A demanding future
The four trends that define insurance in 2020
Chapter One: New world, new customers, new solutions

A demanding future | The four trends that define insurance in 2020 | Chapter One

New world, new customers, new solutions
While technology is transforming the insurance
industry, customers are becoming just as
disruptive. In chapter 1 of our new campaign
A demanding future: The four trends that define
insurance in 2020, based on an exclusive survey of
200 EMEA insurance executives, we explore how
customer needs and expectations are changing
drastically and why the industry has to extend
beyond its core products and services if it is toretain consumer loyalty.

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A demanding future | The four trends that define insurance in 2020 | Chapter One

Key findings
Non-insurance is the
new insurance

Knowledge and ability
breed confidence

think offering non-insurance products, which add value and are
an extension of core insurance products, is the most importantfactor for consumers when choosing an insurance provider.

believe that being able to speak to friendly and knowledgeable
staff for information and assistance is the most effective way tomaintain customer loyalty.

62%
And

61%

of respondents believe they are performing well against thismetric.

Customers are the challenge

45%

believe that rapidly evolving customer needs and expectations
will be the top challenge for growth over the next three years.

57%

43%

of all sector respondents feel they offer friendly andknowledgeable staff.

Rewards are notso rewarding
Only

12%

of respondents see rewards and promotions as the mostimportant factor for customers choosing an insurance provider.
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A demanding future | The four trends that define insurance in 2020 | Chapter One

The years since the crisis have seen new challenges emerge
for the insurance industry. The persistent low interest
rate environment has put pressure on the industry’s
investment returns and regulatory change has necessitatedlarge investment in systems while also increasing capitalinsurers are required to hold. Meanwhile, technologicaldevelopments have brought with them new, agile entrants.
These include insurers, such as US-based home and rental
insurer Lemonade, which uses artificial intelligence andchat bots to deliver its products and which announced, in
20191, its intention to expand into Europe.
These new entrants, some of whom are backed by traditional
insurers, benefit from lower operating costs and an ability touse vast stores of data to make more finely tuned underwriting
decisions, enabling them to charge lower premiums and/or fees
while also offering customers a high degree of flexibility. And,
crucially, the way in which customers are interacting with these
new services is having a profound effect on the sector.

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A demanding future | The four trends that define insurance in 2020 | Chapter One

Non-insurance is the new insurance
As a result of these changes, large, incumbent insurers
are having to work harder and smarter to attract andretain customers. For many, it is no longer the casethat customers will come to them solely on the basis of
reputation and trust in brand – just 26% of respondents
mentioned this as a factor for customers when choosing
an insurance provider, the second lowest response rate forthis question (although the proportion rose to 35% for theproperty and casualty insurance sector).

in the European Union, initiatives that provide a secure way ofgiving financial services providers access to customer information,
may offer new opportunities for brand extension among insurancecompanies and the potential to “own” the customer, much as
WeChat has done in China. Having started out as a messaging app,its access to user data has enabled it to become indispensable
to many of China’s urban dwellers, offering them easy payment
solutions, restaurant- and taxi-booking services and a variety ofoffers on products and services that are highly targeted to users
via a single interface.

Instead, our survey shows that, excluding price, insurers
believe that offering non-insurance products that add
value and are extensions of their core products (including
areas such as home security, financial planning and car
maintenance) is the most important factor for consumers
when choosing their provider, mentioned by 62% of
respondents overall. And this is clearly where they arefocusing their efforts, as this is where 61% of respondents
feel their organisation performs best when it comes toattracting customers.

Preventative measures
Insurers will need to move away from focusing on providing a
product and towards an emphasis on what the products enable
customers to do. For example, customers may not necessarily want
health insurance, but they do want help to stay fit and healthy tokeep away from hospitals. We have already seen some moves in thisdirection. For example, life insurance start-up yulife offers customers
rewards for keeping active or engaging in, say, mindfulness, in theform of its yucoin currency that can be exchanged for vouchers atstores such Amazon and John Lewis. This has the twin benefit ofbringing premiums down for those who lead healthy lifesyles as well
as reducing potential future claims. It is a clear example of the movein the industry towards proactive prevention rather than reactive
payments to cover loss.

