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Global protection gap could widen by 28% by 2025

Matt Britten: reinsurance partner, PwC Bermuda (Photograph supplied)

The difference between actual and insured losses around the world could widen from $1.4 trillion in 2020 to $1.8 trillion by 2025, with the Asia-Pacific region accounting for almost half of all uninsured risk, according to a new PWC report.

PwC on Insurance in 2025 said: “With a growing need to find long-term solutions to address social and economic disparities and business resilience, insurers must go beyond their traditional mandate.

“Expectations are also mounting for the industry to play a greater role in environmental, social and governance issues, as both investors and underwriters of other corporations.”

According to the report, continued rapid advancements in digital and analytical capabilities from inside and outside the industry have put many players under pressure.

“We’ve seen a sharp increase in digital efforts and adoption in areas like distribution, operations and claims,” said PWC. “However, insurers still lack speed and agility due to inherent complexities such as legacy systems and traditionally siloed operations.”

The report identifies five trends that will affect the future of insurance, including macroeconomic and structural headwinds; increased ESG demands around climate risk and social purpose; new forms of competition; changes in reporting and accounting standards; and the exponential growth in digital innovation.

But the report also said insurers and reinsurers came through the tests posed by Covid-19 “remarkably well” and dealt with unprecedented interruptions to their business by accelerating urgently needed digital transformation.

Five trends identified by PwC

1. A widening trust gap in an uncertain world

2. Rapidly evolving customer needs and preferences

3. An increasingly digital and AI-driven world

4. Climate risk and a focus on sustainability

5. Convergence, collaboration and competition

Matthew Britten, partner, insurance, at PwC Bermuda, said insurers and reinsurers must harness the momentum they have gained to reassess the future and determine what long-term changes are needed for their industry to serve a higher purpose in an uncertain world.

“One of the main economic lessons from the pandemic has been the importance of innovation, diversification and strategic agility in sustaining business resilience,” Mr Britten said. “And this has been heightened by a perfect storm of geopolitical instability, pressure on costs, competition for talent and changes in approaches to taxation globally.”

Although 63 per cent of insurance chief executive officers surveyed in PwC’s 25th annual global chief executive officer survey were quite confident about growth prospects in 2022, the volatility surrounding the macroeconomic climate made it all the more important for insurers to conduct robust scenario modelling as they refresh their strategies.

PwC defined five interconnected and mutually reinforcing strategic imperatives for all insurers to consider as they embark on their next phase of growth:

1. Go on the offensive with digital

2. Embrace customer-centric ecosystems to create new value

3. ESG needs to be embedded at an organisation’s core.

4. Win the race for talent

5. Put a premium on execution

For the full report see: www.pwc.com/gx/en/financial-services/fs-2025/pwc-insurance2025.pdf

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Published May 20, 2022 at 7:53 am (Updated May 20, 2022 at 7:53 am)

Global protection gap could widen by 28% by 2025

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