Commercial insurance industry under growing pressure from economic uncertainty, ESG activism and deglobalization

A new report from KPMG has revealed the world’s commercial insurance industry is performing well but faces a number of increasing pressures that threaten its long-term sustainability.

KPMG’s Future of Large Commercial Insurance report was compiled following extensive interviews and research with more than 400 industry leaders throughout the world. The report highlights five critical ‘signals of change’ that are already impacting the sector and could radically reshape the industry in the future. These are:

Client and broker expectations
Economic uncertainty
Regulatory and legal deglobalization
Technology evolution
Environmental, social and governance (ESG) activism

The global commercial insurance industry is predicted to continue its growth trajectory over the next decade, with estimates suggesting the worldwide sector could generate revenues of more than $661 million by 2028, compared to $349 million in 20201. But, despite the positive financial outlook, there are fears growing external challenges could bring the industry’s success to a halt, if decisive action isn’t taken now by CEOs and other sector leaders.

The business landscape is changing rapidly. Despite strong market performance, traditional commercial insurance business models are coming under pressure from swirling changes that now have the sector on the cusp of a radical transformation. 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 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.

Laura Hay

Global Head of Insurance

KPMG International

KPMG’s findings highlight the need for the industry to rapidly evolve and address growing threats before they hamper progress in the sector. The report identifies three new business models for the businesses that emerge as ‘winners’ in the long-term. They are:

Agile global player – optimizing the existing
Innovative specialist – adapting and exploiting at pace
Open-source risk manager – stock market of risk

To help ensure these winning business models will be successful, commercial insurers should focus on building new and differentiated capabilities that connect across their organizations. While leaders can’t do everything, they should identify which capabilities and models will help make the biggest difference to their business. Technology will be critical. But digital transformation goes well beyond technology. A clear, client-led business design of end-to-end processes is essential. It should be driven by deep client, broker and market insights. And 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.

Mark Longworth

Global Head of Insurance Advisory

KPMG in the UK

For media queries, please contact:

Brian O’Neill,
Senior Manager,
Global External Communications

T: +44 7823 668689
E: Brian.O’Neill@kpmg.co.uk

About KPMG International

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.

KPMG firms operate in 144 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

For more detail about our structure please visit: home.kpmg/governance

Footnote :
1 Data from Research Dive