This suggests that insurers recognise that few customers– whether they be consumers or businesses – currently
find the idea or process of buying insurance an excitingprospect. The insurance success stories of tomorrow willbe those that can streamline administrative processes,
such as applications or claims, and that can offer a range
of innovative and flexible products to customers in a waythat interests them. They may offer a suite of products andservices based around their core product – for example aone-stop-shop for home repair and maintenance as well
as utilities offers, all packaged around a home insurance
product. In addition, Open Banking in the UK and PSD25

A demanding future | The four trends that define insurance in 2020 | Chapter One

New products for a new environment
The life insurance and annuity sector felt most confident about
its performance in this area, with 71% saying their organisationsdelivered well in non-insurance products. This could include someform of financial planning assistance, such as offering millennials
savings and investment products that may help them buy their first
property, at which point they are more likely to need life insurance
products.
In property and casualty, where respondents felt they were betterat providing speedy service (52%) than offering non-insurance
products (47%), the development of sensor technology has thepotential to shift insurers towards more preventative services andproducts. Household water leaks, for example, are not only painfulfor customers but also for insurers, which, in the UK alone, pay
out £1.8m a day in claims for repair and damage caused, according
to the Association of British Insurers2. Offering sensors can help
customers spot changes in water pressure early on, enabling a
rapid response, limiting damage and reducing claims.
In reinsurance, 74% of respondents said that the provision of
non-insurance products was key to attracting customers – thiswas the highest of the three insurance sub-sectors. Part of this is
likely to reflect reinsurers’ increased focus on using their data tooffer consultancy services for insurance clients to help them design
better products or target the market more effectively. MunichRe, for example, offers software tools alongside consultancy for arange of clients.

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However, it is also a significant finding for other parts of theinsurance industry, given the fact that reinsurers are diversifying
away from traditional reinsurance products by teaming up with
InsurTechs, in moves that continue their push into the territoryof primary insurers. Again, Munich Re serves as an example
here – its corporate venturing arm Digital Partners has invested
in companies such as Trov, a US-based start-up that offers ondemand insurance, and London-based collective insurance-buying
business Bought By Many3.
The next most important factor in attracting customers is offering
insurance products that are flexible and/or tailored to customers’
needs, as mentioned by 45% of respondents. This is clearly linked
to the rise of non-insurance products and reflects the emergenceof models that are not based on annual premiums, such as payper-mile car insurance.
Speed of issue and query resolution (44%), speed of service(40%) and customers being able to speak to helpful and friendly
staff (40%) were also viewed as important and the areas in which
respondents felt they were performing best largely mirrored theabove proportions.

A demanding future | The four trends that define insurance in 2020 | Chapter One

Figure 1. Overall, which of the following, excluding price, do you think is most important to consumers when choosing an
insurance provider? (select top three)
80%
70%
60%
50%
40%
30%
20%
10%
0%

74

26

35
19

22

Recognition/trust in
brand and good
reputationTotal

33 36 32 30

40

33

40

50

45

51

62 60

56

44 49 4040

40 43 45

40 42

28

12 9 12 14
Rewards
and promotions

Oﬀering of nonAn oﬀering ofClear and simpliﬁed Speed of service
explanations(e.g. when making insurance products/ insurance products
which add value
services thatof product(s)an application
and are extensions
are ﬂexible
information
or a claim)of core insurance
and/or tailoredproducts (e.g.
to the customer's
ﬁnancial planning,needshome security)

Life insurance and annuity insurer (L&A)

Property & Casualty insurer (P&C)

Customer ability
to speak directly
to helpful
and friendly staﬀ

Customer ability
to have their issues
and/or queries
resolved as fast
as possible(whether digitally,or via staﬀ response)

Reinsurance/global speciality

Figure 2. In which of these areas (excluding price) do you think your organisation delivers/performs best? (select top three)
80%
70%
60%
50%
40%
30%
20%
10%
0%

39
18 19 15 20

14 12 16 14

Brand recognition
and good reputation

Rewards andpromotions

Total

47

37

30

41

52
31

40

47 49 44 48

61

71

62
49

Oﬀering of nonAn oﬀering ofClear and simpliﬁed Speed of service(e.g. when making insurance products/ insurance products
explanations ofwhich add value
services thatan application
product(s)and are extensions
are ﬂexible
or a claim)
informationof core insurance
and/or tailoredproducts (e.g.
to the customer's
ﬁnancial planning,needshome security)

