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In the face of gathering economic headwinds, tech disruption and geopolitical uncertainty, PwC’s 23rd Annual Global CEO Survey shows that although most insurers acknowledge challenges over the next 12 months, they’re confident in their own long-term resilience. The front-runners, in fact, want to go beyond simply surviving by using these challenges to their advantage.
This attitude reflects what insurers have been learning over the past two years, as they’ve responded to disruption on multiple fronts, including regulation, new technology and shifting customer expectations. The industry has increased its pace on transformation. As a result, insurers have become leaner and more adept at delivering more for less. Customer experience in key moments that matter, such as policy origination and claims settlement, is becoming faster, more intuitive and more user-friendly. And innovations are coming out of the lab and into the market in areas from real-time risk pricing to movement into adjacent ecosystems such as automotive, agriculture and health.
With the heavy lifting on transformation well underway, insurers are much more confident than they used to be that they can deal with disruption. They still have concerns about regulation and technological change, but survey responses show those concerns are less severe than in the past.
So, how do insurers build on this foundation? First and foremost, customer experience is what CEOs have identified as their top opportunity in the coming 12 months, significantly ahead of the second-most popular choice, core tech transformation. CEOs also say that having a clear vision of how to create value for customers is the most important enabler for realising strategic goals.
But with opportunities come significant challenges. As PwC’s 2019 fintech survey underlined, customers now expect far more than just efficiency and speed — they’re demanding 'wow' factors, such as personalisation, flexible all-channel engagement and solutions that cut across traditional industry boundaries. The bar will only keep rising, and those outside the insurance industry are the ones who will continue to set it. The leading insurers are rising to this challenge.
Talent is as important as technology in keeping pace. No amount of systems investment can equip a business to compete if its workforce is stuck in analogue. Are insurers up to speed? Most are making headway in digital upskilling, but less than 25% report significant progress in defining the skills that will drive their future growth strategy and improving workers’ and leaders’ know-how. They see a lack of resources and difficulties defining future skills as the biggest hurdles. Articulating a vision of the functional skills of the future is critical to making upskilling of the workforce more than just tech enablement.
When insurance CEOs ask world leaders where they need help, the answer is consistently health, climate and financial inclusion, three topics on which the insurance industry has deep knowledge and capability. But the barrier to capitalising on this opportunity and to increased public–private partnership is trust. PwC’s survey shows that insurance CEOs are increasingly concerned about public trust. Without winning this trust, it will be difficult for insurers to bring their expertise to bear. Focusing on sustainability is an opportunity to demonstrate the value of insurance and strengthen public credibility, but it’s only achievable if businesses act with care and integrity in all other aspects of their operations. How insurers respond in moments that matter, particularly the claims experience, dictates public perception.
Looking specifically at climate change, the CEO survey shows that, although it’s moving up the boardroom agenda within the insurance industry, CEOs still primarily see it as a reputational issue rather than as a strategic opportunity or a source of closer government engagement. There’s an opportunity for visionary insurance leaders to be distinctive.
In our view, the defining characteristic of the insurers that are pulling ahead of the pack is their ability to respond to unfolding opportunities. They’re forging the culture of innovation, agile operating platforms and collaborative ecosystems that will enable them to spot openings and quickly capitalise on them. These openings might be in untapped markets or in forging new business models in mobility services or environmental management. Many of these leaders are based in fast-evolving markets, such as Asia, where the absence of legacy infrastructure offers a blank page for invention and reinvention.
What must CEOs do to join this leading cohort? Although market circumstances and unfolding opportunities naturally vary, we believe there are three must-haves for getting ahead:
Organisational resilience and agility will be key to success in the face of tomorrow’s uncertainties and challenges. In addition to eliminating unnecessary efforts and driving down costs, organisations need to align their operating model, workforce, digital labour, culture and ways of working in the most agile, productive and customer-attuned way possible.
Insurers are increasingly comfortable with experimentation and developing partnerships with tech start-ups to innovate their businesses. But success requires scale. This is a matter not just of resources or market reach but also of creating the agile operating platforms and ability to work with multiple partners that will enable quick movement from pilot to market.
Insurers need to combine a strong ability to execute strategy with relentless leadership focus, appropriate decision-making processes, meaningful investments in resources and capabilities, readiness to challenge convention, and incentives to generate and explore new ideas. This includes embracing a private equity–activist mindset and support structure to transform the way they execute their biggest priorities.
Building on the foundations of transformation, insurance is open to new ideas and competitive reinvention. The hallmarks of success include the core essentials of skills, scale and productivity, with the execution capabilities to bring innovations to market at pace, as well as the ability to create solutions for the challenges facing modern society.
“One of the key focus areas of CEO's has been and will continue to be better customer experience. That term will most likely see an expanded meaning given the current pandemic. Insurance companies are in the midst of a significant transformation and current developments in the market will burden the business agenda on top.”
Swiss Insurance Leader, PwC Switzerland
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