Global insurance CEOs are confident in business growth over the next 3 years, despite a widespread recognition that they must change from within, embrace culture change, technology transformation and greater customer focus.
Disrupting themselves and the marketplace is top of mind among the leaders, while they strive to instill organization-wide innovation and cyber controls, and make the most effective technology and workforce investments. They also feel the need to upgrade their skills to overcome an internal ‘innovation disconnect’, forge strong external partnerships, and embed the agility and resiliency to develop holistic, flexible strategies for new opportunities and threats in an uncertain future.
“To become the resilient insurer for the future, organizations must adopt agile operating models and complementary technology and data capabilities. Our survey findings suggest that, despite the many challenges, insurance CEOs are eager to tackle these opportunities.”
Despite a strong awareness of emerging risks, insurance CEOs appeared bullish on their near-term growth trajectory. While expressing a muted confidence in the global economy over the next 3 years (65 percent), they are highly confident in the growth of their industry (85 percent) and their own company (97 percent).
Such confidence with their organization’s resilience can be linked back to insurers’ recent efforts to ramp up transformation initiatives – significant multi-function, multi-year efforts to transform their business, either to drive strategic growth or cost objectives.
Amid emerging threats, insurance CEOs demonstrated a solid appreciation of the need for their organizations to challenge and disrupt business norms. Much of the focus of their disruption is around customer centricity, with 64 percent of CEOs believe that they need to significantly improve their understanding of customers.
Today’s CEOs understand that to elevate the end-to-end customer experience, they must transform their front, middle and back office functions, and they must gain a better understanding of the customer’s current interaction with the organization. Given changing customer expectations, insurers must continuously gather and analyze the latest customer insights to keep up with these expectations.
Insurance CEOs pointed to the crucial role of technology investment in support of future growth. They also affirmed the importance of establishing cyber resilience – 74 percent of CEOs stated that they view information security as a strategic function and a source of competitive advantage, and 67 percent believe that cyber security is critical to engender trust with key stakeholders.
While the CEOs’ emphasis on cyber is a positive development, insurers need to create a mindset in which cyber is incorporated from the beginning of product development, from strategy and visioning.
In light of the pressing importance of technology, 87 percent of CEOs say they are directly involved in devising and leading the technology strategy of their organization.
Despite CEOs’ stated enthusiasm for technology, only 14 percent claim to have already implemented AI in automating their processes. Most companies were still piloting or conducting limited implementation with a few processes.
However, this slow progress is not surprising, given the complexity of this new technology, and legacy technology challenges that insurers may face. AI is expected to be equally challenging for companies to incorporate, since it will require them to build out their cultural and physical infrastructures first. That encompasses both improving their data capacity and accelerating their migration to the cloud.
“Insurers need to find the right usage for AI, since it will not be the answer for everything. It would be a mistake to equate automation with customer satisfaction, and insurers will have to experiment with the right mix of automation and human agents in the customer experience.”
Although insurance CEOs strongly affirm their desire to transform their organization with a bullish, innovative spirit, our survey uncovered a sizable ‘innovation disconnect’ – while 85 percent of CEOs want their employees to pursue innovation without worrying about the negative consequences if an initiative fails, only 59 percent believe they already have such a culture in place.
To perform an attitudinal transformation effectively, company leadership must view innovation in terms of a culture and mindset shift, rather than simply the pursuit of cool, new tech gadgets. That requires an organization to set up new rules of engagement of their employees and for leaders to model the same behaviors. Insurers may consider adopting the growing practice in other industries of ‘borrowing talent’, by which employers embrace contingent labor, and the gig economy, to inject innovative thinking.
Many insurance CEOs plan to turn to third-party partnerships for agility, with two-thirds of them say the only way to achieve agility is by increasing their use of third-parties. This growing appreciation of the value of third-party cooperation means that executives are examining any function that is not core to their business as a potential opportunity to work with a third party.
However, CEOs are concerned about the form of such plans to increase external partnerships. For instance, 68 percent of insurance CEOs are looking for quality over quantity in their new partnerships, including having fewer, deeper relationships. More and more companies today are first determining their firm’s strategic direction and then identify the right partner to align with that, wisely putting the business need before the partner need.
Insurance CEOs plan to create a ‘Workforce 4.0’ by upgrading the skills of their employee base. Almost half of the CEOs plan to upskill more than half of their entire workforce, particularly in digital capabilities like advanced data visualization and coding.
It is crucial that insurers consider a diversified ‘build, buy, and save’ approach to developing their workforce. They must also create a value proposition and employee experience that goes beyond pay and benefits to a culture and environment where they can thrive and do their best work. Insurers must start to ask themselves, ‘What competencies will we need?”
A large majority (97 percent) of insurance CEOs are emphasizing capital investment in technology than on developing workforce skills (29 percent). It is natural that companies see the need to invest in the technology first before they flesh-out the staffing requirements to maintain those systems. Nonetheless, insurers need to understand that they must carefully balance investments in building their people skills, change management and training. Formal change management practices are essential to support the evolving human/technology mix.
KPMG’s Global CEO Outlook 2019 highlights how today’s insurance CEOs are well-attuned to the future they face. With customer needs changing and expectations rising, and the competitive landscape evolving, insurers understand that their legacy operating models will no longer be fit for purpose. The future of insurance lies in achieving a deeper understanding of the customer, operational excellence, intelligent automation and adapting to the industry’s shifting talent needs.
Insurers must increasingly consider what future platforms they build, and develop transformation plans that extend across functions. As highlighted by the surveyed executives, their success depends on being more responsive, faster at introducing products, and better at building effective partnerships.