A recent study done by Mckinsey showed that the insurance sector is way behind in terms of productivity. Indeed, while insurers have invested massively in digital transformation in order to catch up with other sectors such as Telco or automotive, the level of productivity of the carriers has suffered, stagnating for the last 10 years.
The ratio investment/productivity has an important impact on the profitability of the companies. Now facing different kind of challenges, the insurance companies cannot afford to not maximize their profitability. Indeed, they face low interest rates, new emerging risks (such as cyber risk), increasingly frequent and severe natural catastrophes, and new disruptive competitors who optimize their costs and resources. There is thus an evermore present need for insurance companies to be able to stay afloat and profitable in this challenging environment.
In order to improve this ratio McKinsey has identified 4 criteria :
- Functional excellence: improving the existing products, corporate and insurance function excellence (finance, HR, IT, claims, underwriting,..), distribution channel optimization and diversification.
- Structural simplification: organizational simplification, location optimization, restructuring and simplification of IT platform.
- Business transformation: digital and structural transformation.
- Enterprise agility: sustain the momentum.
In order to stay relevant, insurance companies will have to take on a serious challenge: operating a digital transformation in order to boost productivity and reduce costs, while at the same time improving and modernizing the customer experience. This will be key to staying competitive while complying with the latest regulations.
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