Through COVID-19, the insurance industry – along with all business - has experienced a time of monumental challenge. The impacts of a health emergency have expanded into far-reaching economic and societal issues. It seems clear that as we emerge from this period, it will be into a new reality that will look very different to what existed before.
KPMG insurance professionals, have been reflecting intensively on – and widely discussing with clients – the nature of the upheaval taking place and what this may mean for insurers. The result is this series of materials that we hope will provide insight, challenge and inspiration.
As the situation evolves, it is imperative that insurance organizations continuously look to anticipate, adapt to and manage risks and assess the appropriateness and completeness of their strategy. KPMG’s four-phased framework: Reaction, Resilience, Recovery, New Reality can help organizations do this.
When considering what the new reality for insurance looks like, KPMG insurance professionals thought it was first crucial to understand seven key macro themes that are influencing the insurance sector, the economy and society. Then to fully understand the impact of COVID-19 and how insurers must transform their businesses, we felt it was imperative to view the organization across the entire insurance value chain, examining the implications across 11 key components of primary and supporting activities to gain an integrated view across the front, middle and back office.
It is clear that different industries have been affected by COVID-19 to different degrees and in different ways. In some industries, it has required a hard reset simply to survive. For insurance, the impact has been less radical, but still profoundly rooted in changing customer expectations. Insurers must transform their business and operating models to re-emerge stronger than before.
Individual insurers are at different stages of the journey, although most currently sit either in stage 2 (Resilience) or stage 3 (Recovery). This varies through several factors: geography, insurance line of business, and also how far along the journey to digitization an organization has come. In all of this, and across almost every aspect, becoming truly digitized is critical.
The goal must be to achieve a sustained resilience in the face of uncertainty. We have to recognize that uncertainty will continue in the future – it may be with us almost as a permanent state. Reaching the new reality is not an end-point therefore. It is itself an evolving state, but one where organizations are much better able to respond to uncertainty than they ever were before.
The journey started without organizations even realizing they were on it several months ago. Now, it is in insurers’ hands to pick up the pace and drive their transformation. Progressive companies are moving forward quickly and taking actions to transform. The time for action is now.
The seven macro themes impacting on insurers
Successful businesses are those that contemplate their future in the context of the macro themes around them, not just trends within their own sector. KPMG insurance professionals have identified seven such themes that we believe are particularly relevant to insurers and which they must respond to in a fundamental way in order to thrive in the new reality.
Investing in capabilities that respond to these trends could help pay long-term dividends for an insurer. The response, however, cannot be focused on just one or two of them at the expense of the others: they are all essential, individually and collectively. Nor can an insurer’s response be siloed in particular parts of the business – it must be embedded across the organization in an integrated and holistic manner.
Some of the seven themes have been with us for some time but have become greatly accentuated and accelerated in the wake of COVID-19 – such as financial resilience or climate change response.
Others, though, are almost entirely new. The fundamental importance of health in terms of staff, customers, products and economic impacts – what we call The Age of Biology – is one such example. The New Reality Workforce is another because, although remote working has been with us for many years, COVID-19 has elevated it to a new plain altogether, completely overturning old norms.
Many of these themes were already important to insurers but were being looked at through what we might call a ‘side of the desk’ mentality: they were ongoing projects to be progressed, but on the margins of core business concerns. Now, they must be front and center – strategic priorities that demand a strategic response.
We list it as number seven – but in fact the imperative to become Digital First, Digital Now is absolutely core and runs across every single macro theme. COVID-19 has shown us the inter-connectivity of multiple forces and the response must be digital ways of working and originating business that drive speed, efficiency and a better customer experience. Insurers have historically lagged other sectors in their digitization efforts – now, we have reached a watershed moment. It is time for insurance to catch up and re-emerge stronger and better.
Explore the seven macro themes specifc to insurance using the interactive component below.
The new reality and actionable insights across the value chain
In preparing for the new reality, KPMG insurance professionals have set out the eleven key components of the insurance value chain and we offer our insights on the actions that insurers should be contemplating. Naturally, these actions vary according to sub-sector – Commercial, Personal Lines, Life & Health - as customer needs, preferences and reasons for buying are quite different in each.
To thrive, insurers will need to be more connected across their front, middle and back offices than ever before. Strategic planning and decision-making must not be in siloes but must encompass the entire value chain – and be completely customer-led.
Although it varies in degree across personal and corporate lines, customers will increasingly be demanding greater flexibility, optionality, speed and personalized service. All aspects of an insurer’s operations need to be geared around meeting this. Digitization is mission critical.
But it is not only about front-end delivery. Other aspects are pre-requisites too: data security and privacy, cyber resilience, sound risk management. Customers need an insurer they can trust and rely on – and who they know will be there for them in their time of need. Financial resilience and sound long-term management are key.
Certainly, there is much for insurers to do. Rarely has the transformation agenda have been so pressing. However, through all of this, the industry should face the task with confidence. One of the great lessons that COVID-19 produced was that businesses, including insurance, are capable of doing much more, much faster than anyone probably ever believed. Insurers managed a massive transition to remote working in just a matter of weeks; policyholders were serviced; operations were maintained. It wasn’t straightforward, but so much was overcome.
This knowledge should be the inspiration for looking to the future. There is no doubt that insurers can rise to the challenges and embrace the necessary changes and opportunities afforded by the new reality.
Insurance value chain
Country insights
Explore your country’s specific insurance value chain using the interactive map below.