Overview of KPMG’s latest report, “Empowered for the Future – Insurance reinvented”
This week, KPMG have released their latest Insurance Thought Leadership report , “Empowered for the Future – Insurance Reinvented” which addresses the opportunities and challenges that insurers face when transforming or reinventing themselves in a world of increasing change. KPMG International surveyed more than 70 insurance executives, from the largest organizations around the world and asked about their recent transformation initiatives, their existing capabilities and their biggest risks and barriers. The survey data reveals an urgent need for insurers to reinvent their business and operating models.
We have summarised some of the key highlights from the report below which also contains case studies and interviews with Senior lnsurance Executives and KPMG experts. We will also be doing a more in-depth Digital Insurance Library Review over the coming weeks.
Digital Disruption & Consumer Demand
More than a third of respondents said that government policy or enforcement agendas will disrupt their business models over the next 3 years. Another 30 percent said they will need to change their operating models in order to balance the pressure for new growth against the reality of shrinking budgets.
Interestingly, while many organizations seem to talk about the need to become more ‘customer-centric’, just less than one-quarter of respondents expect their operating model to be disrupted by changes in customer behaviour.
“We would argue that customer behavior should actually be the inspiration behind insurers’ efforts to reinvent themselves,” argued Mary Trussell with KPMG in Canada. “The fact that less than a quarter expect to be disrupted by changing demographics and preferences suggests that insurers may not have their eyes on the ultimate prize.”
Recognising the challenges
The data also indicates that few insurers are confident they are achieving full value from their change initiatives. When asked how they would rate their organization against an ‘ideal’ transformation that led to new, sustainable, value- creating business models and an efficient, agile operating model, just 5 percent said they were ‘close to ideal’. More than half (57 percent) admitted they were either ‘not ideal’ or far from it.
According to the survey, most insurers also seem to recognize that they may lack some of the core capabilities required to achieve and sustain value from their transformation strategy. Some are facing challenges creating the right business strategy and envisioning the optimal ‘future state’ for their organizations. Almost half said they lack the capabilities to develop a transformation strategy based on insights gathered from inside or outside of the industry.
Getting past some of the roadblocks
One massive perceived barrier is regulation – more than a third (37 percent) of respondents said that the potential for regulatory change represented a major threat to achieving their transformation objectives. Interestingly, more than a third of respondents said that either disruptive technologies or disruption from organizations outside of the insurance sector also posed major threats to their transformation agendas.
“This reinforces the need to be able to pivot and adjust your transformation strategy as the market changes,” noted Simon Phipps with KPMG in Hong Kong. “Organizations that are looking 5 to 10 years out with the right vision, the right future state business model and a flexible approach to transformation should be able to adapt to disruption and still achieve their objectives.”
Insurers cited a number of other major, and likely common, barriers to achieving their transformation agenda. A significant number (40 percent) admitted that their performance metrics were either too poorly defined, analyzed or reported to allow them to demonstrate how their results aligned to the business objectives. More than a third also said that they underestimated the significance of the operating model changes that would be required to reinvent their organizations.
Looking for new ideas
“If you are going to reinvent insurance, you can’t look at what your competitors are doing. You need to look outside of the status quo”.
Given the high focus across the industry on becoming more customer centric, insurance executives were most likely to say they were looking at customer demographics and insights as a way to help define their business transformation strategy. At the same time, around a third of respondents also noted that they were watching organizations outside of their sector, in adjacent industries and those with disruptive technologies in order to find inspiration and ideas that may help them reinvent their organizations.
“We believe that in order to succeed in enterprise-wide transformation initiatives, organizations need leaders who can collaborate inside and outside their organization to create and implement the new operating models that will enable future success. Insurers that can anticipate what their clients truly value and harness technology to enable innovative opportunities to give those clients more of what they want, will prevail.”