Industry analysis has found that the insurance industry has been experiencing a transformation marked by demographic shifts, swiftly changing customer demands, and advancements in digital technology and analytics. Amid this evolution, insurtechs, characterised by technology-driven innovation, have disrupted the industry with the rapid introduction of capabilities and offerings. Post-covid pandemic challenges, as well as the concepts of trust and social purpose have gained exceptional importance, influencing the industry’s course in innovative ways, a recent PWC report revealed.
Audit partner and newly appointed insurance leader at PWC Luxembourg, identified several challenges facing the insurance industry--such as increased demand for climate risk insurance, social purpose demands and changing regulations--in an interview with Delano. For Pucar, these include: “Regulatory [updates] including solvency II, the insurance distribution directive, and the revisions, and I can go on and on with the regulatory burden. And we’ve seen, like [in] many industries, a new form of competition, the disruption and exponential digital growth around. So, you see all of that and you’re just thinking, ‘Okay, what’s coming?’”
[There’s] a very rich ecosystem here in Luxembourg.
Luxembourg diversity
“Clearly, Luxembourg is a highly diverse market, [meaning] not only we have local players, but also international life and non-life insurance players, and professional reinsurers. The reinsurance captives help and support multinational industry or groups to manage properly their risk. They all work together [as] part of the value chain of providing risk coverage. An insurer without a reinsurer won't be able to offer the same type of coverage to the ultimate customers.”
A widening trust gap in an uncertain world
There is “a very rich ecosystem here in Luxembourg.” Pucar noted that specific trends apply more to the insurance market of Luxembourg, and due to the diversity and the complex environment, one single statement can’t address all market trends.
She highlighted the distinctive role of the insurance and reinsurance market during crucial moments in a customer's life, including life-changing events, disability, retirement, property damage or business interruption. Pucar underscored the crucial role of the trust factor in addressing a wide range of needs, spanning from emotional retail situations to catastrophic events.
Local insurance players are advised to position themselves effectively to respond and commit to protection, showcasing their responsiveness during critical moments, like how they responded to events such as the 2021 floods or 2022 hailstorm in Luxembourg. “Our market is very ready and conscious [for the] need to work on that trust component.”
Rapidly evolving customer needs and preferences
“Going beyond the standard service, what we see, customers want a more and more personalised experience, and they want the insurers [to be] capable [of] offering more of what we call those type of end-to-end solutions.”
Pucar outlined the broader perspective on the customer value chain, given intervention when the risk materialises, and what challenges it entails tied to customer expectations. She provided a concrete example: “The customer search [beyond] the protection, [for] having access to a broader service complementing the basic offering of the healthcare, [like having] a second opinion from a specialist. We’ve seen one of the players that has been moving and establishing partnership around telemedicine.”
Collaboration and competition
Requirements for becoming a trustworthy partner, which includes integration into a larger value chain and engaging with a broader ecosystem, are also key. She stated that the expected results of collaboration extend beyond customer benefits, with insurers connecting to the broader ecosystem and enhancing operational excellence, making the value proposition more effective and delivering greater value to customers.
As for competition, Pucar told Delano that “one could think that an insurer can be disrupted by a new entrant. If you want to remain relevant, are you going to be disrupted, by a fintech? Or by a new entrant, that could be coming [to the market], with a fully digital end-to-end solutions.”
“Long established players need to be aware that there is competition out there. And they are aware, there is competition. Either you go the partnership route, and you can work with those insurers [and] fintech [firms] so that you are part of the journey, [but] you also need to be conscious that there could be other players, who have access to [market] data, true competitors to you, if they would decide to go into insurance.”
Find PWC’s Insurance 2025 and beyond report .
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. .