other stakeholders, an important step given the increasing likelihood of new government mandates.

US citizens aged 65+

In 2023
In 2050 (projected)

Source: LIMRA, US Census Bureau

2. Personalize offerings to expand share of wallet

Usage-based products, modular add-on features and tailored pricing demonstrate to consumers that you are committed to serving their unique needs – a proven way to promote loyalty and engagement. Artificial intelligence (AI) tools can help in this area with tailored messaging, more accurate pricing and faster underwriting and binding processes.

On-demand coverage and real-time risk prevention are other ways that personalization strategies can add value. AI and advanced analytics can also target the highest-potential customers for product bundles and other offerings that maximize customer value.

Technology boost

Increase in operating profits for insurers with successful data and analytics strategies
Increase in employees’ underwriting capacity from generative AI (GenAI)-enabled automation

Source: Gartner 2023

Source: Willis Tower Watson

3. Seek innovation at scale

With a lean and highly automated operating environment, insurers can look to scale low-margin products to new segments via partners and ecosystems and other channels. The rapid expansion of embedded offerings demonstrates what’s possible.

Parametric insurance – policies that pay out when specific events occur – expands the type of attractive products insurers can deliver to new customers, and is expected to grow to US$29.3 billion by 2031. Parametric solutions have gained traction in the agricultural industry and as protection against natural disasters, but can also be applied to business interruptions, supply chain disruptions and cyber attacks.

Parametric insurance market size

In 2021 (in USD)
In 2023

Source: Swiss Re

How EY can Help

4. Use regulation as a prompt to innovate

The combination of more and more stringent rules in Europe and softening oversight in the US may create an unbalanced competitive playing field, with 61% of insurers cite evolving regulatory requirements as the top operational challenge for the year ahead. But firms that go beyond a minimalist, check-the-box approach may generate business value from their compliance programs.


Consider how the EU Financial Data Access (FiDA) legislation, slated to be enacted in 2025, paves the way for consent-based data sharing across pension, savings and nonlife insurance companies and products. That’s an invitation for firms seeking to expand their offerings. Similarly, the opportunity to participate in government pension schemes requires insurers to enhance their ability to share data securely and seamlessly. The Danish Compromise is reshaping the competitive landscape by creating new opportunities in bancassurance channels in Europe. Lastly, more detailed disclosure and reporting standards should prompt more automation and integration of data flows.

Regulation prep
of insurers cite evolving regulatory requirements as the top operational challenge for the year ahead

Source: Mercer

How EY can Help

5. Embrace a unified data strategy for the entire enterprise

Success in the digital age demands that every business have a unified data strategy – one that is comprehensive and led by the C-suite. Because better data underpins every aspect of the business and is crucial to innovation, the data and technology agenda must be driven by the CEO, rather than the IT team. Further, strategic planning and resource allocations – basically any and all senior management decisions – should be redesigned to reflect the richer data sets executives now have at their disposal.


A data strategy must reflect the need to harness the power of AI and other advanced technologies and define the necessary components of a flexible, future-ready data infrastructure. It will also need to establish appropriately robust governance models and controls environments for fully automated processes to ensure quality and build trust.


6. Commit to serving the underserved

What industry wouldn’t like to find tens of millions of new customers? For insurers, devising new solutions (e.g., micro coverages, starter policies) for just 1% of the estimated 4 billion underserved people worldwide could result in 40 million new customers, according to research from Forrester. Here again, it’s all about purpose – delivering protections to the people who need them most.

 

New products – more affordable, easier to buy and modify – hold the key. Parametric policies, microinsurance for smaller farmers and precise coverages for small businesses and gig workers are just a few of the ways to create value for underserved segments. Carriers in some emerging markets offer health and life insurance for as little as $0.20 per month. It will take bold strategic thinking and creative action to deliver what these customers want (and can afford), but the underserved (who contribute to the lion’s share of the worldwide protection gap) offer the biggest potential for insurers to sustain their solid bottom-line performance.

Serving the underserved
projected new customers from engaging just 1% of the 4 billion uninsured, low-income people worldwide

Source: Forrester

Loes Andringa, EY EMEIA Personal lines Insurance Leader; Patricia Davies, EY Global Insurance Lead Analyst; Anna Hurynovich, EY Global Senior Insurance Analyst; James Maher, EY EMEIA Life Insurance Leader and Doug Plenty; EY UK Insurance Transformation Leader contributed to this article.

Summary 

Volatility and uncertainty – both within individual markets and across regions – define the global insurance industry to an extent not seen in decades. The run of economic prosperity and integration that benefitted the financial services sector for several decades seems gone forever. But insurers are uniquely qualified to create value during periods of instability. Those that target investments in AI-enabled tech and stronger data management capabilities to personalize communications and products will be able to create more value, create it faster and deliver it to more customers and communities than ever before.

How EY can Help

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