Accelerating transformation with M&A

The global insurance industry is changing. In recent years, insurance companies have grappled with the realities associated with geopolitical and economic uncertainties, demographic change, emerging risks and adapting to consumer behaviour.

Overall, these factors have led insurance companies to rethink their M&A as well as growth strategies and to realign their business models - including their partnerships and alliance strategies - so that they can continue to grow and succeed in a future that will be fundamentally different from the past.

This latest report provides key insights into global and regional M&A activity and trends. In it, we explain influences on the insurance industry and present future business models that insurance companies should consider when reviewing and developing their M&A and growth strategies to meet the accelerating pace of transformation and changing customer needs.

In the coming years, the transformation in the industry will continue to accelerate. Industry players will need to become more flexible and relevant from their customers' perspective - and differentiate themselves from the competition. In the search for ways to succeed in an uncertain world, leading insurance companies are likely to focus on a number of strategic initiatives that can be broadly grouped into four interrelated themes:

Organisations in the insurance industry will continue to rationalise their business and service portfolios. In this context, they will redefine their core business for the future, identify and evaluate adjacent markets, new value propositions and customer segments, re-evaluate existing products, brands and value propositions, and identify and implement innovative revenue models. This transformation will be enabled and driven by M&A as well as partnerships and alliances.

The drive for higher speed, lower costs and greater efficiency through the use of automation and novel technologies will lead to further realignment of core services, competencies and operating costs. Simplification of the operating model, digitalisation and optimisation targets in several larger insurance companies could result in the further outsourcing of components of the insurance industry value chain to cost-efficient managed services providers and business process solution providers within the insurance ecosystem - mainly through strategic alliances and partnerships.

In the insurance industry, the organisations that succeed most are those that most effectively engage their customers, employees, brokers, agents and other stakeholders. These industry players have a deep understanding of their stakeholders and their needs, desires, motivations and challenges. Based on this, they can shape stakeholder interactions and relevant products and services. Acquisitions, partnerships and alliances that provide access to innovative technologies and services will be critical to improving customer experience and stakeholder engagement.

Strategic partnerships within the insurance ecosystem will play a supporting role as companies seek access to novel technologies, innovative services and new opportunities for differentiation on a large scale. In this phase of transformation, companies may struggle to compete and maintain their market position, and collaboration as a differentiation strategy will become a competitive advantage.

The pressure to maintain momentum in an industry in transition is expected to lead to an increase in M&A activity. Leading insurance companies will seek to realign their business models and adopt novel technologies to improve operational efficiency and create value for their stakeholders. They will also look for ways to better engage with customers to enhance the customer experience. At the same time, they will offer more targeted and relevant products and services to meet the diverse needs of different populations in the regions where they operate.

KPMG's team of experienced professionals is there to help insurance companies along the way. Using leading industry expertise, deep M&A and strategy knowledge, proprietary solutions, and cutting-edge data and analytics, our professionals provide clients with a fully integrated, multidisciplinary approach that manages deal activity across multiple functions and the entire transaction process to deliver unique business and market insights.