The insurance industry is no longer predictable
The insurance business, once stable and predictable, is no more. Growing without sacrificing profitability is a challenge, climate change is irrevocably affecting certain risk profiles, distribution needs have become truly omnichannel and customers expect products tailored to them. Meanwhile, technology continues its relentless advance and an ecosystem of emerging players threatens to dent customer acquisition. As a result, industry leaders must now make a series of conscious and aggressive strategic decisions to succeed. Incremental change or the hope of avoiding change altogether are no longer viable options.
The difficulty in meeting these challenges is compounded by the ways in which the COVID-19 pandemic has accelerated them. Customer and employee expectations have changed more in 18 months than in the previous two decades. This put tremendous pressure on the industry and operators had to adapt virtually, in some cases literally overnight. Despite the ups and downs of the pandemic, the pace of change has remained unstoppable.
Commitment is an act, not just a word
Despite disruption and new entrants trying to take advantage of it, the good news for many operators is that they still have a competitive advantage that others cannot easily replicate. There is room for multiple players in most market segments, but as not all competitive levers are fully or equally available to all, insurers tend to focus on one of the following five areas: 1 - digital, data and integration; 2 - brand and distribution; 3 - superior and innovative products; 4- strategic alliances; 5 - Effective structuring.
Unfortunately, while most insurers try to focus on their strengths, they often under-invest in these areas and fail to act urgently, leading to a rush to the middle. We tell our customers that they must fully fund and support the way they play and take responsibility for the results. In other words, commitment without action won't get you very far.
While shipping companies could get away with a messier approach in the past, this is no longer the case. Private equity, wealth managers and other new entrants are moving quickly, with great focus and discipline, to capitalize on industry changes. Companies that continue to operate in vague three- to five-year terms and lack strategic focus are likely to lose market share and perhaps even end up being acquired by someone else.
Companies that continue to operate in vague three- to five-year terms and lack strategic focus are likely to lose market share and perhaps even end up being acquired by someone else.
Real-life examples: ways to play
Large operators do not rely on past success. They define new ways to stay relevant and grow.
Data and Integration: Operator to Digital Simplification
Leverage advanced technology and data capabilities to create a seamless digital experience, from quoting and selling to claims. It offers simplicity and competitive pricing.
Distribution: Ecosystem Orchestrator
Creates an integrated ecosystem (often through partnerships) that offers customers "more than just insurance" by focusing on distribution and delivering products to win at the point of sale.
Products: Unmet needs customizer
Create innovative, differentiated and customized products to address underserved/underserved segments or new and emerging risks through advanced analytics and consumption-based pricing.
Partnerships: Platform Services Innovator
It extends core capabilities by offering products and services to other operators, resellers or other related businesses. Create scale by funding differentiated skills and experiences.
Structuring: Creator of economic value
Uses a lean operations approach to be competitively priced and enable investments in key strategic areas.
What makes a winner?
Based on our experience working with all segments of the industry, we've found that the most successful insurers in today's environment share some key characteristics. In particular they:
Say "no" to what doesn't fit
Set a strategic direction and say "no" to what doesn't fit. It is not enough just to set financial goals. Committing to a way of playing and then doing everything you've done before while funding whatever comes up isnoa strategic direction. Leaders know how to set priorities.
Fully fund your strategy
They don't make big bets or dilute important investments through allocations in less important areas. It should be noted that they are generally able to make these investments because they have implemented structural, financial, and fiscal approaches that minimize their expense ratios.
Get creative with products
They can identify new product categories (rather than just adding new features) and have the brand power to deliver them. For example, early adopters are designing products that address two increasingly important issues: the environmental, social and corporate governance (ESG) concerns of stakeholders and the still overlooked employer as a source market for a variety of financial services needs. , particularly retirement and university . Savings and payments for caring for children or the elderly.
