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Insurance Industry Outlook: Insurers on the brink

Disrupt or be disrupted

The insurance industry is facing significant disruption. Traditional business models may be in jeopardy. Are insurers ready to rise to the occasion?

What are insurers up against?

Many insurance companies are facing existential challenges to the foundation of their value proposition. Among them are rising customer expectations for personalized products and services in an increasingly connected world, macro-shifts in the economy and culture that threaten to dismantle their traditional business models, as well as new categories of exposures that offer both growth opportunities and inherent bottom-line risks.

We believe the industry’s hesitance to take bolder, faster steps toward transformation may be the result of reliance on a series of what we call “orthodoxies”—core presumptions about the strength and uniqueness of an insurer’s traditional value proposition and business models. Many insurers have treated these orthodoxies as entry barriers effectively insulating them from being disrupted in a significant way by internal or external upstarts.

In this report, we:

  • Discuss each of the four orthodoxies
  • Elaborate on the risk of disruption
  • Consider how insurers might effectively disrupt themselves
  • Forecast how these market dynamics may play out over the next five years

Familiarity won’t insulate insurers from new competition

The first orthodoxy being undermined is the belief that consumer trust in established carriers with proven track records precludes wide-scale disruption by newcomers to the business. On the contrary, incumbents can no longer count on attracting and retaining customers on the basis of having long histories, high brand recognition, and extensive agent networks. Reputation challenges, weak connections with next-generation prospects, and game-changing technological innovations are combining to render such a presumption moot, leaving legacy carriers vulnerable to emerging alternative market players.

Our forecast:

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Key takeaways:


Reputation shortcomings, demographic shifts leave carriers vulnerable to disruption.

New platforms shake up the distribution system

The second orthodoxy we challenge is the presumption that since insurance is often a complex, opaque, and misunderstood product, the expertise and sales skills of the industry’s agent-based distribution system precludes widespread disruption by new types of providers.

Evolving technological platforms are helping to turn that conventional wisdom on its head and threaten to render intermediaries irrelevant for many insurance transactions as consumers have a host of new online shopping and purchase options at their disposal.

Our forecast:

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Key takeaway:


Web aggregators, direct sellers, social brokers challenge traditional agents.

Insurers no longer have a monopoly on assessing, pricing, and limiting risk

The third orthodoxy being neutralized by disruptive trends is the notion that insurers—individually or collectively—still have unique access to and expertise in the data and analytical capabilities required to underwrite and price most risks.

Given the rapid expansion in the amount and types of information becoming available via telematics and other IoT technologies, as well as ongoing advances in the ability to monetize what’s collected through artificial intelligence, innovative carriers as well as data-rich competitors from outside the industry may be poised to spark transformations in a number of insurance markets.

Our forecast:

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Key takeaway:


Greater connectivity generates new data sources and breeds heightened competition.

Insurers cope with new competition on risk pooling

The fourth orthodoxy goes to the heart of the industry’s business model. It’s the notion that since risk pooling is the key to a viable insurance market, the amount of capital assembled by carriers—individually and as a whole—cannot easily be replicated by potential competitors. That is no longer necessarily the case.

Our forecast:

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Key takeaway:


Alternative capacity sources undermine traditional carrier supremacy.

Disrupt or be disrupted

Disruption isn’t likely to be a singular event for insurers, but rather an ongoing challenge. As a result, efforts to mitigate the impact of disruptive trends, as well as capitalize on the growth opportunities they present, will be part of a continuous journey rather than a final destination.

Carriers will need to constantly innovate and experiment as they adapt to the accelerating evolution of technology and consumer expectations, reinventing their products, systems, and business models accordingly. Speed is of the essence, as insurers may not have much time in many cases to transform their operations, policies, and personnel in response to an emerging strategic threat or opportunity.

To start, insurers might try looking through the eyes of non-legacy competitors contemplating the potential to enter the market as a disruptor of the status quo. If they were starting an insurance company from scratch today.

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Explore additional resources

What’s on the horizon for the financial services industry?
  • Take a Closer Look for interviews with our industry leadership
  • Read our blog series for a Quick Look at expected industry trends
Reimagine financial services:
  • Review our recent Dbriefs webcast to hear how disruptive trends will shake up the industry

Discover more Industry Outlooks

Look again.

In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.

Discover more Industry Outlooks.

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