Insurance executives are getting down to action to drive profitable growth
Our recent survey of insurance CEOs indicates that they are bullish about their company's growth potential - 85 percent voiced confidence in their short-term growth prospects, yet nine out of 10 insurance CEOs said they expect to achieve less than five percent growth overall. These results are not entirely surprising as they suggest that insurance executives are starting to recognise that their businesses are being disrupted, and they are finally getting prepared to invest into transforming their businesses for the future.
For the past two years, I have hosted many of the world's leading insurers at KPMG's Insurance Industry Conference, where we surveyed their transformation expectations and activities. The data, while slightly less scientific than our CEO survey, has been telling: the number of attendees who said they were actively piloting Robotics Process Automation (RPA) projects almost tripled from last year; and insurance organisations are more likely to partner with outside organisations to drive innovation, as opposed to last year when they were focused on 'training' their employees to become more innovative.
Somewhat perplexingly, however, the CEO survey results indicate that insurers are not planning any major increases in their innovation budgets in the short-run, suggesting that most will likely continue to `play around the edges' with pilot projects and proof of concepts. While this is certainly an important step for insurers, it will take larger investments and more deliberate disruption to achieve the growth goals they seem to expect.
Certainly, technology and innovation is not the only path to revolutionary growth. Many insurance executives are now looking for alternative sources of revenue and tapping into new service areas for growth. For some commercial line writers, the focus has been on the Small-to-Medium Enterprise (SME) market segment, and in the life segment, the focus has moved towards improving customer segmentation and tapping into niche markets and underserved demographics. Meanwhile, many insurers are continuing to refocus their portfolios - jettisoning unprofitable businesses and segments, divesting non-core businesses or exiting low-margin markets.
The shift from protection to prevention is also giving insurance CEOs reason for optimism. Many believe that they need to get closer to their customers and increase their relevance, and in the past few months we have seen insurance leaders placing significant focus into becoming much more 'customer-centric'. Pursuing a truly customer centric way of life means transformation from front to middle to back office.
After years of smaller targeted improvements, insurance executives are finally getting down to much more significant actions. Rather than waiting to be disrupted, most now feel that they are starting to become disruptors themselves. Howerver, they recognise that transformational growth comes at a cost as implementing new technologies, establishing new systems and shifting business models takes time, investment and resources.
Ultimately, insurers are starting to recognise that they will need to spend their way to growth, and that means slower bottom line growth over the next few years. Immediate pain for long-term gain.
What can insurers do to achieve progress and long-term gain in today's disruptive market? Here are 5 tips for driving profitable growth: