Insurance CEOs are confident about their organization’s ability to grow. But the path to growth has changed dramatically since the start of the pandemic.
We recently conducted a quick ‘pulse check’ survey of more than 50 insurance CEOs from around the world.1 Their confidence was palpable: 94 percent said they are confident in their company’s growth prospects over the next three years; and more than a quarter think they may see earnings growth of more than 5 percent per year over that period. As I said, the confidence is palpable.
What is particularly interesting about this level of confidence is that the path to growth has clearly changed over the past year. Up until the pandemic (and, arguably, for the past few centuries) the path to growth in insurance was largely a numbers game: it was about scale, costs and margins. Decisions were made based on cold, hard math and a deep assessment of the risks.
This survey suggests that the path to growth has changed. And insurance CEOs know they must change as well.
Customers are holding the compass
To start, the customer is now driving the growth agenda. Time and again, our respondents said they were channeling their capital towards investments that would improve the customer experience. More than two-thirds said they have ramped up their investment into customer-centric technologies over the past year. Half think they may have already accelerated the creation of a seamless customer journey by years, not months.
Many insurance CEOs also seem to be on the hunt for acquisition targets that will further enhance their customer experience. Consider this: more than three quarters of insurance CEOs say they have a moderate to high M&A appetite. And two of their three biggest reasons for making an acquisition are to increase market share and to on-board a new digital technology that can enhance their customer experience or value proposition (the third big reason is to capture a disruptive technology that could change their operating model).
Growth beyond the bottom line
Insurance CEOs also recognize that other non-financial factors are now influencing the growth agenda. Almost unanimously (98 percent), the CEOs in our survey agreed that the response to the pandemic had caused their focus to shift towards the social component of their ESG programs. Nine-in-ten said they are keen to lock in the sustainability and climate change efforts that they had made during the crisis.
They are also eager to accelerate their progress on their diversity and inclusion agenda. Sixty percent say progress has been too slow overall. Seventy-eight percent expect public scrutiny of diversity and inclusion performance to increase over the next three years. Boards, in particular, still seem to have significant room for improvement in this regard.
Purpose also emerged as a massive influence on decision-making in the insurance sector. Indeed, the vast majority of insurance CEOs say their purpose carried them through the pandemic. Eighty-six percent credit it with driving specific actions in addressing the needs of stakeholders; a greater number say it guided their pandemic decision-making and dictated their approach to pandemic response. Based on this data, it was a strong sense of purpose that got many insurers through the darkest days of the pandemic.
Dynamic and connected
What I believe insurance CEOs are recognizing isn’t just that the path to growth has become more dynamic. It is that the trends influencing growth in today’s market are all interlinked. And that is making decision-making and prioritization much more complicated and nuanced than it was before.
Customers want a seamless experience, but they also want to know they are working with an insurer that stands for something more than just their policy. ESG, diversity and inclusion and purpose all play a role in creating a stronger relationship with customers.
In many cases, a company’s purpose drives positive and accelerated action on the diversity and inclusion agenda, or on the climate agenda and the shift to decarbonization. Greater diversity often encourages greater attention to the ESG agenda (and vice versa). Those active on the ESG agenda tend to be driven by a strong purpose. It is all so inextricably linked.
The end of the line
My takeaway from this data is that many insurance CEOs recognize that the path to growth in the insurance sector has become much more dynamic. And they are taking positive steps towards identifying, understanding and influencing the factors that are driving that change.
My view suggests those that view these factors as inter-connected and aligned will discover a much more dynamic and accelerated path to growth.