Insurers need to rethink distribution and product development
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In a virtual roundtable convened to discuss how the COVID-19 pandemic has changed the insurance CEO’s role, and to provide other insights into the future of the global insurance industry, McKinsey & Company senior partners gathered virtually to discuss strategic factors that will impact industry going forward.
McKinsey senior partners, Stephan Binder, Brad Mendelson and Kurt Strovink have discussed buiness with hundreds of insurance leaders since the pandemic began. They say the pandemic has forced CEOs to evolve in several ways – executives are focusing on what it means to be an emotional leader, one that is more connected to their organizations in different ways. CEOs also think about their obligations to customers and to society more today, and they are much more focused on technology’s role than they have been in the past.
Going forward, McKinsey says companies need to rethink operating models, distribution and new product development, hiring, and the rising importance of company purpose, along with environmental, social and governance (ESG) considerations.
“Insurance has historically been a very relationship-oriented business. Relationships among employees have been quite important. Think about the interactions between underwriters, product folks, executives, brokers, agents, and bank partners,” Mendelson says. “Insurers are finding they are able to maintain and build those relationships remotely.”
Remote work, he adds, “has a neutral, if not positive impact on productivity,” he says. “Insurance companies are going to be willing to embrace this model going forward.”
A golden opportunity to attract fintech talent
Later in the roundtable, Strovink added that this is an opportune time to acquire digital talent. “Insurers have less digital talent than other companies, and fintechs are laying people off. There’s a golden opportunity for insurers to attract some talent that may have been living in the fintech world or even in the big tech world – if they are aggressive about acquiring talent and promoting diversity.”
Coming out of the pandemic, meanwhile, they say product innovation is going to be a big priority for companies. They say carriers will move from developing products from a financial and actuarial standpoint, to start thinking about how to make product development driven by emerging customer needs. Mendelson says companies are also going to get much more systemic about embedding customer insight into product innovation.
Erosion of confidence
In the current crisis, meanwhile, Binder says there is a feeling that somehow the promise of insurance has been eroded. “We’ve seen this whole discussion about business interruption and the pandemic being excluded. There are some very good reasons to exclude pandemics but not every customer was fully aware of that. That erosion of confidence and trust in the industry’s purpose has to be addressed. Many insurance companies are now stepping back and rethinking how they can deliver.”