Business really is about ‘survival of the fittest’. So insurance companies need to shape up if they are to play and win in the post-crisis world. The rules of the game have changed. Now is the time to move beyond a diet of cost cutting and start on a new fitness regime – so that your business can emerge from the recession strong, healthy and able to compete.
For insurers the new challenges do not only come from the global crisis. Changes in customer behaviour, new regulation and demanding shareholders are making it increasingly difficult to generate an acceptable return on investment.
Most have responded by trying to push through rate rises, with limited success to date, and/or by further slicing of operating costs. For those that want to thrive, this will not be sufficient. Indeed doing more of the same, even if done better, will not be what marks out the eventual winners.
The winners in insurance will be those that examine their business models and develop new approaches to understanding and meeting the needs of their customers. This will require leaders to think differently about their organisations and challenge the status quo.
Change is rarely easy, but the sooner companies start out on the path to fitness the better. By embracing transformation now, companies can develop the agility and flexibility required to remain winners over the long term.
The specific opportunities for insurers to increase profitable growth are:
Consistently deliver a defined level of service at low cost. In particular, much can be learnt from other industries on how to better source and manage services from both external and internal suppliers. For example, the fast moving consumer goods industry is leading in the innovative management of shared services through new 'Global Business Services' functions. More
Improve flexibility to respond to external factors and make best use of capital. This is an area where Solvency II, for example, presents an opportunity for those willing to embrace the changes and use them as a catalyst for better business performance. More
Get closer to customers. Learn from other industries how to collect and use data to understand needs and tailor propositions. This is not just a question relating to new business, indeed far greater benefits will be realised by applying these techniques to retention and claims management. More
Examine your position in the value chain. The fall-out from the credit crunch and the imposition of new regulatory changes are presenting opportunities for insurers to exploit their position in the value chain – both organically and non-organically. Regulatory changes such as the retail distribution review in the UK are a catalyst for a re-evaluation of the distribution landscape, and a desire to diversify capital, geographic footprint or product coverage is starting to drive renewed M&A activity. More
PA works internationally with insurance clients including ING Investment Management and the Pension Reserves Investment Management Board in all of these areas.
To find out how your business can play to win in the post-crisis world, please contact us now.