Life insurance business model 2025-2030 A European perspective

The end of life insurance has been predicted several times, be it with deregulation in 1994, the end of tax privileges in 2005, or the low-interest rate phase of the past few years or rather decades.

Does life insurance still have a future and what does it look like? Which trends will characterize life insurance in the future? And what (new) profitable business models will arise for insurers?

The study “Life insurance business model 2025-2030 – A European perspective” is dedicated to these and other questions. It is primarily aimed at people who are concerned with the strategic orientation of their life insurance company and would like to take a look at the future of life insurance in the next five to ten years.

Life insurance in transition

The industry is being driven by various new challenges: Political, economic, ecological, and technological factors require insurers to adapt, digitize and modernize their products and business models. What influences these and what effects have been worked out in detail in the study?

Developments in the context of occupational disability

For the second time since 1997, the DAV 2021 presented a new table for BU insurance. Since then, the probability of becoming unable to work, especially for insured persons over the age of 40, has fallen significantly by around 40 percent. Due to the increase in mental illnesses, women up to the age of 40 have a higher risk of being unable to work. However, it remains the case that mathematically every fourth employee in Germany becomes unable to work at least once. However, people who are unable to work return to work more quickly today. 1 The challenging business with old-age provision products could in the future prompt insurers to focus on the biometrics business, as there is market potential here.

Biometric products in focus

A study by Oliver Wyman, which presented the consequences for typical life insurers based on two basic scenarios, showed that model insurers with primarily unit-linked or biometric products are in a much better position. In the case of unit-linked products, a large part of the market risks can be passed on to the policyholder and the biometrics portfolio can use the margins priced into the products to increase the economic equity strength. 1Sales of BI insurance have stagnated at a relatively low level for years. However, the market potential for the biometrics business is there and insurers could focus on this in the future. Concerns about possible long-term consequences of Covid-19 could also increase interest in biometric products. The management consultancy Simon-Kucher & Partners assumes that insurers could grow by 150 percent in biometrics.

Business model: target group insurer

Which effects can lead to which business models? The business model of the target group insurer results, among other things, from the impact of the focus on biometric products.

As a target group insurer, the focus is on aligning the business processes with (the largest possible) “communities of practice”. This starts with the target group-specific, digital addressing of the selected customer group and goes through the appropriate design of the products to the development of a community for customer loyalty in the respective area. It is possible to address different target groups by building different brands.

Country-specific characteristics: For example France

After the analysis of drivers, effects, and possible business models, the next step is to present products and solutions within the framework of the respective business model approaches. With the help of qualitative interviews with experts from different countries/regions of Europe, country-specific characteristics were worked out and individual business model approaches were assigned to the countries/regions. France is discussed here as an example since the business model of the target group insurer predominates here.

Here, pensioners and the self-employed in particular are not addressed by a certain part of the products. There is an ever-growing market for individual product solutions for this target group. Wholesale brokers continue to focus on niches that have been neglected by large companies.

This is how actuaries look toward the future

Finally, the focus is once again directed to the actuaries in Germany. An online survey is used to ask for your opinion on the most important drivers and strategic requirements for life insurance, future business models, and product concepts. In this way, the previous, country-specific characteristics and business models are again intensively examined from a different perspective.

The focus of product development: pure unit-linked insurance and disability insurance

The 61 actuaries surveyed, 43 of whom come from insurance companies, focus in particular on pure unit-linked products in the pension sector and BU products in the field of biometrics. The low-interest rate is viewed as a key driver that is almost forcing new guarantee models. Meanwhile, new digital possibilities are also driving product development, which will result in greater flexibility in product design.