The insurance world is changing fundamentally: the outlook is one of low interest rates, new geographical markets and consumer segments.
Regulators and regulations impose new means of reporting and measures of capital and profits. Property and casualty insurance are facing small margins and few growth opportunities, whereas the life insurance market is further declining.
Customers, consumers and corporates expect to be able to select products, defined and driven by their specific needs, preferences and convenience.
Executing closed book strategies is key in order to survive. At the same time, the digital revolution is impacting the entire insurance value chain, as other industries from e-retailers to automotive enter insurance markets, and pension funds and hedge funds finance capital market solutions. At the centre of this transformation into a more connected world are customers, consumers or corporates. They expect to be able to select products, defined and driven by their specific needs, preferences and convenience.
Four ingredients to achieve long-term improvement
In our view, insurers should build upon four key aspects that are essential ingredients to generate value: focus, efficiency, agility and trust. To place their customers at the heart of their business and help them face the global megatrends over the coming decades. Harnessing these traits, integrating them into their business model and supporting operations are key activities. Activities to empower insurers to recognise, adapt to and succeed in the face of ever-shifting economic, political and market conditions. To position them to leverage new digital technologies, react to competitive threats and seize emerging opportunities.
Mix them all up
Insurers face several interrelated issues that need to be addressed today in order to achieve the desired long-term improvement on these four key aspects.
Focusing on rapidly changing customers
Changing preferences of the next generation of insurance customers demand fresh new thinking on product design and the distribution of products. Successful insurers leverage the opportunity to win over customers at every touch point. By doing so, customers are involved in the development of new types of insurance products that fit their needs in the current environment.
SMAC: Operating in an increasingly digital world
Digital technology is transforming the way insurers do business today and how they build strategies for future growth via social, mobile, analytics and cloud (SMAC). They see that harnessing digital technologies should enable them to improve the customer experience and better manage risk, thereby increasing revenues and enhancing efficiency. Key question is what to tackle first.
Driving value from your legacy systems
Legacy systems are the gateway to unlocking data from the entire value chain. While data and analytics are a key capability for insurers, with the volume, variety and velocity of data now available, many struggle to put strategy into action. Successful insurers incorporate data innovation and go beyond predicting future outcomes.
Organisation and culture play a pivotal role
To reflect the changing environment, insurers must also transform their human capital: recruit new and engage and train existing employees. An actionable, open culture is required to incorporate new concepts, ideas and innovative players and to create an environment of innovation and collaboration.Pick the right ingredients and mix them all up. A recipe for success? Well, we believe it’s only the start. Translation to a successful business model is key.
The KPMG Financial Services Strategy Consulting team is leading in supporting insurance companies with setting a clear strategy, defining their business model and optimizing the day to day operation. What is the durability of the current business model? Follow our blog posts to learn more.
Authors: Marit Wijngaards, Manager FS Strategic Consulting, and Tjerk Klompmaker, sr. Manager FS Strategic Consulting.