24/11/2022 – In the short term, inflation will have the greatest impact on insurance companies, premiums and claims benefits will increase, consultants must prevent a wave of write-offs. Greater damage can also be expected from climate change, but the current situation of impending recession is slowing the trend towards sustainable action. In the long run, the imminent labor shortage poses a challenge to all market participants and could result in a “war for talent”, especially in sales.
- Study “The value of change – reloaded”
(Cover; Those: Telemark Marketing/FMVÖ)
Twelve board members of the 14 largest insurance companies operating in Austria have the Telemark Marketing Gebhard Zuber GmbH asked about their expectations for the future of the industry for their study ‘Value of Change – reloaded’.
In addition to digitalisation, which has received a major boost from the pandemic (VersicherungsJournal, November 23, 2022), these experts have addressed inflation, climate change and labor shortages as megatrends for the insurance sector.
The second part of the study, conducted by Robert Sobotka, CEO of Telemark and member of the board of directors of Financial Marketing Association FMVÖ, it was presented, deals with these trends that insurance companies will have to deal with in the coming years.
Inflation hits insurers hard
Insurance executives expect rising inflation to have the greatest impact on insurers in the short term. Real incomes will fall, the average Austrian will have to save money and question their running costs, says Sobotka.
Since most insurance contracts are indexed, premium income would also increase in the short term. However, this is offset by claims inflation, as the costs of benefits in the event of a claim also rise.
However, because claims are made after premiums have been paid, inflation could be overcompensated by an increase in premium income. However, the board members interviewed disagreed on this point.
The postponement of larger purchases should have little impact on the insurance sector: in this case, for example, existing vehicles or apartments would continue to be used and old contracts would continue.
Greater impact on life insurance
Life and pension products in particular will probably be affected. The monthly premiums are the highest for them and the benefit event is usually far off; therefore, these products would provide an easy way to reduce fixed costs.
Consultants are therefore asked to prevent a wave of cancellations; they should offer premium reductions or temporary waivers. However, it will be difficult to avoid a decline in life insurance premiums.
Customer uncertainty is already becoming apparent, especially with regard to new business in the life insurance segment, and the negotiations that have started are currently being delayed.
In the case of personal and property insurance, it can be expected that customers will seek to optimize their spending. Some experts therefore expect that comparison platforms will become more important in new businesses, while existing businesses should suffer less.
Climate change makes forecasting more difficult
Due to climate change, natural disasters are more striking than before and cause greater damage. According to the study, this makes it more difficult to predict damages and thus also to calculate premiums.
The higher risks would also hide the risk of underinsurance; Consultants are required to inform their clients of contractual adjustments. However, it is questionable whether all customers can afford comprehensive protection.
In risk situations, in particular, there could no longer be insurable risks or at least significantly higher premiums; However, according to Sobotka, possible risk selection would mean moving away from the idea of a risk community.
At the same time, climate change could also represent a business opportunity for the sector: a repositioning of the image on core values such as protection and safety is conceivable. And some experts are also tackling compulsory legal insurance.
The trend towards sustainability has currently slowed down
While in the previous study the sustainable orientation of insurance companies was considered the most important trend, it now seems to have slowed down: the question arises whether sustainability can be allowed in times of energy crisis and impending recession.
But opinions differ on this, says Sobotka. What is certain, however, is that the boards of directors of insurance companies are reflecting intensely on the issue of sustainability and the application of ESG criteria.
Customers, on the other hand, “wouldn’t associate” sustainability with insurance at all, according to Sobotka; The only exceptions are “green” funds. Longer term, however, this will likely change.
Labor market gap in sales
Not all directors interviewed addressed the issue of the workforce; presumably this is therefore not yet a threat in some societies, according to Sobotka. In the medium term, however, the labor shortage can be expected to affect all market participants.
Even before the pandemic, it was difficult to find young employees to sell insurance; the current situation only exacerbates the problem. Currently, skilled employees are sought across all sectors and there is also a “war for talent” between sectors.
Above all, the age structure in sales is a concern; Brokers and sales reps have a high average age and a wave of retirements is imminent. In view of this, the question arises who will personally deal with insurance customers in the future.
Image problem
The main problem is that the insurance sector has an unattractive job profile. It is therefore necessary to position the image of the sector or the image of the insurance consultant in a more attractive way; Employer branding alone isn’t enough, Sobotka points out.
According to the study, the future is likely to bring a struggle for the few qualified candidates. If such employees can be found, the question arises whether they can be retained in the long term.
Due to the increase in home office activity, the tie to the business is likely to decrease. On the other hand, home office opportunities must now also be offered, which is what younger candidates in particular expect. Here, too, competition from other sectors is strong.
Additional information
The Value of Change – The Reloaded Study can be downloaded from the Telemark Marketing website PDF document (887 KB) can be downloaded.