Life insurance and annuity insurer (L&A)

Property & Casualty insurer (P&C)

43

36

47 48

Customer ability
to speak directly
to helpful
and friendly staﬀ

38

35

40 38

Customer ability
to have their issues
and/or queries
resolved as fast
as possible(whether digitally,or via staﬀ response)

Reinsurance/global speciality

7

A demanding future | The four trends that define insurance in 2020 | Chapter One

Figure 3. Which of the following enhancements to the customer experience do you believe to be the most eﬀective inmaintaining customer loyalty? (select top three)
80%
70%
60%
50%
40%
30%
20%
10%
0%

28 24 32 28

41 43 39 40

40

66
47

47

52

45

40

41 37 39

48
16

Proactive
assistancewith loss
prevention

Life insurance and annuity insurer (L&A)

Instant access to
information andassistance via
digital platforms(including website/
mobile/apps)

Ability to speak
and friendly andknowledgeablestaﬀ forinformation andassistance quickly

Property & Casualty insurer (P&C)

With great service comes greater loyalty
When it comes to maintaining loyalty among existing customers,
insurers are clearly focusing on service provision. Over half (57%)
of respondents said the ability to speak to knowledgeable andfriendly staff was effective in customer retention. It’s clear that,while technology such as chat bots has its place (see below),
insurers feel that many situations are too complex to be handled
by technological solutions alone. People with expertise play animportant role in insurance companies. As one Danish property
and casualty insurance CEO commented: “We put great emphasis
on customers being able to speak with well-trained staff, since
this is their main point of contact with the company. This plays animportant role in them determining company service.”

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57 60

56

23 25 19 26

Oﬀering ofMore frequent
non-insurance
insurer-policy
products which
holder
add value and areconnection
extensions of core
insurance products(e.g. ﬁnancial planning,home security)
Total

50 49

Rewards andpromotions(unrelated todata received by
sensor devices)

Access toinsurance
products/
services thatare ﬂexible
and/ortailored to thecustomer's needs

24
9

12

Clear and
simpliﬁed
explanationsof product(s)information

Reinsurance/global speciality

While it is natural to shift to serving customers effectively tokeep them on board, it is intriguing that insurers are less likely
to maintain their efforts to offer these customers adjacent, noninsurance products (just 28% cited this), even though they cited
this as the most important way of winning new business. Thissuggests a missed opportunity, particularly in a world where widely
available data, not just data collected by insurers themselves,
can be easily mined and analysed to suggest new products andservices that are likely to be suitable for existing customers.

A demanding future | The four trends that define insurance in 2020 | Chapter One

Creating a rewarding experience
This is not the only missed opportunity. While just 14% of insurers
said their organisations performed well when it came to offering
rewards and promotions – the lowest response – nearly half (47%)
said this was an important factor in maintaining customer loyalty.
Yet if they are to compete on factors other than price, traditional
insurers will need to place customer retention at the peak of
their priority list, particularly given the increasingly competitive
landscape, which includes InsurTech entrants and is likely tofeature technology giants.
Technology businesses have access to and – more importantly –the capacity to analyse and make sense of deep pools of customer
information. With brands such as Amazon, Apple and Google
launching financial services products, such as digital wallets andcyber currency, it is likely that these tech giants will soon set theirsights on large parts of the insurance market, using their vast
stores of data on customer preferences. One of the ways in which
they are seeking to do this is by becoming distribution channels for
insurance products. While Google Compare, an online insurancecomparison service, was shut down in 2016, this is unlikely to be
the end of technology brands attempting to get into the market.
Amazon, for example, teamed up with Travelers Companies in 2018
to provide smart home kits at discounted prices in the US throughtheir Amazon.com/Travelers site, with other devices offered free tocertain home insurance customers.

Targeted engagement
Unlike traditional insurers, which have often used intermediary
distribution channels, technology businesses already have multiple
touch points with customers. As our survey shows, insurers are
currently less focused on proactive contact with customers – just
23% of respondents said more frequent insurer-policy holder
connection was effective for maintaining customer loyalty. Yet if
insurers were to offer more rewards and promotions to customers
that are relevant to their needs, either through in-house initiatives
or through partnerships with customer-facing organisations (suchas the Travelers/Amazon example above), this could provide more
opportunities to engage.
As one group IT director at a UK-based life and annuity provider
commented: “We understand the importance of customer loyalty
through our marketing services and are monitoring the effects ofeach effort, mapping out the results and acting accordingly. We’ve
noticed how proactive contact has been the most effective way tocommunicate, increase services and retain customers.”“We understand the importance ofcustomer loyalty through our marketing
services and are monitoring the effectsof each effort, mapping out the results
and acting accordingly. We’ve noticed
how proactive contact has been themost effective way to communicate,increase services and retain customers.”
Group IT Director9

A demanding future | The four trends that define insurance in 2020 | Chapter One

New forms of communication
And, while customer service is clearly an important area on which
to focus, this proactivity does not necessarily require the additionof further teams at call centres. Technology businesses have built
platforms that are effective at answering most customer queries
and issues through the use of chat bots and online resolution.
There will always be a need for customers to be able to speak toknowledgeable and friendly staff in more complex situations (asour survey attests), yet customer behaviour is changing – younger
generations tend to prefer to transact and communicate online
and through digital platforms.

Indeed, many will prefer to make their own choices across a
range of financial services and insurance products. “There will be
more self-service models in place in the next 10 years,” said an
Oman-based CEO of a property and casualty insurer. “This will beappreciated by customers, but there will be consequences, such as
having to lower the workforce further to support these models.”
To remain attractive to these customers, insurance companies
need to find ways of helping them do this in a streamlined way.
There are signs that the industry is working on this. Half of
respondents said that instant access to information and assistancevia digital platforms was effective in retaining customers. This was
the second highest result, yet it does follow the more traditional
response of having friendly and knowledgeable staff. As one
Nigeria-based reinsurance CEO commented: “Digital technology
is helping us engage with customers. It is challenging to keep up
with advances, but it is worth the extra spend and effort because
engaging customers through innovation is a better direction for thecompany than more traditional routes.”
Perhaps one of the reasons behind these missed opportunities
is related to the way many insurers view the shifts in the market.
When asked about challenges in the industry, 45% of respondents
said that evolving customer needs and expectations would be amajor challenge over the next three years – the top response.
This is hardly surprising in an industry where change andinnovation can often be held back by legacy systems, the size andcomplexity of many insurance organisations and, in some cases,
regulatory issues.

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A demanding future | The four trends that define insurance in 2020 | Chapter One

Three steps to success
It is clear that customer needs and expectations are changing –and they will continue to do so, possibly at an even more rapid
pace. Those that view this as an opportunity to provide new
and innovative products, services and delivery channels will be
the winners in what will be a different market in years to come.
And there are three crucial steps that insurers need to takeif they are to change with their customers.

Be truly
customercentric

Get onboard withthe sharing
economyGetcreative11 The four trends that define insurance in 2020 | Chapter One
A demanding future |While insurance companies have made significant strides inbecoming much more customer-centric organisations, this is still awork in progress. Many organisations claim to have a single view of
the customer and some insurers have been successful in creating
slick user interfaces, but the reality behind the scenes is often anumber of siloes, each with their own processes and datasets.
In contrast, many new entrants benefit from simpler structures,fewer staff and no legacy infrastructure to upgrade, all of whichenables them to be innovative and agile. As a head of technology
at a life and annuity group in France commented: “InsurTechs
have the upper hand when it comes to providing personalised
policies, and present more advanced aspects which are intriguing
to customers, hence the challenge to our core business. Over the
next three years, we need to step up and work on strategies tocombat the new players in the market and move forward.”

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Be truly
customercentricA demanding future| The four future
trends that define insurance in 2020 | Chapter One
A demanding

One area that looks set for significant growth, for example, is thesharing economy. As a report by AIG and Marsh acknowledges4,
the development of more flexible ways of working and using assets
such as cars and homes present new opportunities if firms cantruly understand the nature of the sharing economy. AXA, forexample, has teamed up with Uber to provide all its drivers andcouriers in Europe insurance covering areas such as accident,
illness and paternity benefits5.

sharing economy. As a report by AIG and Marsh acknowledges4,

can truly understand the nature of the sharing economy. AXA, forexample, has teamed up with Uber to provide all its drivers andcouriers in Europe insurance covering areas such as accident,
5

However, challenges such as outdated regulation, a lack ofhistorical information and/or collateral in start-ups and a blurringof the lines between commercial and personal lines of insurance
could hold less fleet-footed firms back.

