Fresh business opportunities

Thanks to economic growth in emerging markets, almost one billion new consumers are expected to enter the global marketplace in the next decade. By 2015, consumer spending power in these economies is forecast to rise from the current USD 4 trillion to USD 9 trillion - almost the current spending power of Western Europe. ¹

But while billions spend, millions more in the hugely expanded elderly population will be keeping a close eye on their saving accounts, hoping they have enough on which to live comfortably in a lengthy retirement.

Stacks of people…

Life insurers will probably find themselves offering protection against such “risks” as longevity as well as long-term care and health care costs. In the UK, for example, insurers are already increasing trading in annuities and pension accounts in the so-called “longevity risk” market, based on speculation about whether people will outlive their savings. And in May 2007, the UK’s Financial Services Authority warned life insurance companies that they may need to factor in still higher forecasts for life expectancy.

Health, wealth and hazards

As national health systems face increasing demand from a growing population of over-60s, there will inevitably be more opportunities for private health insurers. Medical savings accounts, or health savings accounts as they are known in the US, are already being seen as a form of self-insurance, designed to cover minor illness and non-essential treatment. Funds paid in earn interest, and they are income-tax-exempt as long as they go only towards medical care.

At the other end of the age range, there is a pressing need around the world to stimulate savings and investment among huge numbers of younger people who are now waking up to the fact that state and company pensions schemes will be inadequate.

…can also mean stacks of money for merchants.

Natural catastrophe modeling and research will take on even greater importance as more people and industries move to coastal areas prone to hurricanes, windstorms and flooding. In Florida, for example, the population has swollen from 13 million in 1990 to 18 million today as increasing numbers of people, both retired and younger, flock to the sunshine state despite its highly-publicized hurricane hazards.

On the other side of the world, China’s exposure to earthquakes, floods and typhoons is fuelling demand for natural catastrophe indemnity. With 80 percent of China’s foreign direct investment concentrated in seven coastal provinces and cities, the impact of a catastrophe is easily imagined. Environmental liability insurance will also assume added importance as developing economies expand in vulnerable regions.

Microinsurance and risk insights

Microinsurance will gain prominence as more insurers offer professional products and risk management tools to low income people who are playing a greater part in the globalized economy. Zurich has already recognized the significant unmet need in this respect, and has been one of the early movers among the major insurance companies in providing innovative products in Latin America. It has also entered a partnership with the Swiss Agency for Development and Cooperation, in collaboration with the International Labour Organization, to pursue a joint three-year microinsurance initiative. Its primary aim is to expand insurance cover to disadvantaged sectors of the population in countries across Africa, Asia and Latin America.

And everywhere, the emphasis on risk management will be paramount. Providing risk insights to customers, especially those in the commercial field, will be more important than ever.

Source:

1) The McKinsey Quarterly, Ten Trends to Watch, January 2006