The Growth of the Insurance Sector
As people grow in income, they begin to feel the need to protect themselves and their families. This increased spending on consumer goods, automobiles, and travel is likely to increase the demand for insurance. As the insurance sector grows, awareness of the importance of insurance grows, and the number of providers increases. Competition is fierce, but a diverse product mix helps insurers compete with each other. In addition to diversification, the Insurance sector must consider new value propositions to remain competitive.
The world’s insurance industry is growing at a modest rate of 4.9 percent annually, with total premiums of EUR5 trillion in 2017. In 2018, the fastest growing region was the Americas, followed by Asia-Pacific and Europe, Middle East, and Africa. The two largest regions for insurance premium growth in recent years were developing APAC and North America. Although the U.S. insurance industry is booming, the global insurance industry is still far from having enough penetration.
The US insurance sector continues to grow, with P&C premiums increasing by 4.6% in 2017 and 12.7% in the first half of 2018. Meanwhile, the life insurance market accounts for 46 percent of all insurance premiums and is expected to increase by 3.2% by 2020. Despite the challenges of global economic conditions, forward-thinking insurers are not sitting on their hands, and are taking bold decisions to improve profitability. By increasing the FDI limit, insurers can attract more foreign direct investment and boost their business.
Overall, the insurance industry in India continues to grow at a moderate pace, contributing between 15 and 20 percent to GDP. Yet, the penetration of the insurance sector is low – over 80 percent of the population lacks health and life insurance. As a result, the industry is in a strong position to thrive and continue to expand. While the world’s economy is growing rapidly, it is still untapped by the average consumer.
While the P&C segment accounted for 33% of the insurance market in 2017, the life insurance market accounted for 46% of premiums. Insurers in emerging markets are not sitting on their hands. They are taking bold steps and investing in operational efficiency. Consequently, the growth of the insurance sector has been slowed. However, the world’s economic climate remains stable, with more people living longer, healthier lives.
Distribution trends vary based on product and region. While in-person sales force is the traditional method of selling insurance products, the direct sales channel is growing quickly. Some direct players are even outperforming the market. Furthermore, insurtechs are increasingly present in marketing and distribution, and they are poised to further increase the growth of the insurance sector. This trend is not limited to the P&C segment. By 2020, there will be a combined 5,929 companies in the industry.