Join associations and do business
Participate in partnerships and make agreements to achieve strategic objectives. Inorganic strategies have a long history in the industry, but have recently accelerated as operators focus on core competencies and technology upgrades. In fact, partnerships and deals have become a necessity for most operators to support their chosen forms of play. You participate in ecosystems and invest in InsurTech. While most of these types of investments don't change things on their own, they are worthwhile moving the acquiring company closer to a strategic objective.
That said, the world's best InsurTech ecosystems and innovations won't help you if they don't fit your strategy or if you don't execute your strategy properly. When operators find new partners, technologies and business models that align with their core principles or strategic plan for growth, they can prove their worth and decide whether to embrace innovation or stay in the partnership.
60% of consumers do not feel financially secure or are not covered for their emergencies and long-term security needs.
Technology platforms driving strategy
Even a clear and consistent strategy will fail if your technology doesn't allow for it. We haven't spoken to a single business leader who doesn't recognize that investing in new technologies is the best way to improve market access, risk selection and management, financial reporting quality, and customer service capabilities. However, we've seen that many operators are not adhering to a coherent strategy that goes beyond "digitization". There is often a lack of clarity and therefore nebulous objectives about how these high investments relate to the business. The discussion above about funding a competitive advantage also applies here. Senders should invest fully in ways that build on their strengths and hold the organization accountable for results. At the risk of repeating ourselves, we've seen time and time again that many traders simply don't do this. Customers (and employees) increasingly expect working with insurers to be as easy as working with an online retailer, and newcomers are giving them exactly what they want. If you can't do that, you lose companies and employees.
A truly strategic technology platform includes:
- A central processing system
- Digital data and integration options
- Customer and user oriented systems
- Reporting and compliance platforms
A central processing system
A central processing system that efficiently issues policies and contracts, authorizes payments, and tracks finances. You don't need embellishments per se, but you do need something that does the essential job of helping you climb faster.
Digital data and integration options
Digital data and integration capabilities that enable access and understanding of your own and third-party data to inform management decisions and enable new capabilities.
Customer/user oriented systems
The absolutely customer-critical and user-critical systems that support your call centers, customer chats, and fulfillment locations. They allow carrier representatives to instantly discover customer identities and service histories to quickly resolve customer issues. In addition, an effective integration layer facilitates the rapid onboarding of new partners and solutions for your digital assets.
Reporting and compliance platforms
Reporting and compliance platforms that deliver high-quality data, facilitate accurate accounting and financial reporting, and enable effective compliance.
Cloud because insurers no longer need (and, more importantly, probably shouldn't) support their own infrastructure. Those who are at risk of sacrificing operational agility. Almost everything in the insurance industry eventually becomes a margin game, with the benefit of allowing carriers to scale effectively, reduce costs and achieve broad price competitiveness. Operators with adaptive cores that can be quickly configured for new innovations, a key advantage of cloud technology, can achieve this scale faster.
Changing customer expectations from 2018 to 2021
Source: PwC 2018 and 2021 surveys of 6,000 insurance customers.
the way forward
None of this is easy, and no company has mastered all of these ways to make money. But we've never seen a truly competitive insurer that doesn't at least:
Set clear goals and stick to them.
Support business objectives with a technology strategy that builds on and integrates proprietary and third-party data.
Invest fully and take responsibility for achieving 1 and 2.
Whatever your business focuses on - data and integration, branding and distribution, products, strategic partnerships or structure - these three are absolutely essential.
A série 'Next in Insurance'
- To war for talents
- ESG Considerations
To war for talents
The workforce that brings your strategy to life and is key to your company's future
Insurers feel insecure in the war for talent. They often rightly feel that they lag behind other "sexier" industries when it comes to attracting and retaining the best people. However, recent changes in workers' expectations of their employers and in the very nature of work present insurers with a great opportunity to level the playing field. Companies that proactively and persuasively demonstrate flexibility and offer meaningful career paths with plenty of room for growth prove that insurance, like any other industry, can be professionally and personally rewarding. In other words, it's time for insurers to be offensive rather than defensive.
