Insurance carriers should pivot in 2023 to longer-term reinvention
Going forward, insurers should emphasize an ongoing culture of innovation while making customer-centricity the standard.
Necessity has indeed been the mother of reinvention for the insurance industry these past few years, as most carriers were remarkably adaptive and resilient in overcoming obstacles raised by the pandemic.
However, this is hardly the time for insurers to rest on their laurels — not with inflation, interest rates and loss costs soaring, looming threats of recession, climate change and geopolitical upheaval.
Instead, as carriers set strategic plans, investment priorities and budgets for 2023, they should be building upon the momentum that enabled the transition to a remote workforce and virtual client engagement nearly overnight. The emphasis should now be on maintaining an ongoing culture of innovation while making customer centricity the focal point of the industry’s standard operating model.
Accomplishing this will likely depend on how quickly and effectively insurers can:
- Pivot from having laid the foundation for operational transformation (such as transitioning to the cloud and adding a host of new data sources and digital tools) to fully realizing the value and benefits of infrastructure and technological upgrades.
- Go beyond responding to requirements of regulators and other industry overseers to more proactively anticipating and fulfilling distributor and policyholder expectations, setting themselves apart in an increasingly competitive market.
- Broaden their historical focus from risk and cost reduction to also prioritize greater levels of experimentation and risk taking that drives ongoing innovation, competitive differentiation, and profitable growth.
Deloitte’s 2023 Insurance Outlook suggests these reconstituted approaches should involve more than tactical tweaks. More fundamental cultural changes are also likely called for in how insurers recruit, retain and optimize talent, as well as engage with customers in customizing and distributing products and services. At the same time, they should expect to be called upon to reconcile society’s overriding environmental, social and governance (ESG) priorities with their own traditional top- and bottom-line considerations.
While most insurers were able to adapt quickly and effectively during the pandemic, the industry is likely to face a host of additional macroeconomic and geopolitical challenges that could inhibit growth and profitability — including the continuing fallout from Russia’s invasion of Ukraine and ongoing COVID-19 adaptations. However, Deloitte’s Outlook posits that most insurers should be well-positioned to capitalize on a more agile digital infrastructure enhanced during the pandemic to meet rising customer expectations for customized products, a wider array of channels, and a broader portfolio of services.
Meanwhile, even in a problematic economy like this, there are likely to be multiple opportunities for property & casualty insurers to improve top- and bottom-line results through organic growth. Consider the potential for new business in emerging areas such as the transition to sustainable energy sources, the burgeoning legal cannabis market, and coverage for volatile intangible assets such as NFTs and the metaverse, to name just a few.
As evolution in society, technology and the global economy continue to speed up, insurers that can at least keep pace while maintaining a commitment to transformative change will likely be among those best positioned to excel against slower-to-adapt legacy carriers as well as new forms of competition already here and yet to emerge — from standalone insurtechs powered by reimagined business models to a host of non-industry players offering embedded coverage options.
As always, new and unforeseen wild cards are likely to come into play that are largely out of the industry’s control, further testing an insurer’s ability to adapt on the fly. But there are plenty of core areas for improvement that carriers should be able to control in terms of how they treat their customers and run their business in a rapidly changing marketplace — not just in 2023 but during the rest of this already-turbulent decade.
For more details about the outlook for growth, talent, technology, finance and sustainability in the year ahead, download Deloitte’s full research report: “2023 Insurance Outlook: Global Insurance Industry at a Crossroads to Shaping Long-Term Success.”
Former NU Property & Casualty Editor Sam J. Friedman (samfriedman@deloitte.com) is insurance research leader and Michelle Canaan (mcanaan@deloitte.com) is insurance research manager at the Deloitte Center for Financial Services. These views are the authors’ own.
This piece is published with permission from Deloitte. See www.deloitte.com/about to learn more about Deloitte’s global network of member firms.
Read additional columns by Sam J. Friedman: