It is an understatement to say that 2020 had a significant impact on the insurance industry. The COVID-19 pandemic touched every corner of the insurance sector, whilst severe weather events, a shifting workforce and evolving regulatory focus have all further compounded challenges.
Moorhouse and Expleo are supporting numerous insurance clients across the globe to meet the challenges faced in this new world. These are the key themes that our clients are focusing on as they rally into 2021|2022:
Prior to the recent supreme court judgement1 Many policyholders have had claims rejected during the Coronavirus crisis. Increasing expectations, anticipated premium rises and weak brand loyalty will drive customers to re-assess their provider. This is a critical time to win the ‘customer experience race’ by reducing policy jargon, streamlining the claims process and restoring faith in the market.
Furthermore, the way customers want to interact with their insurance has fundamentally changed. We are seeing firms shift to preventative, service-based offerings and away from traditional protection products. We predict that the insurers who focus on a customer-centric response will emerge with sizable market share increases, as consumers shift further to trust-based decision making.
Insurers are seeing a continued focus towards achieving more sustainable operations. Firms are assessing their exposure to the physical effects of climate change, and there is pressure to reduce coverage and divest from highly pollutant industries.2 This focus will accelerate change, manage climate risk and strengthen firm’s resilience.
The 26th UN Climate Change Conference, in November 2021, will put a further spotlight on UK firms. Taking more significant steps to address climate change will help firms to satisfy consumers and investors, whilst also aligning to the cultural drivers of many employees and society.
Legacy systems are commonly referenced as a primary barrier for digital transformation within insurance.3 Many insurers have reached a tipping point where sizeable new technology investment is required to maximise the benefits of business transformation. The adoption of cloud services, with Software as a Service in particular, has been a top focus for several years now, and will continue to be so in the coming period.
Greater prevalence of customer-facing digital platforms and a focus on data-driven decision making also remains a high priority. Many firms are seeking to build their ‘data maturity’ by refreshing their data strategy and building data science and analytics capabilities. Equally, firms need to ensure that their customers and employees buy in to their transformation to fully realise its benefits.
The insurance sector has been scrutinised for its lack of diversity, especially in leadership roles. Progress is being made; however, insurers are struggling to accelerate change. Coupled with the emerging ‘war for talent’, the most progressive firms are re-evaluating their employee proposition as a strategic priority.
Firm’s should reaffirm or redefine their purpose and culture in order to attract, retain and build a diverse and thriving organisation.
Workforce supportInsurers are making significant long-term changes to their ways of working; creating an agile, remote workforce4 that enables business operations to continue, and innovation to flourish in a virtual world.
Many of our clients are now starting to see the people impacts of prolonged remote working and its toll on staff and organisational wellbeing.
Cultural fractures are forming where different teams/offices are subject to different rules (e.g. contact centres and traditional head office roles) and critical change initiatives are ever more challenging to deliver. Having a clear people strategy and effective employee engagement is vital in this period of high uncertainty.
With difficult market conditions expected in 2021/22, and limited growth expected across the sector, operational efficiency and cost saving is becoming a key priority again.
Rapidly introduced new processes and changes in ways of working following the pandemic will now benefit from review. A key consideration of this focus however is balancing process improvement activities against the wellbeing challenges and ‘change fatigue’5 for employees.
Three key regulatory themes will dominate in the coming years.
Firstly, despite the IFRS 17 deadline being delayed until 1st January 20236, this will be one of the most impactful change for accounting in the insurance industry for several decades. Firms must now take the necessary steps to ensure their internal systems are fully operational – and robustly tested – before the first reports are shared with investors.
Secondly, early planning on climate risk reporting, in line with the guidelines from Task Force on Climate-Related Financial Disclosures (TCFD)7, will be needed to understand obligations and reporting capability.
Thirdly, firms will be considering their operational resilience in light of COVID-19, and the increasing regulatory attention8 on the topic.
M&A activity is expected to pick up throughout 2021, as firms seek to growth in a prolonged low interest rate environment9. Successful partnerships with innovative InsurTechs, to form and build new alliances, will become more commonplace as firms seek to drive greater revenue opportunities, whilst broadening services available to customers.
Firms are identifying suitable intermediary or partner services to bring strong benefits to bottom line revenue and customer satisfaction. The health insurance market is seeing some of the biggest pushes in partnerships with AXA PPP and Vitality offering a range of partnership benefits.
To understand more about these themes and understand how Moorhouse are supporting our clients navigate these, please get in touch.
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