Accenture has published a monograph titled Insurance Revenue Landscape 2025: Innovate for Resilience. The fifth slide of the deck is eye catching because of the numbers involved; it states as follows: “We expect $1.2 trillion of the $1.4 trillion in expected growth to come in existing products, which may give the false impression that staying the course is a viable plan. But insurers can no longer rely on familiar products, channels, and historic retention rates to drive profitability long-term. Rising costs, volatile markets, and increasing consumer demand for digital services show no sign of abating. Almost half a trillion dollars ($480 billion) of the $7.5 trillion in GWP expected in 5 years, or approximately 7 percent, would be heavily impacted by innovation, including $200 billion in new risks, product offerings and services.”
These are truly significant sums of money, and so the question arises: What’s in it for captive insurers?
Accenture (report is available for download with registration at the Accenture website) posits that the $200 billion figure will be divided into two parts: $160 billion in new product development and $40 billion of value-added services to support both existing and new products. They see this growth occurring in technology-enabled health and wellness, auto, and home products. Given that most captive insurance companies are focused on corporate risk mitigation, we can eliminate anything consumer based such as home products and private auto.
However, captives have always played a fairly substantial role in workers compensation and commercial auto, so the first two growth areas seem viable. We touched on workers compensation and how artificial intelligence is having an impact in a 2019 article titled “Musings on the State of Workers Compensation.” At the time, we were cautiously optimistic about the trends that were beginning to develop. Two years later, we find nothing that causes us to change our minds.