Successful transformation requires insurers to go beyond digital

Jessica: Hello and welcome to our Insurance Speak series. I'm Jessica Lewis, a Director in our Insurance Consulting Team, and I'm joined today by Keegan Iles, our National Insurance Consulting Leader, and a partner in our Strategy& team. Today we're discussing the current state of the insurance industry and the opportunities we see to support both life and health and P&C insurers to remain competitive. Keegan, where do you think the market is heading as we begin to prepare for market recovery?

Keegan: I think the market is likely to see slower growth, creating the need for insurers to take a fresh look at their businesses and productivity to ensure they're among those who will succeed. While insurers have been historically focusing on transformation, the changing needs and the changing landscape means they need to continue to build on those successes to speed up the pace of their change to be able to compete successfully in the future.

Jessica: Right. The key to winning in this environment will be to embrace the convergence of consumer insights and technology. It will be important to invest in the tech and digital capabilities that can both accelerate product innovation and continue to better serve customer experiences. What are you seeing changing in the market strategies for Canadian insurance?

Keegan: I think it's really around connecting your strategy to your purpose and obviously execution. We're seeing that in the market with a conversation around ESG playing an essential role in terms of our investment portfolio, but the broader connection of what you're doing with your customers and your communities through to your business results is going to be a huge theme for 2022.

We see a variety of trends underneath that. First and foremost is the rise of modular but mass personalized products, offerings that let customers either have their own unique life or product need represented, but also the combination of those in different affinity pools.

That leads to another trend around bundled product offerings. We heard a lot about pay as you go or usage-based insurance during the COVID pandemic. And I think that's interestingly just the tip of an iceberg around how much further we could go to bundle products in new and innovative ways.

And last but not least, the changing nature of advice and what people are looking for from their advisors, their brokers, or other intermediaries, as well as their own research that consumers are increasingly doing online, is going to force a conversation around how hybrid advice is being enabled and powered through new technologies.

Ultimately, I really see those three themes and trends coming together as the backdrop to seamless digital experiences. From customers' perspectives, they've grown accustom to being able to articulate their needs digitally, and they want to go from ideation to sale and close all in one seamless experience. This is a huge opportunity for insurers to reframe both the experience, but also their operations, to better manage their business.

Jessica: I totally agree with you, Keegan. I think we can confidently say growth is on the agenda and the ways to pursue it are boundless. Our recently launched CEO survey showed that more than ever, insurance CEOs are confident about growth prospects in the next 12 months. It sounds like there is a lot insurers will need to be focused on as they look to achieve aggressive growth goals. Where do you think they should start?

Keegan: It's so great to see the industry so optimistic about growth. Interestingly, our survey also found a disconnect though between growth goals and their planned investments in those high potential projects. There's really sort of three or four areas that we see as being potentially transformative. The first is, and largely over the last number of years, there's been a significant change in many carriers' portfolios, the mix and distribution type of their products. Defining how you compete and excel in those segments and micro segments is going to really help set you apart as well as enable your ability to get at those new micro segments that maybe you haven't even identified yet. 

In that old adage of form follows function, once you've got that better sense of portfolio optimization, the next trend that we really see is around operating models. Aligning that portfolio segment to your op model is your key in your ability or your right to win. And part of that, might be things like have you optimized or rationalized your real estate footprint? Have you optimized either type of advice channel or that hybrid advice channel? How do we think around your distribution effectiveness?

There's actually a huge ESG element in that. Are you being conscious about where and how your environmental footprint really relates to your purpose? And so there's a coherence that we're trying to drive to, from portfolio to op model.

And last but not least, digital transformation. We've seen a lot of insurers embrace digitization. The evolution and maturation of the platforms and the processes that are now in market are really going to allow people to take it to the next level, truly end to end digitized experiences. That's a huge opportunity, to better serve and drive value for consumers who are increasingly looking for the ability to have that omnichannel experience with the ecosystem that they play in.

That sort of forced people into a conversation around partnerships. What role in the ecosystem do you want to play? As we start to see some thesis around adjacent markets being pulled into the insurance sector more generally, there's an evolving ecosystem, and what we really get at is the role that they can strategically play to make deliberate choices around the ecosystem investments that they want to make.

Jessica: Winning in this environment is going to require a multitude of investments across the organization. How do you think insurers can position themselves to realize the benefits of these investments that are required across their organization?

Keegan: There's a series of actions that insurers can take. The first and foremost is evaluate the market around you. Where do you have a competitive advantage? Are you underserving target customers? Where do you fit within the broader financial services ecosystem and where can you add your own value?

Two, you want to consider the investments required. There's a significant amount of places you can spend your money across your portfolio, your op model, digital technology, customer experience. How do you create additional value by connecting those in interesting or bespoke ways? And evaluate which ones are a medium to long term horizon investment opportunity to best meet those needs of your target customers.

Unsurprisingly, three, you should prioritize and focus. How do you take an iterative and regular review of the investments that you're making to make sure those are most aligned to your purpose and the impact in your market? Be clear on where in the ecosystem you can play and rapidly find value and prioritize those. Take an investment mindset to those opportunities.

Four, this is a people business, enabling your workforce to succeed is essential. Do you have the right talent management program? Are you attracting talent from traditional and non-traditional sources? How are you enabling them to succeed in a largely virtual workforce environment? Understand how you can create impact for them so they can do the same for you.

Last but not least, continually reassess and adapt to the market demand and changes. How do we take some of what we've been doing and show that longer term customer value, longer term stakeholder value? How do we create trust by combining those two elements?

Jessica: I love that clear path forward, Keegan. If you could summarize our key message to insurers today as we think about their future in the Canadian market, what would those three key takeaways be?

Keegan: It's got to start with being clear on your purpose. Your impact on your market, your people, your customers, needs to be well understood.

Two, you need to pick your north star, pick your destiny. Coherence from your strategy, your portfolio, your op model, through to how you deliver your services from a technology perspective, all need to focus on places where you can win and the capabilities you'll deploy to excel and exceed. Clearly defining where and how those differentiate you in the market is going to be critical.

Three, the future of distribution and advice is the war to win. The changing nature of consumer expectations around what they look for in advice, but also the ability for technology to deliver advice in a different way, is going to create a very uneven playing field for those who are agilely responding to the market change and demand. And what we think about the talent management challenges and changes that are happening, whether that's an aging workforce or just the ability to attract and retain exceptional talent, it's the combination of those two that's going to create a lot of opportunity for those who are willing to dive in and take it on.

Jessica: Thank you for your time today, Keegan. This continues to be a very exciting time for the industry as we see insurers making investments across operations, distribution, and their product portfolio, to remain competitive and grow within the Canadian market.