The growing breadth and importance of ESG considerations, from investment and underwriting strategy to public perception
The insurance industry has long paid close attention to environmental issues, as they directly affect the way insurers assess and rank risks and settle claims. But sustainability and governance are becoming equally important. In the first case, insurers are undergoing a major overhaul of their business models. For example, what's the right balance between hedging against weather-related risks and underwriting initiatives that can increase those same risks? Such sustainability concerns are directly related to governance issues. Insurance leaders are now required to comply with formal and increasingly detailed ESG reporting requirements, covering everything from their investments to how they underwrite their business. And investors, customers and the workforce are watching closely.
- Changing risk profiles and risk exposure.
- Massive amounts of insurance data.
- Data security and privacy.
- Digital modernization.
Climate change, ESG responsibilities and cyber risks are just some of the key concerns facing the insurance market in 2023, the latest Annual Insurance Review from international law firm RPC has revealed.What is the outlook for 2022 insurance? ›
Insurers are buckled up to accelerate growth in 2022
Despite lingering concerns about COVID-19 variants, most insurers expect an accelerating economic recovery and additional digital technology investments in 2022. About one-third of the survey respondents expect revenues to be “significantly better” next year.
Unpredictability, lack of end-to-end oversight, and changing consumer expectations are challenging the insurance industry. In an unpredictable world, insurance has never been more important; everyone wants to minimise risk and protect against financial loss.What is the future of insurance industry? ›
The future of insurance is now. Learn how emerging technologies including hybrid cloud and AI can elevate policyholder experiences, reduce operational costs and accelerate new products and services to market.What is one of the biggest challenges in selling insurance? ›
Customer expectations can continually change, and keeping up with these shifts is one of the biggest challenges of being an insurance agent. Whether clients are becoming more price-sensitive, are changing their communication preferences, or anything else, insurance agents need to stay on top of evolving expectations.Why are people leaving the insurance industry? ›
Compensation, work-life balance and benefits are the most frequently cited reasons for leaving the insurance industry, according to a study by Vertafore.Which are the five 5 life events which could decrease premiums for auto insurance? ›
- Getting Married. Good news for honeymooners: in most cases, being married will lower your car insurance rates! ...
- Buying a Home. One of the biggest milestones in life is buying your first home. ...
- Adding a Teen Driver. ...
- Getting Divorced.
THE HARD MARKET CONTINUES
Overall, the size of rate increases has decreased since late 2020, and 2022 rate hikes are expected to moderate throughout the year, particularly in the property and casualty sector.
- HDFC Life Click 2 Protect Plus. Term.
- SBI Life eShield. Term.
- Future Generali Care Plus. Rural.
- Aviva i-Life. Term.
- Birla Sun Life BSLI Protect@Ease Plan. Term.
- Max Life Online Term Plan Plus Basic Life Cover. Term.
- LIC's Jeevan Pragati Plan. Endowment.
- PNB MetLife Mera Term Plan. Term.
Insurify says the main causes of the predicted increase are: “Americans are driving more, causing more total accidents; “Auto repair costs are rising, making every accident more expensive; “Inflation is increasing costs of all goods and services; and.What is one current industry trends in insurance? ›
Artificial intelligence (AI)
AI is significantly making its mark in the insurance industry and is one of the key trends on the list. AI is transforming critical insurance processes such as underwriting, pricing, and claims.
According to a recent study from the NAIC, the core risks facing an insurance company are “underwriting, credit, market, operational, liquidity risks, etc.” The study also lists the data types that must be protected via risk management and classifies such data as “nonpublic” information.How Millennials are changing the insurance industry? ›
The ability to tailor their coverages and policies to the right audience can be invaluable to insurance companies. The data-driven, computer savvy, innovative mentality commonly attributed to millennials make them prime candidates to help carriers create insurance products that truly speak to the right audience.Is the main challenge of the insurance industry? ›
Low-interest rates, keeping up with technological advancements, and the expectations to deliver profitable and sustainable growth amidst this change are some of the problems in the insurance industry.What are the 4 types of risk in insurance? ›
Risk Types — a number of different ways in which risks are categorized. A few categories that are commonly used are market risk, credit risk, operational risk, strategic risk, liquidity risk, and event risk.What is causing the hard insurance market? ›
Key Takeaways. A hard insurance market is when there is high demand for insurance coverage and low appetite to insure. A soft market is when there is little demand for insurance coverage and companies are competing for business. Insurers make money from underwriting profit and investment income.What is the best topic for insurance? ›
- Health Insurance Importance. ...
