Reinvention and differentiation: 5 strategic priorities for reinsurers and insurers
While re/insurers of all types face challenges in the aftermath of COVID-19, there are certain strategic priorities that will apply to all, according to PwC’s latest report, as Arthur Wightman of PwC Bermuda explains.
“The speed of technological advances has already created significant demands for upskilling your workforce, and post-crisis demands will heighten that need.”
Arthur Wightman , PwC
As the world deals with the impact of the COVID-19 pandemic, insurers’ strategic focus is turning to what the competitive landscape is going to look like in the aftermath, what it means for their business, and how to come out in front. If you’re an insurance or reinsurance leader, focusing on five key priorities will help you to be stronger and more resilient in the post-crisis world.
Exploring these questions will require considerable scenario analysis and optional planning. And the answers will depend on the nature of your business: property and casualty face different challenges from life and pensions, in particular.
However, regardless of the shape of the recovery and your line of business, we believe there are five overriding strategic priorities that will help you emerge from the crisis stronger than before. They are outlined in PwC’s report “Beyond COVID-19: Five key strategic priorities for a post-crisis world” published in May.
The priorities are: ● Realign your cost structure and sharpen productivity ● Supercharge digital transformation to create a digital enterprise ● Carve out new revenue streams ● Prepare your workforce for the new world ● Strengthen capital efficiency
These shouldn’t be new priorities—any good strategy should have included some or all of them already. However, the COVID-19 pandemic has increased the urgency of these competitive imperatives. PwC’s report outlines why we think so, what actions you should take, and which potential benefits you should target.
Out of every crisis come opportunities for competitive reinvention and differentiation. Today’s strategic rethink provides a catalyst for accelerating operational transformation, developing new business models and connecting more closely with customers. We believe that our five priorities offer a valuable starting point for capitalising on these opportunities.
Before we further discuss these priorities, we would be remiss if we didn’t highlight the need for leading with purpose.
Insurance and reinsurance has always had a greater purpose than just revenues, profit or shareholder value. Insurers’ role in providing peace of mind to consumers and businesses and coming through in times of need and distress is vital. This is a time for organisations to renew and refresh their purpose—their ‘true north’ driving company culture. Purpose also guides, motivates, and aligns decisions, actions, and behaviours with respect to all stakeholders.
Five key strategic priorities
1. Realign your cost structure and sharpen productivity
Productivity is an enduring challenge to resolve, not just a temporary issue caused by our current circumstances. Operationally-oriented functions, such as IT, underwriting, claims and customer service, are ripe for a re-engineering of what they do, why, how and where. Performing this re-engineering provides a fundamental opportunity to simplify, automate and right-source many functions. 2. Supercharge digital transformation to create a digital enterprise
The post-crisis shakeup is an opportunity to put all your organisational focus and muscle behind the digital agenda to create a truly transformed enterprise, from front to back offices. This is the way forward for all modern enterprises; as an insurer, your company is no exception. 3. Carve out new revenue streams
To capture new markets, insurers and reinsurers need to design products that reflect today’s evolving needs (eg, usage-based insurance, employment loss protection for gig workers, pandemic business interruption coverage and cybersecurity for remote working). If your business has a strong balance sheet and capital position, this is also a good time to consider strategic mergers and acquisitions.
For global players, China and fast-growing South East Asian insurance markets remain attractive, and for the first time in a long while, the South East Asian market’s growth potential might not be fully priced into its valuations. 4. Prepare your workforce for the new world
The COVID-19 lockdown has forced all businesses to reassess almost every aspect of how they work. In whatever ‘new normal’ emerges for your employees—whether it includes continuing to work from home, interacting digitally or harnessing emerging technologies to innovate—it’s important to ensure that your people have the right skills and a willingness to embrace change.
Upskilling your workforce is not just a matter of pushing out technical training to your employees. It requires careful assessment of desired skills and competencies to be targeted, investment in a learning environment, assessment of the impact of change and a systematic way to measure the return on your upskilling investment. 5. Strengthen capital efficiency
Once you’ve steered through the immediate capital and liquidity stresses of the crisis, it will be important to focus on the longer-term capital management impact of lower interest rates, greater hedging costs, and heightened market volatility.
Read more about the action points and outcomes to target in “Beyond COVID-19: Five key strategic priorities for a post-crisis world” at pwc.com/bermuda
Arthur Wightman is PwC Bermuda leader and Caribbean region insurance and markets leader. He can be contacted at: firstname.lastname@example.org
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