Operational excellence in insurance

Operational excellence in insurance

Explore the enterprise journey to achieving operational efficiency through pervasive change.


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Insurers are under more pressure than ever to effectively manage their current operating expense environment. Persistent low investment returns, ever-increasing competitive pressures and enduring excess capacity have hampered the industry's ability to grow revenue faster than the rate of operating costs. Currently, 25 percent of every premium dollar is consumed by operating expenses, a pattern that has held for the past 10 years or longer. These expenses have largely kept pace with the rate of growth in premium income among life and property and casualty (P&C) carriers, with both growing in the low single digits over the same time period.

In order to understand the current environment, KPMG and ACORD recently completed a survey focused on the challenges and opportunities insurers face with respect to improving operational efficiency. Responses were collected from more than 60 life, P&C, composite and reinsurance carriers from around the world, with premiums ranging from less than US$1 billion to more than US$10 billion.

Survey results indicate that, although 94 percent of carriers say they are actively working on improving operational efficiency, 55 percent say they are behind target. In addition, most respondents reported only limited integration of their technology platforms across functions, including underwriting, distribution and product operations – functional areas to achieving operational efficiency.

Overall, survey responses make clear that the majority of these organisations are falling behind in their quest to improve operational efficiency, and that a lack of process standardisation and strategic vision is the primary obstacle to future transformation efforts.

The survey highlights the need for CEOs and other senior leaders across the strategy, technology and operations areas of insurance organisations to carefully consider several approaches to correct these deficiencies. Initiatives and transformations critical to this include:

  • operating model and process redesign
  • distribution
  • legacy systems
  • alternative sourcing
  • intelligent automation (IA).

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