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Every year, the management consultancy Horváth surveys board and management members at large insurance companies about their business outlook and top challenges. This year, the respondents are more optimistic than ever before according to Corona. The participants expect premium increases of around four percent for both 2023 and 2024 as a whole. This is about two percentage points more than in our previous surveys since 2020. "In view of the gloomy overall economic situation and the persistently high inflation rate, this outlook must be seen as positive," says Martin Müller, partner and insurance expert at the management consultancy Horváth. He adds that the premium growth is mainly due to price increases caused by inflation. Furthermore, the ambitious net-growth targets for contract elements are contributing to the positive outlook. With regard to the EBIT margin, insurers are also predominantly positive. 75 percent expect an increase in 2023 – in a sector comparison, this is the second highest value after the energy sector (77 percent). "Across all lines of business, net income in 2023 is expected to be higher than forecast in 2022. This is due to better results on the capital markets and higher premiums. Within the individual lines of business, of course, there may be a differentiated development," says Müller.
Profit potential depends on progress in digitalization
In the race for efficiency, clientele and margins, insurance companies are going "all in" on further digitalization. Digital transformation continues to top the list of management priorities. From service to sales to IT, companies are hoping that digital advances and innovations will give them further significant competitive advantages. But there is still a lot of groundwork to be done. When asked about the biggest challenges facing their industry, the most common answer is back-end optimization or the further development of the data ecosystem, ahead of dealing with the high inflation rate or regulatory requirements.
Price and revenue models are being revised in response to inflation
The biggest challenge currently facing the surveyed board members is price inflation. One indication of this is that the realignment of price and revenue models has gained in strategic importance compared with the previous year. Whereas in 2021 only about half of respondents described this field of action as an important management issue (52 percent), the figure is now more than three-quarters (77 percent). "Inflation-related premium adjustments are to be expected, for example, to compensate for increased expenditure on claims and benefits, and are the main driver of absolute premium growth," Müller explains. Capital market and interest rate developments have also come into sharper focus. 74 percent of insurers want to adjust their product portfolio and investment strategy. "This is also reflected in the increasing activities around life insurance in run-off and portfolio disposals," says the expert.
Focus on digitalization and cybersecurity
However, digitalization remains the biggest strategic priority for the industry. 80 percent of insurers are currently consider this a very high priority, and another 20 percent a high priority. This makes it the top topic since 2019. However, the focus is shifting from the customer interface to back-office processes and core IT systems. "This can also be interpreted as a reaction to the foreseeable shortage of skilled workers," says Martin Müller.
Cybersecurity is also gaining in importance. More than half of insurers view this field of action as a very high priority right now – protecting customer data and meeting regulatory requirements is enormously important. "It should not be forgotten, however, that this could also be an interesting growth area for the insurance industry on the product side," states the Horváth expert.
About the trend survey
For the industry survey, a representative sample of more than 20 board members from major insurance companies was interviewed. Intensive, qualitative interviews were conducted with the participants. These took place as part of Horváth's large-scale "CxO Priorities 2022" study, for which a total of 280 top managers were interviewed, mostly in June 2022.