Cynthia Ezekwe
The insurance industry is in the midst of a major transformation, driven by the confluence of several powerful forces. New technologies, including artificial intelligence and blockchain, are revolutionising the way insurance is done, while shifting consumer demands and economic conditions are creating new challenges for insurers. These challenges are compounded by the increasing frequency and severity of global risks from climate change to cybercrime.
Based on this, Deloitte, in a recent report titled “2024 Global Insurance Outlook:Insurers evolving to address changing operating environment and precipitate even greater societal impact”, outlines several strategies for insurers to consider in order to evolve and stay relevant in 2024 and beyond.
The multinational professional services network identifies key issues that insurers will face in the coming years, such as changes in the operating environment, the need to improve societal impact, and the need to address the effects of climate change. It also suggests strategies for insurers to adopt, including the use of technology, innovation, and talent development.
Deloitte’s report paints a picture of a rapidly changing world, where the pace of change is unprecedented. It notes that a variety of factors are driving change, including climate change, technological advancements, workforce changes, and shifting customer and societal expectations. These factors are also having an impact on macroeconomic and geopolitical factors, creating a complex and challenging environment for insurers.
To survive and thrive in this environment, the report suggests that insurers need to transform their businesses in several key areas. These include technological infrastructure, products and services, business models, and organisational culture.
Deloitte noted that the goal of these transformations is not only to generate profits, but also to ensure the long-term sustainability and viability of the insurance industry. This includes addressing important societal and environmental issues, such as climate change and inequality.
According to the report, the insurance industry is uniquely positioned to create positive social change because of its existing role as a financial safety net for society. The industry provides protection against a wide range of risks, from natural disasters to accidents and illnesses. The report suggests that by expanding its role beyond financial protection to include social and environmental good, the industry can have an even greater impact on society. This could involve initiatives such as using data and analytics to identify and address social risks, developing products and services that promote social equity, and partnering with other organisations to create positive change.
The report notes that many insurers are beginning to realise that they can play a more proactive role in helping to prevent risk, rather than simply providing financial compensation after the fact. This shift in thinking is being driven by a number of factors, including the growing number and severity of risks, such as climate change and cybercrime, and the increasing need for financial protection for people who are uninsured or underinsured.
It also brought to fore that insurers are exploring new ways to address these challenges, such as using data and analytics to identify and address risks before they occur, and developing new products and services that prevent or mitigate risk. The report suggests that this new approach can have profound benefits for both individuals and society at large. By addressing risks before they occur, insurers can help to prevent or reduce the damage caused by disasters, health emergencies, and other events. They can also help to close the protection gap, making sure that more people have access to the financial protection they need. This can have a significant impact on reducing inequality and improving the quality of life for people around the world.
“Even while the most extreme events may appear unavoidable, insurance combined with proactive risk management can still help minimise the degree of their impact on affected individuals and communities,’’ the report highlighted.
Deloitte lays out five core strategies that insurers can use to evolve and better serve industry, society, and the planet. These strategies include:
– Improve the bottomline by decreasing the frequency and severity of insured events and thereby lower loss ratios.
– Enhance brand reputation by enlightening consumers and communities that support it year-round, rather than only at the point of sale, renewal, or when a claim is filed.
– Upgrade the insurance value proposition by placing standard risk-transfer policies at the centre of a much broader, more holistic risk mitigation programme.
– Create access and inclusion for all underrepresented and unprotected segments.
– Build trust and confidence of consumers by being more transparent, responsible, and involved in environmental and societal issues.
In order to successfully implement the strategies outlined in the report, Deloitte highlights the need for insurance companies to adopt new technologies such as generative AI. Generative AI is a type of artificial intelligence that can create new data based on existing data, which can be used to generate insights and predictions about future events.
In addition, the report suggests that insurers should seek to collaborate with other industries to access a wider range of data sources, products, and services. The report also highlights the importance of talent development, noting that employees with the right skills and knowledge will be essential to effectively using new technologies and implementing new strategies.
“Transformative change will likely have to go beyond adding new tech bells and whistles. More proactive insurers are also beginning to embrace enterprise wide culture change to reduce silos, elevate their talent, and achieve a more ubiquitous focus on customer-centricity. For global insurers, this may include rethinking how capabilities are shared across geographies and business lines to help drive a more consistent and integrated customer experience,’’ the report stated.
In addition to the technological and strategic changes outlined in the report, Deloitte also stresses the importance of a strong commitment to diversity, equity, and inclusion (DEI) as a key factor in the success of the insurance industry. This commitment, it stressed,should be demonstrated through a variety of actions, including ensuring that the workforce is diverse and inclusive, and that products and services are accessible to all customers.
The report points out that improving the industry’s DEI record will help to build trust with stakeholders, including regulators, legislators, and rating agencies, as well as the general public.
It argues that by demonstrating a commitment to DEI, insurers have the potential to not only improve their own bottom line, but to elevate the perception of the insurance industry as a whole. It added that by taking on a more holistic approach to consumer interactions, insurers can build deeper relationships with their customers, which can lead to increased trust and loyalty.
According to Deloitte, this could ultimately lead to a shift in the way the industry is viewed, from a purely transactional role to one that is seen as having a positive impact on society as a whole. This shift in perception could lead to even more growth for the industry, as consumers would be more likely to view insurance as an essential part of their lives, rather than a grudging necessity.
The report stresses that this is a long-term process, but one that is well worth the effort. By demonstrating a commitment to DEI and building a positive reputation, insurers can create a virtuous cycle that leads to more growth and better societal outcomes. This would be a significant departure from the traditional view of the insurance industry, which has often been seen as a necessary evil, rather than a force for good.
The report suggests that insurers who are able to make this shift could be well-positioned for success in the coming years.
