McKinsey: Restore and reimagine: Digital and analytics imperatives for insurers

Executive summary :

As the world recovers from the COVID-19 crisis, insurers should invest in digital and analytics capabilities that will make them more customer-centric, simple, tech driven — and competitive.

Digital demand is here to stay 

Embed resilience and flexibility

When the world paused (and reorganised) its usual activities to contain the spread of COVID-19, many insurers demonstrated great resolve. As operations stabilise — even as the macroeconomic environment does not — the next phase must be focused on embedding resilience and flexibility in organisations and reimagining insurance for the next normal.

The COVID-19 crisis will cause structural shifts that will have significant implications for the insurance industry. An extended period of volatility, uncertainty, and depressed economic activity will accelerate ongoing changes in consumer behaviour, needs, and expectations. Some of these shifts will be irreversible.

Demand for digital interactions will spike and stay elevated. In such an environment, digitally enabled intermediaries and digital-only sales models are proving to be effective and may be accelerating the winner-take-all trend.

Insurers must simplify  and become efficient

Customers will also be more acutely aware of their personal and health risks and will demand solutions to help them better manage these risks. These shifts, combined with ongoing economic pressures, will require insurers to develop radically simple solutions, highly efficient operating models, and consistently innovative business models.

Accelerating investments in digital and analytics initiatives that have long been under consideration is a crucial strategic choice. Such investments can be the difference between slowly declining and flourishing. Indeed, our research shows that across sectors, revenue growth (as measured by the five-year compound annual growth rate) for digital leaders is on average four times that of companies that only dabble in disjointed digital initiatives.

For many insurers, capturing the business value of digital and analytics capabilities will require rapid upgrades to technology platforms. Insurers have no time to lose.

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