The high-performance insurer of the future – Accenture Report
Article Synopsis :
By and large the last decade has been a successful one for insurers, with stable growth rates, relatively high profitability levels, and return-on-equity for top performers exceeding 20 percent. Will this continue?
In “The high-performance insurer of the future“, Accenture details the major trends and forces shaping the insurance industry and offers possible models for future success. Geared for senior management, the report identifies five key attributes common to all high performers in the insurance sector today, irrespective of geographic footprint and products or services, and discusses their strategies in the following areas:
- Effective customer-centric distribution
- Responsiveness to the market
- Operational excellence
- Relentless pursuit of cost reduction
- Focus on risk management
Looking ahead, the report identifies a set of forces Accenture believes will challenge even today’s successful strategies. Although these forces may not strike the reader as new, it is their intensity and speed, say the authors, that make them dangerous. These forces are:
- Shifts in growth from mature to emerging markets
- Increases in the development and consumption of technology
- An escalation of both risk and regulation
- Changes in consumer behaviour
- Changes in the competitive landscape
- The report provides carve-outs/case studies on Islamic insurance, and insurance in rural India, the UK, Spain, Russia, and China.
There are sections on the Consumerization of IT, mobility, digital marketing, and analytics, with carve-outs on Amazon.com and Accenture’s own CUBISM insurance reference model. With changing consumer behaviors among the most daunting of challenges faced by insurers today, this section is appropriately comprehensive.
Other topics discussed in detail include: Increased risk and regulation, changes in consumer behaviour, the changing face of competition, and the new normal with respect to market conditions.
The final section of the report envisions the high-performance insurer of the future, including potential business models and strategies, operating models, governance structures, and decisive capabilities.
Digital Insurer's CommentsThe trends driving slower growth and lower profitability are already visible in the insurance marketplace. As a consequence, insurance may become less attractive as an industry and for investors than it was in past decades. Insurers that fail to respond effectively to the new normal can expect, at best, a return on equity of 5 to 10 percent. However, we believe there is still a lot of upside for insurers that identify the right niche and/or business model.
The digital business model holds a great deal of promise for carriers, but the twist is business leaders are overwhelmed by the scope, complexity, capital investment, and skill requirements associated with digital technologies. The Accenture report rightly concludes that insurers need to act now and make clear and deliberate choices about where their growth will come from, and then align operating models, governance and human and financial resources accordingly.
In lieu of a grand digital strategy, insurers can and should make incremental investments in pursuit of:
- Better Customer Segmentation
- Enhanced Operational efficiencies
- Enhanced marketing, distribution and sales efficiency
- Real-time servicing
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