The economic environment has stabilized for European insurers, but uncertainty in the market will continue until European Union policymakers find a long-term solution to the Eurozone challenges, including high unemployment and stagnant economic growth, according to A.M. Best. And, in its report, “European Insurers Experience Improved Environment, but Challenges Remain,” the rating agency said non-life and life insurers in this market continue to respond by adjusting product offerings and adapting reinsurance purchasing in response to the low-yield environment as they increase their focus on risk management.

In the past year, insurers have taken significant steps to improve their capital positions, including the de-risking of investment portfolios, re-engineering of products and refining of asset-liability matching strategies, according to A.M. Best’s report. The report also notes that many of the large European insurance groups are reviewing their overall reinsurance purchasing.

“European insurers are seeking a more centralized purchasing of reinsurance as they increasingly focus on enterprise risk management (ERM) and attempt to protect consolidated group balance sheets,” said Stefan Holzberger, managing director, analytics, A.M. Best. “ERM encourages complex insurance organizations to develop a risk appetite at the group level and manage it holistically through targeted reinsurance protection, rather than on a silo basis.”

Another change in the European market is on the distribution side. According to a report from Accenture, the total annual volume of P&C and life insurance policies sold through digital channels in Europe could reach €25 billion in 2016, which is more than double the 2012 value of €12 billion. The study, which is based on a survey of 78 insurers across Europe, predicts policies sold through digital channels will account for 18 percent of European insurers’ total annual new business premium volume in 2016, compared to 11 percent in 2013. The complexities of managing changes across physical channels is perceived by insurers in Europe as the most important challenge in the digital transformation of their distribution, cited by 85 percent of respondents. Other significant barriers include the constraints of their IT legacy systems (81 percent) and the inability of their organization to act quickly (81 percent).

Also 89 percent are expecting competition to intensify in the insurance distribution market over the next three years. Almost two-thirds (64 percent) believe that this competition will come from non-insurance players, such as Google, or e-commerce giants like Amazon.

“The shift to digital is inevitable for insurers and our study reveals that the industry is investing heavily to transform itself,” said Piercarlo Gera, global managing director of Accenture Distribution and Marketing Services. Survey respondents’ top priorities in their digital transformation strategy are consumer-focused: obtain a 360-degree customer view across all channels, streamline processes and increase customer self-service functionalities. “This transformation is critical to attract consumers who are becoming increasingly unwilling to buy a product or service that does not provide the same levels of convenience, simplicity and speed to which they have become accustomed from many other services they use every day. Especially, the ‘digital generation,’ or Generation D, which is permanently connected and used to purchasing books, electronic devices, music and travel online. Insurers must invest in capabilities with a clear strategy to improve the overall customer experience with every interaction.”

To respond to this, 78 percent are planning to increase investments in the digital transformation of their sales and distribution functions, and expect to spend €27 million, on average, in this space over the next three years. Over the next three years, insurers plan to invest in “big data management capabilities” (53 percent), “unstructured data management” such as voice and video (40 percent) and mobile technology (36 percent). Regarding back-office functions, respondents’ top investment priorities are “collaboration and social networking tools” (40 percent) and “Web-enabled reporting and data-mining” (36 percent).

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