A new report by McKinsey and Co. says key trends are reshaping the insurance industry, including the rise of competition from an array of insurance and non-insurance digital players, rapidly changing customer expectations, the increasing importance of growth in valuations, and financial and interest-rate pressures.
The situation has meant that all segments of insurance, including life and health, property and casualty and reinsurance, need to shift from a “repair-and-replace” approach to one of “predict and prevent” across all segments. Some new business models, notes the study, have already begun such as financial wellness based around analytics-as-a-service.
Insurers must move quickly to build new businesses
This building of new businesses is crucial for the industry to survive, stated the report, and insurers have to move quickly. What used to take years now has to be done in months or weeks to meet the changing demands of the market. Insurance executives must shift how they lead their institutions from a methodical pace of change to a decisive reinvention of their businesses.
The report states that making this strategic change requires strong commitment from senior management, building new businesses, adapting a test-and-learn culture, further embracing technology, encouraging innovation and allowing new businesses not be bound to financial measures of performance when they start out.
“Insurance-industry leaders should pursue these …elements as they seek to expand customer value propositions, growth, and differentiation in building new businesses,” says the report. “With a solid idea in place, leaders can create a detailed blueprint of the new business and conduct active testing with real customers before scaling. … The key is to commit to the undertaking and get to work.”