Insurers plan to expand M&A activity as customers demand more from services
19 July 2019
- Majority think that over half of the growth in the insurance industry in the next five years will be driven by M&A;
- Expanding customer expectations identified as the biggest challenge in the next three years;
- More than six in ten (62%) believe new, non-traditional products are the key to attracting new customers;
- While 78% say Brexit is decreasing their M&A appetite at present, half (52%) expect to complete two or more deals over the next three years.
The majority (72%) of insurers think that over half of the growth in their industry in the next five years will be driven by mergers and acquisitions (M&A) activity, according to Deloitte.
According to the survey of 200 insurance leaders across the EMEA region, expanding customer expectations is the biggest challenge facing the insurance industry in the next three years. As a result, the majority of insurers (62%) believe new, non-traditional products are the key to attracting new customers.
Insurers are expecting to have to broaden their service offerings to include more than just the insurance protection element. Respondents cite value-adding non-insurance products including: cyber response support, security, plumbing and other household services as being most important to customers.
David Rush, head of insurance for Deloitte North and South Europe, said: “Customers’ expectations have evolved. Experience in other industries has taught them to expect more and they have become used to being able to access relevant services in one place. Despite the fact that insurers are bullish about the industry’s progress in adapting to the new digital age – 80% think the industry is keeping up with technological advancement – there has been little genuine disruption in the market so far.”
While 81% of insurers are planning partnerships in existing markets, almost half (44%) have firm plans to forge alliances to enter new territories. M&A is increasingly becoming the tactic of choice for those companies looking to grow their business and keep up with fast-moving technological change, with 49% saying the top driver for this activity is the need to expand products and service offerings.
Although more than three-quarters (78%) of all respondents say Brexit is decreasing their M&A appetite at present, in the longer term, deal making confidence abounds. More than half (52%) expect to complete two or more deals over the next three years.
Meanwhile, nearly all respondents (93%) say they will make M&A part of their growth strategy next year and in the long term.
Ian Sparshott, global insurance sector financial advisory leader at Deloitte, concludes: “Against a backdrop of surplus capital and continuing low GDP growth and interest rates, M&A remains a critical growth strategy for many insurers. The survey results suggest M&A activity will centre around core markets and products but also be used, either via acquisition or partnership, to access technologies that enable improvements within the industry. This could include distribution, new products, underwriting capabilities or claims process improvements. However the successful integration of newly acquired assets will be crucial in determining the success of this strategy.”
Note to editors
About the report
‘A demanding future: The four trends that define insurance in 2020’ is based on a survey of 200 CEOs, CFOs, CRO and CTOs in the EMEA region. 75 respondents represent property and casualty (P&C) insurers, 75 represent life insurance and annuity (L&A) and 50 represent reinsurance/global speciality. The survey included a combination of qualitative and quantitative questions. Results were analysed and collated by FT Remark and Deloitte.
In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.
Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms.
Deloitte LLP is a subsidiary of Deloitte NWE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.
The information contained in this press release is correct at the time of going to press.
For more information, please visit www.deloitte.co.uk
Member of Deloitte Touche Tohmatsu Limited