A more assertive regulatory landscape may prove concerning for large commercial insurers (LCI) in the near future, especially those with multinational clients, a survey from KPMG suggested.
Evolving client and broker expectations, economic uncertainty, technological evolution and environmental, social and governance (ESG) activism also are causing mounting pressures to the LCI sector, said approximately 400 respondents from commercial insurance organizations in The Future of Large Commercial Insurance survey.
Commercial insurers are finding the regulatory landscape to be more “fractured and complicated” than before, and the changing landscape will not be easy for LCIs of multinational clients, KPMG said.
“It will require them to establish trust with multiple regulators, understand and anticipate future changes in regulators’ priority areas, embed values into their decision-making and create a culture where employees are rewarded for doing the right thing,” the report read.
Decision-makers at LCIs are most concerned about regulation and governance (43%) as top risk areas for establishing customer trust. Crime and cybersecurity followed at 35%, along with technology and disruption (34%), brand and reputation (32%), operational and financial (28%) and environmental and geopolitical (26%).
What’s more, both client and broker expectations are evolving, the survey found. Eighty-three per cent of LCI decision-makers cited their customer-centric strategy as a high or top priority.
LCIs need to stay ahead of the curve as insurtechs’ rise in the commercial space is adding competitive pressure to client ‘pain points,’ the report said.
“Collectively, this is forcing commercial insurers to radically rethink their operating models, business models and channels,” the report read. “In our view, the winners will be those that secure the trust of their clients in the new risk landscape and are able to deliver innovative, tailored and commercial solutions and experience.”
KPMG also found economic uncertainties arising from the COVID-19 pandemic, the Ukraine invasion, rising inflation and interest rates will require insurers to adjust their business strategies.
“For multinational commercial insurers in particular, new digital capabilities and solutions may offer some much-needed flexibility and agility as organizations strive to respond to this complex and interconnected web of challenges,” said the report.
Forty-four per cent of respondents found new financing models (e.g., special purpose acquisition companies) to be among the challenges they face, along with increased business interruptions (e.g., data breaches, climate-related events) at 31% and new delivery models (e.g., embedded insurance) at 25%.
Another trend LCIs found to be both an opportunity and catalyst for internal change is the evolution of technology.
Seventy-two per cent of LCI decision-makers agreed or strongly agreed that in addition to acquiring analysis tools and developing analytics skills among existing staff, they also hire for emerging analytics roles like dedicated AI specialists and experts.
“Industrial automation and robotics are providing new opportunities for insurers to streamline processes, as well as gather and analyze data,” read the report. “Cloud-driven technologies, artificial intelligence and machine learning are helping to unlock leaner, more automated underwriting and claims-settlement processes, supported by data-driven decision engines.”
LCIs that want to stay ahead of the tech curve will need to put digital and data capabilities at the core of their operating and business models.
The report also found insurers will face increased scrutiny from stakeholders, regulators, investors, employees, clients and the general public if they do not enable ESG in their business.
“By consciously investing into sustainable options, insurers should be able to create real and tangible value — not only by meeting customer demand for transparency and sustainability, but also by building innovative propositions and resilient business models,” the report read. “In our view, commercial insurers will need to embrace the shift towards ESG prioritization, both as a way to differentiate and as an opportunity to innovate.”
Feature image by iStock.com/Nastco
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