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. This was likely thanks in part to all the new technology and talent put in place to upgrade systems and capabilities well before COVID-19 hit. But it may also be due to a significant change in perspective and approach from what might be possible or useful at some point down the road, to what had to be altered immediately to stay in business during the pandemic—often under the most trying of circumstances.

  • Insurers are facing a host of macroeconomic and geopolitical challenges likely to inhibit growth and profitability—including the looming threat of global recession, continuing fallout from Russia’s invasion of Ukraine, and lingering COVID-19 concerns.
  • However, insurers that effectively transitioned during the pandemic to a remote workforce, as well as virtual customer and distributor engagement, could be better positioned to capitalize on a more agile digital infrastructure in meeting evolving expectations for customized products, channels, and services.
  • In setting strategic plans, investment priorities, and budgets, insurers should therefore strive to maintain the momentum of creative adaptation established over the past few years, accelerating upgrades in systems, talent, and culture while becoming increasingly proactive, innovative, and customer-centric.
  • While technology and resulting improvements in risk selection and pricing are likely to remain the primary drivers of improved bottom-line performance, insurers should expect to be increasingly judged by stakeholders on their response to broader sustainability priorities such as climate risk, diversity and inclusion, social equity, and transparent governance—all of which could become competitive differentiators in the battle for talent, investors, and market share.
Insurers Should Be Pivoting to Longer-Term Reinvention

In such an environment, any headwinds slowing transformation initiatives often became tailwinds, particularly in accelerating technology and talent transformations.

Together, these adaptations should leave most carriers better able to withstand and recover quickly from difficult situations going forward.

Yet this is hardly the time for insurers to rest on their laurels. Rising inflation, interest rates, and loss costs, along with the looming threats of recession, climate change, and geopolitical upheaval, will likely test insurer resiliency. They will also be tested by the entry of new types of competition from InsurTechs and even noninsurance entities such as e-tailers and manufacturers.

Insurers should be building upon the momentum that enabled the transition to a remote workforce and virtual client engagement nearly overnight.

More fundamental adjustments should be considered to maintain an ongoing culture of innovation while making customer-centricity the focal point of the industry’s standard operating model.

Insurers Should Be Pivoting to Longer-Term Reinvention

Accomplishing this mindset change 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—to fully realizing the value and benefits of infrastructure and technological upgrades.
  • Move from 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.

Carriers should be building upon the momentum that enabled the transition to a remote workforce and virtual client engagement nearly overnight.

Interviews with insurers and Deloitte’s direct experience working with a wide variety of carriers suggest these reconstituted approaches should go beyond tactical tweaks.

Cultural changes are also likely called for in how insurers:

1) recruit, retain, and optimize talent;

2) engage with customers in customizing and distributing products and services;

3) reconcile society’s overriding environmental, social, and governance (ESG) priorities with their own traditional top- and bottom-line considerations.

Analytics cite growth opportunities while addressing challenges facing nonlife, life, and group insurers in an increasingly volatile economy. We have also looked at nonorganic growth potential to assess the merger and acquisition environment. But we mainly focus on bigger picture, cross-industry agenda setters likely to confront insurers in human capital, technology, and sustainability—all areas that could ultimately turn out to be competitive differentiators.

New, unforeseen wild cards are likely to come into play that are largely out of the industry’s control, further testing insurers’ ability to adapt on the fly.

But this outlook concentrates on core areas carriers can and should be able to control in terms of how they view and run their business in a rapidly evolving marketplace—not just in 2023 but during the rest of this already-turbulent decade.


AUTHORS: Karl HerschUS Insurance leader, Principal Deloitte Consulting, Neal BaumannGlobal Financial Services Industry leader, Principal Deloitte Consulting

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