Impact of Brexit: The referendum of Britain to exit Eurpoean Union has created unexpected volatility among the businesses. Organizations will have to rework on their strategies which were earlier pan-European. Although, current signals suggest limited and cautious adaptation by the market, but Brexit may lead to series of other legislative acts in a wave of nationalism around the world and such a wave would constrain the growth and social mobility which the companies have been enjoying for the past few decades to grow.Economic1. Insurance Relevance to the Economy: Globally, the insurance premium has decreased over the decade and as of today it stands to being 2.
0 percent of the GDP which was 2.2 percent a decade ago- The reason for this being the significant drop among the countries in Europe. However, countries like India, China and Latin America are some of the bright spots and show a growth. The chart below compares the property-casualty premium and GDP for the top 50 countries over the last 10 years. 2.
Need for insurance in Emerging Economies: Emerging Economies like India which are undergoing the Economic transition there is tremendous potential for growth because there is need for insurance of health, property etc which is still at a very nascent stage. For example, around 40 million people in India suffer financial crises due to health issues. Aon can capitalize on this opportunity by creating products for these markets. Social1. Social media influence on younger generations: In the age of internet-enabled world, The younger generations which have grown up in this age are highly influenced by Social media as it ensures that the cnsumers are aware about their own needs and the options available to them.
It provides them a greater transparency in terms of pricing and also gives them the voice if they are not satisfied with the product or service standards which are set tremendously high by the new age technology service companies and the insurance companies are finding it very difficult to compete, which they have to change in order to compete and influence the new generation.2. Rapid growth of Takaful: Takaful, an insurance form compliant with Islamic law is rapidly growing in the Asian and Middle East countries where the insurance has not played a very significant role till now. According to Ernst & Young, Global contributions of Takaful have been growing annually at 14 percent and are forecasted to reach USD 20 billion by 2019 and are expected to maintain strong growth, driven by the slamic banking sector strength and the government initiatives.
This niche but growing segment deserves the industry attention.Technological1. Implications on insurance due to Autonomous vehicles: The personal motor insurance segment contributes around 47 percent of the global insurance premium and is the most significant contributor, but due to the self-driving technology and autonomus vehicles the research experts suggest that the frequency of accidents will decrease sharply while the severity will modestly increase resulting in reduction of premiums for the insurance industry putting pressure to find new avenues to replace the lost revenue. Estimated values suggest that the premiums will fall by around 20 percent compared to their level in 2015 till 2035 and by 2050, the premiums would drop by more than 40 percent as the technology is fully adopted.2.
Issues realted to Cyber security: Cyber risk has become more than an IT issue and presents and an opportunit for insurance industry to play a major role to help the businesses address this omnipresent and emerging risk. According to the estimates by Global Cuncil on Internet Governance, the cyber crimes costs could grow to as high as USD 2 to 3 trillion by 2020. The Cyber insurance premiums have grown over 30 to 40 percent annually from USD 600 million in 2010 to USD 2 billion in 2015 which is expected to continue through 2020.
Legal1. Impact of changes in healthcare industry regulatory policies: The healthcare industry has seen significant changes in order to improve the overall efficiency, these changes related to reimburesements and other services related to it in countries like USA and Canada would have an impact on the margins of the companies like Aon operating in the insurance segment.Environmental1. Change in climate: Climate change has become one of the biggest risk and Governments are looking for innovative ways to spread the financial risk. One such initiative is when G7 Countries top Insurers teamed up to address Climate Change insurance related discussions and create new models address these contnously evolving and upcoming risks.References1.
G7 Countries, Top Insurers Team Up for Climate Change Resiliencehttp://web.unep.org/newscentre/newscentre/g7-countries-top-insurers-team-climate-change-resilience2. Pwc 2017 insurance industry top issueshttps://www.pwc.
com/us/en/insurance/publications/assets/pwc-2017-insurance-top-issues-tax.pdf3. Analytics Homeowners ROE Outlookhttp://thoughtleadership.
aonbenfield.com/Documents/20171016-ab-analytics-homeowners-roe-outlook.pdf4. Aon Third Quarter 2017 reporthttp://ir.aon.
com/about-aon/investor-relations/investor-news/news-release-details/2017/Aon-Reports-Third-Quarter-2017-Results/default.aspx5. Aon article on ‘Open architecture will drive new growth’http://ir.aon.com/about-aon/investor-relations/investor-news/news-release-details/2017/Open-architecture-innovation-will-drive-new-growth-for-insurers-according-to-Aon-GIMO-report/default.
aspx6. Aon catastrophe reporthttp://ir.aon.com/about-aon/investor-relations/investor-news/news-release-details/2017/Global-economy-suffers-53bn-natural-disaster-loss-during-1H-2017-according-to-Aon-catastrophe-report/default.
aspx7. Aon GIMO 2017http://thoughtleadership.aonbenfield.com/documents/20160911-ab-analytics-gimo.
pdf8. Aon GIMO 2016http://thoughtleadership.aonbenfield.com/Documents/20170910-ab-analytics-gimo-2017.pdf 9.
Aon’s Inorganic Growth Impresses, Rising Debt Level a Draghttp://www.nasdaq.com/article/aons-inorganic-growth-impresses-rising-debt-level-a-drag-cm890246