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As featured on BusinessMirror: The Future of Large Commercial Insurance

To survive and thrive in this new environment, commercial insurers shouldn’t stand still. They need to evolve and build new differentiated capabilities that connect across the organization. Technology will be critical, but digital transformation goes well beyond technology.

Insurers need a clear, client-led business design of their end-to-end process that should be driven by the deep client, broker, and market insights. It should be underpinned by a digitally enabled technology architecture and empowered workforce. In our view, it is only by taking this “connected” approach that insurers can achieve true value from their digital transformations.

Signals of change

The traditional commercial insurance business model continues to function. The market remains buoyant. Profits are rising. Yet there are strong “Signals of change” swirling around the sector. And while commercial insurance businesses always face new challenges, from both internal and external factors, these “Signals of change” suggest the commercial insurance sector now stands on the cusp of a radical transformation. What are these “Signals of change”?

1. Client and broker expectations

Clients and brokers expect a cutting-edge experience — every bit as sophisticated and customized as they experience in their personal lives. Meanwhile, the rise of ‘insurtechs’ in the commercial space is starting to add competitive pressures focused on client pain points. Collectively, this is forcing commercial insurers to radically rethink their operating models, business models, and channels. In our view, the winners will be those who secure the trust of their clients in the new risk landscape and can deliver innovative, tailored, and commercial solutions and experiences

2. Economic uncertainty

Uncertainty abounds. The long-term shape of the post-COVID-19 recovery remains uncertain. The crisis in Ukraine has unleashed an unprecedented range of business impacts and political instability. Inflation is on the rise. Governments are rethinking interest rates. And other risks are emerging — supply chain disruption, protectionism, and regulation, for example. We believe that navigating this uncertainty will require commercial insurers to be able to dynamically adjust their strategy. For multinational commercial insurers, new digital capabilities and solutions may offer some much-needed flexibility and agility as organizations strive to respond to this complex and interconnected web of challenges. They will certainly be needed to help anticipate and respond swiftly to clients’ needs.

3. Regulatory and legal deglobalization

The world order is changing and that has catalyzed a shift towards more assertive national regulation in some markets. Combined with ongoing concerns about business and supply chain resiliency, many commercial insurance players are starting to find the regulatory landscape more fractured and complicated than ever before. We expect that getting ahead will require a more holistic view of the changing regulatory landscape. Managing this increasing regulatory complexity is not likely to be easy for commercial insurers that often deal with multinational clients and risks. In our view, it will require them to establish trust with multiple regulators, understand and anticipate future changes in regulators’ priority areas, embed values into their decision-making, and create a culture where employees are rewarded for doing the right thing.

4. Technology evolution

New technologies are permeating the insurance industry, providing commercial insurers with a range of new opportunities to help meet expectations, drive efficiency, and encourage innovation. Industrial automation and robotics are providing new opportunities for insurers to streamline processes, as well as gather and analyze data. Cloud-driven technologies, artificial intelligence (AI), and machine learning are helping to unlock leaner, more automated underwriting and claims settlement processes, supported by data-driven decision engines. To help ensure they are maximizing their technology investments, we anticipate commercial insurers will need to put digital and data capabilities at the core of their operating and business models to drive decisions across the business.

5. Environmental, social and governance (ESG) activism

Environmental, social, and governance (ESG) factors aren’t just impacting the risk landscape for commercial insurers. They are also influencing the scrutiny insurers face from key stakeholders, including regulators, investors, employees, clients, and the public. While ESG may sometimes feel like a distraction from the core business, the reality is that it is critical both to stakeholders and future growth. By consciously investing in sustainable options, insurers should be able to create real and tangible value — not only by meeting customer demand for transparency and sustainability, but also by building innovative propositions and resilient business models. In our view, commercial insurers will need to embrace the shift towards ESG prioritization, both to differentiate and as an opportunity to innovate.

The ability to think “outside-in” is key to building a customer-centric business. Ensure you know and act on what your consumers want, need, and value; keep continually looking up and outside of the organization and industry to help ensure alignment with the best consumer experiences in day-to-day life.

Build resilience. Take on today’s challenges with resilience and determination, and be prepared to expect the unexpected, fail fast, and learn along the way. By developing a connected enterprise architecture, you will find your ability to change course at speed can be significantly enhanced.

Make use of new technologies. Continually look at what new technologies are becoming available that could help you serve consumers better or connect your business more seamlessly. Experiment with the opportunities available through the cloud, machine learning, and advances in data science.

The excerpt was taken from the KPMG Thought Leadership publication:  https://home.kpmg/xx/en/home/insights/2022/07/the-future-of-large-commercial-insurance.html