The insurance sector is struggling to innovate, with half already being disrupted by new, more nimble competitors according to a KPMG global survey. Less than half of insurance companies have a formal innovation strategy, despite most saying their future success is closely tied to an ability to innovate, a KPMG International report issued today reveals. The study of 280 insurance leaders around the world also finds that half of insurers’ business models are being affected by disruption.
In A new world of opportunity: The insurance innovation imperative, insurance executives overwhelmingly acknowledge that innovation will drive future competitive advantage and growth, with 83 percent seeing it as key to their company’s prospects. But only one-third even try to be ‘first-movers’, which is key to successful innovation.
Martin Blake, KPMG Australia Head of Insurance said: “Rapid innovation has created significant challenges for insurers with 48 percent saying that their organisations are already experiencing disruption from new, more nimble competitors. It is not just start-ups that are creating innovation challenges for the insurance sector. 40 percent of respondents say that increased competition from their existing competitors would create significant challenges over the next 2 years.”
“However, the report also finds that – while insurers clearly recognise the innovation imperative – most are struggling to catalyse innovation within their own organisations. More than three-quarters (79%) say that they are already running just to keep up with their day-to-day requirements. Almost as many (74%) say they lack the internal core skills needed to drive innovation. Australian insurers were no exception to these problems.”
Martin Blake said: “The insurance industry will need to lift its game if it wants to increase innovation and fend off disruptors. Relatively few insurers try to get first-mover advantage and fewer than one in four had a specific person accountable for innovation. Collective responsibility is not proven best practice for developing and implementing a stream of innovation. Only 40 percent had a budget dedicated to innovation and less than 10 percent a hard measure of ROI from new products or services.”
He added: “The insurance industry seems caught in the innovator’s dilemma – much of the focus is on expanding products for existing customers or marketing current products to new customers. Blue-sky attempts at completely new offerings are not central to strategy, although regulation may be a problem here, which some see as a barrier to innovation in the industry. While many respondents collaborate with other companies and have partnerships with academics or other industries, many also look internally for ideas.
Insurers and intermediaries are increasingly finding that there is no ‘silver bullet’ to create a more innovative organisation; no ‘off the shelf’ package that drives new ideas. Instead, organisations will need to navigate their own path through this new world of opportunity, developing new business and operating models and new partnerships in order to out-compete and out-innovate their peers and bold new entrants.
”The KPMG International report, which contains insights, articles and quotes from top executives, board members and CEOs at both traditional insurance organisations including AMP, IAG, MetLife, SwissRe and AIG and new entrants1, identifies a number of key focus areas for those insurers seeking to enhance the results from investment in innovation. From cultural transformation through to re-thinking business models, the report leverages the KPMG network’s experience to provide practical advice and valuable viewpoints to help the insurance sector innovate.
With two-thirds of survey respondents saying they already look to other industries for inspiration and innovation models, the KPMG International report also includes leading insights from other fast-moving industries and sectors such as automotive, retail, healthcare, and technology, as well as functional viewpoints on areas such as customer focus, people and change, and models to encourage innovation.
KPMG International conducted on online poll in April 2015 with 280 Insurance industry executives across 20 countries. Sector profiles include: 25 percent Life and Health, 23 percent Property and Casualty, 29 percent Composite and 23 percent other. Of the organisations surveyed, 32 percent indicated their global revenues exceed $5B USD; 33 percent said they have between $500M and $4.9B in global revenue, and 36 said their global revenue is less than $500M.
90% of Australian respondents were C-suite, 54% of which were CEOs – a higher percentage than any other region.
 Including Achmea, AIG, AMP, Beagle Street, Bought By Many, Desjardins, Generali Group, IAG, LIME, MAPFRE, MetLife, MunichRe, RGA, and SwissRe.
Senior Communications Manager, KPMG Australia
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