McKinsey's latest research sheds light on the complex tapestry of the Asian insurance market, with a comprehensive exploration of both life and property and casualty insurance sectors.
According to the firm’s Global Insurance Report 2023, amidst a multitude of challenges including slower growth rates, profitability concerns, and a fragmented market, the Asian insurance industry stands at a pivotal junction. The region, however, is also a hotspot for innovation, particularly as insurers tackle the risks associated with climate change, cyber threats, and the dynamics of an urbanising demographic.
The life insurance industry in Asia is currently experiencing a significant transformation. According to the report, growth within this sector has decelerated, signalling a period of reassessment for insurers. In particular, the divide between established and emerging markets is prompting a recalibration of strategies to better align with evolving market conditions.
A key finding of the report is the expected expansion of Asia's mortality protection gap, which is projected to reach an alarming $119 trillion by 2030. This underscores the urgency for enhanced financial protection for individuals and their families.
The study also highlights the gains made by the top 10 multinational corporations in market share across nearly all surveyed markets from 2016 to 2021, with significant dominance in emergent markets like Malaysia and Thailand. Another notable trend in the region is the prevalence of bancassurance, which constitutes around 48% of global bancassurance premiums, dominating channels in several Asian markets.
A slowdown in life insurance uptake was noted from 2017 to 2022, particularly affected by stagnation in China and Hong Kong, with noticeable declines also seen in Taiwan amid the COVID-19 pandemic. The rapidly aging population of Asia, expected to surpass 800 million individuals over 60 by 2030, also poses challenges, as current pension systems reveal substantial coverage gaps.
Turning to the P&C sector, Asia's contribution to the global premium share is relatively modest at 20%, with market penetration rates that have remained static at 1% to 2% over the last decade. However, the annual growth rate of about 5% indicates a potential that is in line with growth rates in the Americas, outstripping those in EMEA.
Insurers face a range of challenges, including a rise in catastrophic claims and increasing operational costs, which have significantly pressured the sector's financial stability. The emergence of new risks, such as the prevalence of cyberattacks and the rapid adoption of electric vehicles, calls for robust insurance solutions that are responsive to an ever-changing risk landscape.
Asia, despite being the most targeted region for cyber threats, also has a cyber insurance market that is poised for rapid expansion, with expectations to triple by 2025. Digital distribution channels are evolving rapidly as well, with predictions that digitally embedded insurance will account for 10% of total premiums by 2030, which could amount to a considerable $270 billion.
In another report earlier this year, McKinsey highlighted the power of the embedded insurance market in Asia, a sector set for huge gains in the coming years, fuelling the next wave of growth and driving further penetration across markets.
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