- Organizational Behavior in Insurance Marketing Group. ...
- Life Insurance Ethical Issues. ...
- A Comparison of Construction Surety Bond and Insurance. ...
- Capital Mortgage Insurance Corporation. ...
- The Issues in RACQ Insurance.
The sharp decline comes after Sitharaman proposed to tax total returns upon maturity of life insurance policies (except ULIPs) issued on or after April 1, 2023, if the aggregate premium of such policies is more than 500,000 rupees a year.Which technology is creating disruption in the insurance industry? ›
For the insurance industry, the implications of the IoT are about more than adding additional data points to measure risk, retain customers or grow revenue. IoT technology is disruptive, offering the opportunity to be at the forefront of innovation.
- Digitizing small commercial.
- Improving quality of analytical data.
- Using data to improve experiences.
Overview of the Insurance Field
While there are many kinds of insurance (ranging from auto insurance to health insurance), the most lucrative career in the insurance field is for those selling life insurance.
Your insurance premiums are primarily based on the specific risks you face and your individual claims experience, however factors such as claims inflation, investment returns and the expenses in providing the insurance service itself will have an impact.Why do so many insurance agents fail? ›
Most agents quit because they can't get enough sales to support themselves and their families. The only way to change that is to learn how to get more leads, better leads, and follow up on them. People go on fact-finding missions online. They don't care who answers their question, as long as they get answers.How is Covid affecting the insurance industry? ›
The staggering loss of life due to COVID-19 — especially among vulnerable older adults who are more likely to hold life insurance policies — led life insurance companies to pay out over $90 billion in 2020, a 15.4% increase over 2019, the largest year-over-year rise since the 1918 influenza pandemic.What are the 5 P's in insurance? ›
Purpose, Planning, Preparation, Participation, P.S.What are the top 3 things you can do to lower your health insurance costs? ›
- You can't control when you get sick or injured. ...
- See if you're eligible for the tax credit subsidy. ...
- Choose an HMO. ...
- Choose a plan with a high deductible. ...
- Choose a plan that pairs with a health savings account. ...
- Related Items.
Not only do you prevent expensive speeding tickets or other moving violation costs, you also help keep your insurance rates lower by proving you're a less risky driver. Additionally, if you have a claims-free or violation-free history, you can receive additional discounts.What are the two challenges to the insurance sector? ›
Two of the primary cost drivers in the industry are compliance with regulatory requirements and products marketing. For instance, to stay ahead, insurance companies need to come up with more products and therefore expend more.
- Talent risk.
- Geopolitical risk.
- Information security.
- Resilience risk.
- Third-party risk.
- Conduct risk.
- Climate risk.
- Regulatory risk.
The Indian Insurance Sector is basically divided into two categories – Life Insurance and Non-life Insurance. The Non-life Insurance sector is also termed as General Insurance. Both the Life Insurance and the Non-life Insurance is governed by the IRDAI (Insurance Regulatory and Development Authority of India).What is a SWOT analysis in insurance industry? ›
The swot analysis of the insurance industry explains the internal and external factors like strengths, weaknesses, available opportunities, and potential threats in the external environment.What are six insurable risks? ›
Most insurance providers only cover pure risks, or those risks that embody most or all of the main elements of insurable risk. These elements are "due to chance," definiteness and measurability, statistical predictability, lack of catastrophic exposure, random selection, and large loss exposure.What are the 5 main risk types that face businesses? ›
- Security and fraud risk. ...
- Compliance risk. ...
- Operational risk. ...
- Financial or economic risk. ...
- Reputational risk.