Following the release in 2012 of “The Intelligent Insurer”, KPMG has released the latest insurance research report “The Valued Insurer: Leading the pursuit of sustainable growth.” Where “The Intelligent Insurer” focused on the dominant forces impacting the insurance industry over the next 20 years, “The Valued Insurer” focuses on the characteristics shared by today’s most successful insurers thriving amidst times of economic uncertainty.
The four key attributes
KPMG observes that most profitable insurers all shared a customer centric approach. A relentless customer-orientation is the core element of the attributes that KPMG has identified that contribute to sustainable superior performance which are:
- Focus: Top firms have charted a precise course with a long-term view – an articulated and clear strategy that reflects their vision and specialization.
- Efficiency: The most successful insurers have embraced a culture of continuous operational efficiency, establishing scalable, low cost models and invested in systems and processes to resolve inefficiencies.
- Agility: From the boardroom to the back office, successful insurers demonstrate flexibility to adapt swiftly to a shifting environment across their entire organization.
- Trust: Top insurers have found ways to attain or regain confidence and trust, through genuine, far-sighted efforts that build constructive relationships with mutually beneficial goals for all stakeholders including customers, regulators and investors.
Creating value in difficult times
Successful insurers although sharing the four key attributes varied immensely in their application. Combining the key attributes with customer centricity has enabled them to outperform despite the difficult times. This creates an organizational capacity facilitating sustainable growth and capacity to withstand low interest rates and equity market volatility.
Challenge of “knowing” the customer
The affects of technology will change the way organizations interact with their customers. An increase in mobility devices will doubtless decrease the face-to-face customer interaction, making “knowing” the customer a challenge. The use of predictive analytics and segmented customer data will become vital in understanding customer needs.
The Paradigm for the Valued Insurer
To prepare for the road ahead, KPMG has developed the paradigm of The Valued Insurer to help explore what insurers need to do to position themselves for profitable future growth. To deliver a customer-centric business model, KPMG recommends insurers build their business on the following four pillars:
- Better knowledge of customers: Understand the needs of customers and develop propositions to match. Use predictive analytics and propensity modeling to target and cross-sell.
- Propositions aligned to customer needs: Sell based on customer needs to secure customer loyalty, referrals and retention. Be prepared for consumer-focused regulation.
- Optimize distribution to each customer segment: Understand how customers want to buy and align to distribution strategies. Optimize the cost of acquiring customers based on the value of the product they are buying.
- Best possible servicing for each customer segment: Understand how customers want to be serviced and through which channels. Promote a positive customer experience at every touch point.
The time required to gather customer perspectives, refine propositions and go to market spans more than a few quarters. However KPMG believes those insurers focused on long-term sustainable value creation will be rewarded by their investors and positioned as valued insurers.
Need for action for Swiss insurers
Insurance plays a very important role in society and the global economy. Switzerland has one of the highest insurance penetration rates in the world and the Swiss insurance market is one of the most important global insurance markets.
Swiss insurers, both those that operate on a global and national basis, must continually strive to increase the value they provide to customers if they are to increase the opportunities available to them.
Evidence would suggest that this is recognized, planning and action is happening but there is some way to go to achieve a clear competitive advantage.