“The industry is on the verge of a paradigm shift – and insurers face fundamental strategic questions. Anticipating emerging trends and preparing for them is more important than ever”, says report coauthor and McKinsey Senior Partner Stephan Binder.
These strategic questions include: How can insurers create value for shareholders, improve customer experience, and attract and retain talent? How can they, individually and collectively, reframe the role and purpose of insurance in society?
To address these challenges, McKinsey lists nine value levers leadership teams need to capitalize on:
- Make environmental, social, and governance (ESG) considerations a core feature of the business model. While many insurers have begun to incorporate climate-risk considerations in their investment processes, new-product launches and underwriting processes are mostly unchanged.
- Regain relevance through product innovation and coverage of new risks. New risks call for new products and a reallocation of priorities, and represent significant opportunities for P&C and life insurers that are willing to innovate.
- Enhance and personalize customer engagement and experience. A seamless, consistent “multi-access” experience in every channel is now the gold standard for insurers.
- Engage with ecosystems and insurtechs. McKinsey’s research suggests that ecosystems could encompass $70 trillion in revenue by 2030. Many insurance executives are looking at ways to engage with emerging ecosystems in areas such as mobility, healthcare, and the connected home.
- Develop new businesses for the digital age. Private investors have spotted the potential for improvement and the not-too-distant prospect of attractive returns in insurance.
- Scale impact from data and analytics. Leaders see enormous potential in best-in-class data and analytics capabilities across the value chain, even for the highest-performing companies.
- Modernize core technology platforms. Digitalization is straining legacy systems, some of which are decades old, and many insurers are considering a replacement of core systems with tech platforms that support the requirements of the digital age.
- Address the productivity imperative. Each carrier is unique, but any company can begin the process to improve productivity by establishing the trajectory and full performance potential of the business across the value chain—including sales and distribution, product development, operations, technology, and corporate functions.
- Reimagine culture, diversity, and ways of working to attract and retain talent. The return to the workplace is a chance to create a new, more effective operating model that works for companies and people navigating a world of increasing uncertainty.
The report shows that carriers not only need to think about “how to play”, but also to evaluate “where to play” in terms of geography, lines of business, and position in the value chain.
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