Positive but slowing economic momentum will support modest global insurance premium growth of around 3% annually in real terms over the next two years, a 1 ppt improvement from 2018, according to the latest sigma report by Swiss Re Institute.
In both non-life and life, the emerging markets remain the main driver of growth, in particular China, the report titled “Global economic and insurance outlook 2020” says.
Global non-life premiums will grow by around 3% on an inflation-adjusted basis in 2018, and Swiss Re forecasts similar growth over the coming two years. The global aggregate is being driven by the emerging markets, where Swiss Re estimates 8% premium growth this year, and around the same over 2019 and 2020.
Non-life business in China and India has been particularly strong, with combined premiums up 12% in real terms this year. Agriculture insurance has been a main growth driver in both countries.
For 2018, Swiss Re expects a positive underwriting result for the global non-life sector of around 1% of premiums. This will be mostly driven by a lower loss burden from natural catastrophes compared to 2017.
In the next several years, in the absence of clear direction on rates, Swiss Re expects underwriting results to remain stable at current levels. The recent improvement of property rates has been mainly felt in regions that suffered a high natural catastrophe burden last year, and is expected to fade.
Swiss Re estimates that global life insurance premiums will grow by 1.6% in real terms this year, slightly slower than the average annual growth rate of the last five years. Premiums in the advanced markets will grow by 1.7%, while emerging market premium growth will likely be much slower than usual (Swiss Re forecast: +1.3%).
Overall profitability in life insurance has improved this year, with outperformance in the US. The ongoing low interest rate environment, however, will remain a challenge, says the report.
A main enabler of future profitability in insurance and overall industry growth will be technology and data. Information, once digitalised, is being used to improve processes across the insurance value chain, including underwriting and pricing decisions, and outreach to customers. Policy and claims management is becoming more efficient as machine learning and pattern recognition are used to analyse handwritten and unstructured documents to expedite and detect false claims. The integration of cognitive computing systems with voice recognition and text reading algorithms will eventually make it possible to extract meaningful information from all sources of data, including unstructured medical reports.
So far, insurers' investments in technology have led to some efficiency gains and compressed margins for the distribution system in commoditised lines, the report says. Technology such as telematics and advanced analytics can also be used to reduce claims frequency and severity, reduce fraud and lower claims costs.
In Swiss Re's view, the scope for digital disruption is much further reaching. Crucially, technology can facilitate access to new risk pools. In the long run, this will help close existing protection gaps and improve economic and social resilience.