How insurance firms can sustain impressive growth

By Staff | January 2, 2019 | Last updated on January 2, 2019
3 min read
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The global life insurance business is growing impressively—but mostly in emerging markets, says a recent report from New York–based consulting firm McKinsey & Co. To generate growth in the years ahead, companies must make bold moves, says the report, such as seeking innovation, engaging in mergers and acquisitions (M&A) and enhancing productivity.

The McKinsey report examined the global insurance industry and found that recent top-line growth in global premiums masks a stark divergence between developed markets and emerging markets. For example, while global premiums increased by 5% in 2017, growth in developed markets, such as the U.S., Canada, Europe and Japan, was between 1% and 2%, compared with 12% to 15% in developing Asia and Latin America. Additionally, the report notes, asset managers have taken market share from insurers in the retirement-savings business over the past five years.

The report states that, in the years ahead, the industry’s winners “will benefit from bold resource allocation to the right markets, customer segments and adjacent sectors, such as asset management, while also driving substantial productivity improvement.”

In particular, the firm reports, the insurance industry has not tackled its cost structure as effectively as the global banking business has over the past few years. “Costs have become a greater priority because investment returns have remained fairly muted,” the report says. “Meanwhile, insurers have not substantially altered their customer engagement or distribution strategies even as customer expectations have changed dramatically.”

Along with evolving customer expectations, the report notes, financial advisors and captive agents will increasingly expect firms to provide “a digital interface and automated tools in their interactions with insurance home offices and wholesalers. Successful insurers will focus on improving the partner experience to help elevate the customer experience.”

Firms will need to make “bold moves,” the report adds, regarding the ways in which they allocate resources, engage in M&A and invest in their businesses to create long-term value. Two Canadian insurance giants—Manulife Financial Corp. and Sun Life Financial Inc.—rank among the industry’s large, globally diverse firms that have led the way in these sorts of strategic efforts over the past 10 years, the report notes.

“Conditions continue to be attractive for M&A,” the report states, “including improved investor confidence, rising rates and areas for potential technology acceleration.”

To the extent that the industry’s leading firms have engaged in M&A over the past decade, the report says they have “avoided big-ticket deals in favour of targeted, strategic transactions, including deals to expand into new product lines, go up- or downmarket in a given segment, acquire new technological capabilities or diversify into less capital-intensive lines of business, such as asset management.”

Looking ahead, the report notes that “companies must pick the right markets,” to find future growth in global markets. “Over the past five years, for example, the still-developing Asia-Pacific region has accounted for almost 70% of global premium growth.”

Additionally, to take advantage of future growth opportunities, insurers will have to strengthen their M&A capabilities, enhance their resource allocation efforts, improve productivity through automation and outsourcing, and increase their operational agility. staff


The staff of have been covering news for financial advisors since 1998.