Largest European Insurers Navigate 2023 Amidst Demographic Shifts and Economic Uncertainties
Insurance industry in Europe exhibits continuous expansion / Profitability shows progression / Demographic shifts exert substantial influence on the sector
Europe's top 25 insurers have shown resilience in 2023, expanding their revenue by 5.3% compared to the previous year. While this growth is cause for celebration, the story differs dramatically between the Non-Life and Life segments.
The Non-Life segment, encompassing auto, home, and liability insurance, experienced a whopping 13% increase, contrasting the nearly 3% decrease in the Life segment, which includes life, disability, and long-term care insurance. The reasons for the contrasting growth can be attributed to several factors.
The increase in interest rates has made bank deposit products more attractive, causing customers to divert their savings away from life insurers. In the Non-Life segment, insurers have been able to implement necessary price hikes due to widespread inflation, allowing them to earn significantly higher revenues.
Disappointingly, the profits of Europe's large insurers had been on the decline for several years, but they managed to achieve a turnaround in 2023. Operating profit before taxes increased by a remarkable 46% compared to the previous year, and net income grew by 49%. This turnaround can be attributed to the insurers' ability to compensate for negative effects of inflation through higher prices. Fortunately, the current decline in inflation suggests profits will remain high in the foreseeable future.
Solvency, a crucial measure of financial stability, has remained at a high level, averaging 227.5%. Despite a slight increase of 0.5 percentage points compared to the previous year, none of the top 25 insurers are close to falling below the regulatory threshold of 100%.
While Europe's large insurers are currently in a stable position, they cannot ignore the looming demographic shifts on the horizon, specifically in Germany, which may pose significant challenges. Due to differing demographic developments across Europe, the authors of the latest European Insurance Study (EIS) by strategy, management, and IT consultancy zeb focused on the demographic changes in Germany.
In Germany, the aging and shrinking population presents a significant challenge for insurers. They will need to adapt their business models and strategies to address the changing needs and demographics of their customer base. This may include offering new products and services, diversifying revenue streams, and investing in digital technologies to improve efficiency and reach new customers.
The demographic shift is hitting German insurers hard. Their customer base and business model are changing, as is their workforce, the foundation of their organization. Younger and attractive target groups are shrinking, and it's uncertain if the 60-80 age group, which traditionally requires less insurance, can compensate. Profitability shows a less uniform picture, with costs likely to rise due to personnel and IT measures, while being spread over lower premium volumes.
Insurers have recognized the need for action and are addressing the impacts of demographic change in various dimensions. Measures include attracting young customers and implementing modern HR management, often neglecting the potential of employee retention.
zeb partner Dieter Kipp, co-author of the study, concludes: "The demographic shift will be a major challenge for German insurers. However, they are not helpless in the face of these impacts. They can be mastered - with decisive and, above all, timely measures."
For more information on the European Insurance Study by zeb, visit European Insurance Study 2024 | zeb consulting
Press Contact:Franz-Josef ReuterHead of Public & International AffairsPhone: +49.251.97128.347Email: [email protected]
Original Content by: zeb consulting, transmitted through news aktuell
Finance is a key factor in the growth and performance of Europe's large insurers, as demonstrated by the 46% increase in operating profit before taxes and 49% growth in net income in 2023.
strategic shifts will be necessary for insurers to compensate for changes in customer needs and demographics, particularly in Germany, where an aging and shrinking population presents a significant challenge for the insurance industry.
