The insurance sector has endured a dramatic evolution in recent years, which has largely changed the direction of the industry and shifted its traditional expectations. Due to a range of dynamic external influences from technology to socioeconomic factors to climate change, these macro trends are poised to continue, changing the insurance industry along with it.
Because of these changes, Equinix in partnership with Acord, has set out to explore the new insurance landscape, looking at how regulatory issues, technological innovation and workforce issues are transforming the industry. These will be discussed in our upcoming whitepaper series.
Let us first begin by setting the scene. The global insurance industry is set to register US$6.1 trillion in premiums by 2015 with global insurance assets already totalling USD $23 trillion. Dramatically, by 2025, more than half of the world’s population will have moved into the “consuming class”, driving annual consumption in emerging markets to $30 trillion. Most of this emerging market growth will occur in cities where substantial infrastructure and transportation investment is also required.
From a market specific perspective, China is predicted to become the second largest insurance market over the next 10 years with 25 percent of the global insurance growth emerging from the mainland. The majority of the growth is stemming from the automotive sector, with analyst IHS Automotive forecasting that the global vehicle market will exceed 100m units by 2017 and around 108m in 2020. China, India and other emerging economies are positioned to account for 63 percent of automotive global sales in 2017, up from 58 percent in 2015.
There will also be newfound insurance opportunities in more developed Asian markets, like Japan, which have an increasingly wealthy aging population. As such, insurance coverage and old age provision will be more and more in demand.
Climate change is also taking the insurance industry by storm. Following record flooding and earthquake losses, natural catastrophes cost the insurance industry US$110 billion in 2011. Climate change research suggests that this may not be random occurrences but a harbinger of things to come. This coupled with a fast growing global population that’s forecasted to be 9.1 billion in 2050 puts more people and assets squarely in the path of disaster.
And lastly, data growth will also play a big role in the shift of the insurance industry in Asia-Pacific. Growth in mobile devices is expected to drive smartphone traffic to 50 times the size it was in 2012 by 2016. In 2017, the Asia-Pacific region is projected to generate the most mobile data traffic with 5.3 exabytes per month. Mobile network capacity will need to increase 20 to 25 times to handle the growing load.
According to Forrester, the domination of the mobile platform ‘…will remake insurance business models by 2020.’ This is based on the forecast that mobile will lead to increased customer engagement with policyholders, as well as new sales opportunities and better underwriting, as mobile technology will enable innovations in how customers buy and how insurers price insurance.
How Technology is supporting the insurance evolution
To remedy these changes, insurance giants are discovering that a direct way of driving efficient operations and improving underwriting and claims practices is via the consolidation of various legacy systems and the implementation of data analytics. Outsourcing data intensive requirements is also part of the strategy.
While the insurance industry is beset by rapid change, the rise of new technology and working models also presents a host of new opportunities for insurers to reshape their own business practices.
Because of this, insurance companies are turning to data centers as they will now require remote storage of equipment and systems that can be provided by locally sourced multi-tenanted data centers. Especially, with the rise of unpredictable weather patterns, use of proven and secure data center capacity will be one way to safeguard corporate operational lifeblood.
While this shift in the insurance industry is just beginning, these global shifts will radically alter the macro-environment of the insurance industry in near-time. Stay tuned, as coming up, we’ll take a look at the impact of technology in the industry.