Partnering for growth in the insurance sector – KPMG
Article Synopsis :
Entering an era of unprecedented change in the insurance sector, the vast majority of insurance executives intuitively know they need to be more innovative. At the same time, they recognize their current organizational structure and culture may not be conducive to the type innovation required to compete in a digital world.
In “The power of alliances: Partnering for growth in the insurance sector”, KPMG shares insights from past and present partnerships in insurance, focusing on three main areas where insurers have been particularly active: bancassurance, financial technology (FinTech), and digital (non-traditional) distribution channels. Toward creating sustainable and value-driven partnerships and alliances, five key takeaways from the report are:
- Think about the customer: The success of a distribution channel largely depends on consumer preferences and demands, trends that insurers must understand before investing.
- Be open to non-traditional ideas: Selling insurance in supermarkets, over mobile phones and in vending machines may be somewhat unorthodox but could unlock new markets entirely.
- Consider the additional value: The use of digital distribution channels opens the door to additional revenue or value generation opportunities for insurers and their customers.
- Explore affinity deals: Affinity partnerships provide insurers with an established client base to market to.
- Don’t forget the basics: Whether for a distribution channel or new technology, creating the right structure, operating model and success factors is critical.
An alliances-based mindset sees new and endless combinations of tie-ups leading to profitable growth. To guide thinking, KPMG suggests deals centred around:
- The acquisition of companies bringing complementary capabilities from outside the insurance sector (e.g. accessing customer segments in a user-friendly, customer-driven format)
- Partnerships supporting and developing innovation (e.g. incubators and innovation hubs)
- Partnerships creating infrastructure to reduce the protection gap
- Joint ventures and alliances bringing together complementary skill sets (e.g. behavioural analytics capabilities to support sales and product development)
This report follows on from KPMG’s recent industry publication, A New World of Opportunity: The Insurance Innovation Imperative, which explores other key challenges and considerations facing insurers as they strive to become more innovative. Combined, these reports create a compelling perspective highly relevant to innovation-minded insurance executives worldwide.
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Digital Insurer's CommentsTechnology innovation moves faster than the rate at which people adapt, and it definitely moves faster than the average insurance company. This is not a knock. Insurers are paid to be risk averse and many new technologies raise new operational and reputational risks.
Tier I and II insurers especially, with large customer bases, have inertia on their side and inertia is a powerful thing. But a new set of competitors is emerging, both from within the industry and outside, with digital business models capable of challenging, even upending the status quo.
Many insurers are looking outside for help in developing digital capabilities. According to KPMG, external, digital-driven partnerships have already proven their value ‘beyond doubt’. Is your organization struggling with digital transformation? Look to strategic partnerships to add key capabilities, channels, and insights.
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