Victoria Carter, Vice Chairman, Global Strategic Advisory
The world’s ageing population is causing the fourth disruptive phenomenon. For example, as Europeans’ lifespans increase and they have fewer children, the share of people aged 65 and older is projected to double from 16 percent in 2005 to 30 percent in 2050. Simultaneously, the most economically active age group (25- to 64-year olds) in Europe is projected to decline to less than half the population by 2050. These trends may pressure society’s ability to fund the increasing costs of retirement and healthcare for the elderly.
These waves of change are growing exponentially and impacting all sectors of society, including sweeping away many of the assumptions, accepted truths and standard practices that have held firm for decades. The (re)insurance industry, faced with a rapidly changing world, must re-evaluate its role and recognize that the traditional business model is not designed to meet the demands of this new environment, even though it may continue to generate revenue.
The (re)insurance sector must also recognize the potential threats and opportunities for innovation this creates for the industry. The primary insurance product is becoming increasingly commoditized, while digital firms and service providers are beginning to supplant the role of the (re)insurer. New technologies are reducing the need for certain forms of cover and in some cases making them potentially obsolete. All of these factors are combining to diminish the role of the insurer.
To continue to add differentiated value, the industry must acknowledge that fundamental change is required and actively seek out the opportunities these forces create in their wake. The industry can no longer rely on applying past lessons to prepare for and manage the future - the pace of change is simply too fast and the level of disruption too great. We must innovate, change and adapt, as well as seek opportunities to work in tandem with leaders in other markets, such as “fintech” companies. (Re)insurers need to embrace this period of transformation, boost the potential it creates and redefine their future role and relationships with clients.
(Re)insurers have to move beyond standard insurance parameters into new growth areas both in personal and commercial lines. We have already witnessed the potential created by cyber, and that will grow exponentially as the world becomes increasingly dependent on e-commerce and cloud computing. We must seek out opportunities to help reduce the unsustainable public sector debt levels generated by an ageing population, seeking to expand involvement in long-term care. We must look to support (re)insurers by providing the secure platform that serves as a springboard for innovation.
For every industry transformed by disruptive forces, the net result has been growth. It is up to the (re)insurance sector to grasp the myriad opportunities this environment creates and drive the industry transformation that needs to take place.