The future of P&C insurance

The future of P&C insurance

Fourth edition of "KPMG Insurance Thinking Ahead: How insurers can still be successful in the saturated P&C insurance market"


Property, liability, accident or vehicle insurance are the current darlings of the German insurance industry. Almost all insurers desire to grow in the property/casualty insurance segment  - since the 2008 financial crisis triggered an ongoing phase of low interest rates that made the previous favourite, life insurance, less attractive.

But the potential of P&C insurance is limited. The market is already well saturated. Competition between providers is becoming cut-throat. "On top of that, the insurance industry is in the middle of probably the biggest transformation in its history", says Markus Heyen, Partner at KPMG in Germany. He notes that this transition process has been instigated by the megatrend of digitalisation, and could influence several aspects of P&C insurance, particularly customer behaviour, sales forms and premium volumes.

We expect that future growth in P&C insurance will come from business within 'ecosystems'. By 2030, this business will account for almost 15% of premium volume  - and almost 50% of the profitability of the P&C market.

Faced with this situation, what are the strategic options for insurers? Our study, "The future of P&C insurance", cites three lines of action that are generally possible:

  • setting up internal ecosystems
  • entering into partnerships in ecosystems
  • focusing on the 'traditional business'

Let's look at these strategies individually:

Setting up internal ecosystems

In the age of digitalisation, customer requirements are increasing, and they want more than just insurance. Companies should focus on more comprehensive offers that address consumers' fundamental interests, for example security, health and mobility. Insurers can build ecosystems around such needs. 

Ecosystems are open networks set up by companies who focus their products and services on a customer interest. However, there are considerable hurdles along this path, which is why only a few insurers (generally the larger ones) will be able to successfully take it.

Entering into partnerships in ecosystems

Rather than building an internal ecosystem, insurers can join already existing or newly emerging networks. If insurers are to do this, it is important that they have suitable technical architecture to facilitate quick and seamless integration into the ecosystem and with its participants. 

It is also key for insurers to demonstrate what added value the ecosystem provides beyond the insurance service  - for example in the form of risk management services or incident management. However, insurance companies should bear in mind that there are also strategic risks involved in being part of such a network  - bigger than the risks in today's collaborations.

Focusing on the traditional business

One potentially profitable option is to continue to concentrate on the traditional insurance business and to sell products through the familiar sales channels. Although market volume in traditional insurance is expected to decrease, it is still predicted to amount to between EUR 31 and 32 billion in 2030. 

But this doesn't mean that everything should stay as it was. To successfully implement this strategy, insurers need attractive products that represent good value for money, highly efficient processes and, above all, access to their own sales force. Despite the size of this segment, we are talking about a shrinking market with declining profitability. To survive under these circumstances, firms must be competitive and able to adapt quickly.

Fourth edition of "KPMG Insurance Thinking Ahead" 

How have individual providers managed to sustain profitable growth in this environment in recent years? On what scale could insurance volumes be processed via ecosystems by 2030? And how can insurers position themselves on the market? You can find answers to these questions in the fourth edition of "KPMG Insurance Thinking Ahead" - in our study "The future of P&C insurance".

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