However, challenges such as outdated regulation, a lack ofhistorical information and/or collateral in start-ups and a blurringof the lines between commercial and personal lines of insurance

The AIG and Marsh report advises insurers to become morecreative, giving the following example: “An insurer can look at three
years of historical loss data to predict future losses for a traditional
limousine company. A modern ride-sharing company won’t have
that… but with the telematics they are collecting, the right model
could lead to a more accurate representation of exposure.”

The AIG and March report advises insurers to become morecreative, giving the following example: “An insurer can look at
three years of historical loss data to predict future losses for a
traditional limousine company. A modern ride-sharing company
won’t have that … but with the telematics they are collecting,the right model could lead to a more accurate representation of
exposure.”

The potential market is significant. A 2018 survey of consumers
across the US, UK, China, Germany, France and the UAE we carriedout with Lloyds of London6 estimated that 500 million people
have shared assets or services and that 680 million people had
consumed shared assets or services, with nearly three quarters(73%) of the online population in China falling into the latter
category. While 57% of those who had shared assets or services
had taken out insurance for this activity, the report notes that
there is still a gap in bespoke cover. It recommends that insurers
and sharing economy platforms work together to reduce risk andpromote growth.

across the US, UK, China, Germany, France and the UAE wecarried out with Lloyds of London estimated that 500 million
people have shared assets or services and that 680 million people
had consumed shared assets or services, with nearly threequarters (73%) of the online population in China falling into thelatter category. While 57% of those who had shared assets orservices had taken out additional insurance, the report notes that
there is still a gap in bespoke cover. It recommends that insurers
and sharing economy platforms work together to reduce risk andpromote growth.

Get on board
with the sharing
economy13 13 The four trends that define insurance in 2020 | Chapter One
A demanding future |If traditional insurers are to remain relevant, they will have tofocus on how customers live their lives and the changing nature ofbusiness goals. The advent of products such as pay-per-mile, ondemand insurance and the bundling and unbundling of products
to provide flexibility for customers is just the start of an industrywide shake-up. For many organisations, boosting creativity is likely
to require:• Recruitment of in-house expertise from other sectors to allow
cross-fertilisation of ideas.
ideas;• Re-evaluation of distribution channels – organisations that ‘own’
today’s customer have the greatest capacity to create value forcustomers and, ultimately, themselves by moving away fromproviding commodity purchases based on price alone.
alone;• More effective analysis of data to create a truly customer-centricmodel, including more bespoke products and services andoffering rewards and promotions that are relevant to them tomaintain loyalty.
loyalty;• More partnerships and collaboration with technology companies,
financial services organisations and possibly even competitors tocreate a seamless and more engaging customer experience.
experience;• Removal of pain points for customers, such as streamlining
applications and claims processes through the use of big data
and analytics so that customers are not filling in multiple forms or
being asked questions they cannot accurately answer.

14© Deloitte Alternative Capital Solutions

Get
creative

A demanding future | The four trends that define insurance in 2020 | Chapter One

Endnotes
1.

https://www.lemonade.com/blog/coming-to-europe/2.

https://www.abi.org.uk/news/news-articles/2018/12/is-water-damage-covered-by-insurance/

3.

https://www.munichre.com/topics-online/en/digitalisation/reinventing-insurance-digital-generation.html

4.

https://www.aig.com/content/dam/aig/america-canada/us/documents/insights/aig-insuring-the-sharing-economy.pdf

5.

https://group.axa.com/en/newsroom/press-releases/uber-and-axa-join-forces-to-set-a-new-standard-for-protection-of-independent-drivers-and-couriers

6.

https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/financial-services/deloitte-uk-squaring-risk-in-the-sharing-age.pdf

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Contacts

David RushEMEA Insurance Sector Lead
+44 20 7303 6302
drush@deloitte.co.uk

Jordi Montalbo
EMEA Insurance Sector Lead
+34 93 253 3733
jmontalbo@deloitte.es

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Neal Baumann
Global Insurance Sector Lead
+1 212.618.4105
nealbaumann@deloitte.com

Peter Evans
UK Head of Insurance Insights+44 20 7303 0010
peevans@deloitte.co.uk