As P&C insurers continue to make significant investments in customer-facing transformation and back-office optimization, it’s worth evaluating their progress to date and the overall outlook for 2019 and beyond.
For Property and Casualty outside of life insurance, the industry has grown at a very low rate. Falling profitability caused by higher underwriting losses and a weak pricing environment in commercial lines are creating an uncertain environment.
What are the issues insurers must conquer in this tough business environment?
No 1: Speed of Digital Business
Insurers have historically reacted to macroeconomic trends, demographic shifts, market demands, technological developments and regulatory changes, rather than seeking to get ahead of them. This reactive stance has hurt customer trust. Today, greater consumer trust is necessary to increase organizational velocity, which is vital in everything from launching products to navigating competitive threats.
As more automotive, technology and consumer brands — many of them highly trusted by consumers — consider offering insurance products, insurers must increase trust to retain relevance.
Insurers also need new capabilities if they are to move faster. Specifically, they need to:
- Precisely track shifting customer and market variables
- Identify demand before it materializes
- Launch products before competitors
A strong and flexible operational backbone, modernized processes and systems, and increased organizational agility underlie these capabilities. This is what it will take to shrink product development and launch timelines from years to months.
No. 2: Exploring Startups and other InsurTech partnerships to leverage new capabilities.
Many large insurers have invested in InsurTechs during the last several years. Results to date have been marginal, with only nominal contribution to volume and profitability, relative to the overall business.
Innovative carriers will scale up their partnerships with InsurTechs in pursuit of breakthrough innovations. The first step is to clarify strategic objectives and then select the best approach or combination of approaches. Insurers must identify and pursue the right number of opportunities and clarify exactly what they want — including specific capabilities, ROI targets and monetization plans — from each investment. Otherwise, great opportunities may be wasted if insurers fail or struggle to integrate InsurTech innovations with the rest of the business.