Processes should be digital by default. More agile operations and robust digital capabilities can help insurers eliminate frictional costs at key touchpoints and meet customer expectations for speed and personalization. Those attributes are also critical to boosting performance across the value chain and developing new business models that hold the key to long-term success.
Imperatives for insurers:
- Dramatically expand the intake of third-party data to enhance underwriting and marketing
- Identify steps in the application and purchase processes that can be eliminated or simplified
- Create digital services, platforms and ecosystems that lead to stronger customer engagement and generate new demand
- Develop new features that allow customers to personalize standard products
- Handle the majority of claims via no-touch or straight-through processing
- Embed more insurance offerings within retail and ecommerce purchases of different types of products (e.g., consumer goods, travel) through partnerships with non-insurers
- Deploy robust application programming interfaces (APIs) to create an environment for data passporting and access, digital payment and other Open Finance innovations
3. Create value by optimizing cost management and capital allocation
While balance sheets across the industry were in strong shape before the pandemic, insurers must generate greater shareholder returns and more customer value. By simultaneously optimizing cost structures and strategically prioritizing investments, insurers will be able to meet both goals.
However, serious economic pressure, low interest rates and significant strain on capital reserves and liquidity necessitate hard choices. All options should be on the table — automation, divestment, restructuring and outsourcing. Cost efficiency should be viewed as an operational design principle that liberates funds for ongoing transformation and opens new paths to growth. For instance, prudent partnerships with InsurTechs can produce innovation without significant capital expenditures.
Even as cost pressures mount, the need to invest in product innovation and expanded digital capabilities is only increasing. The time has come to rationalize portfolios and books of business fully. The goal is lean and agile operations, with a flexible cost structure that can easily scale up or down as business expands or contracts. Rather than tactical cost-cutting, insurers need to manage a strategic cost agenda.
Imperatives for insurers:
- Expand cloud adoption exponentially in the next 24 months
- Quantify the economic impacts (e.g., cost savings, ROI) of alternate sourcing models
- Refine your alternative capital strategy and identify plans for targeted growth investments
- Develop and apply new productivity metrics for people and teams
- Rationalize product and business portfolios and geographic operations to free up capital for innovation investment
- Examine the mix and structure of capital resources to support both organic and inorganic change
To learn more about the opportunities, risks and critical imperatives for insurers, read our full EY 2021 Global Insurance Outlook (pdf) report.
Summary
EY’s 2021 Global Insurance Outlook outlines current market conditions, the most significant risks and opportunities, and key imperatives for insurers to reorient and retool their businesses for this unique transformational moment.