Top insurance industry issues in 2021

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The COVID-19 pandemic has forced insurers to leave the status quo behind. More change has occurred in the industry in the past year than in the previous several years combined and its pace is only accelerating.

How you ride the wave of change is what will matter most in the coming year. Many insurers are taking bold steps to capitalize on structural changes in the marketplace, technology trends, and evolving customer behaviors. Where do you stand?

  • Is your business model business as usual?
  • Have your operations become digital or are they still largely analog?
  • Can you provide the kinds of new products and services your customers want?

A common theme has emerged: To effectively transform your business, you’ll need to make more than just fragmented business line or functional investments. Although an effective strategy will include “quick wins” in specific areas, ultimate success requires an enterprise-wide focus.

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Alternative models

Insurers promise “we’ll be there when you need us.” In exchange for premiums paid today, buyers trust that they can rely on certain financial help if they face peril in an uncertain future. To reinforce that promise, insurers have to diversify risk, and scale helps them deliver on that promise. And, to some extent, they’ve been trying to fine tune the balance between centralized, standardized and controlled capabilities and decentralized models.

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Insurance business models

Underwriting

It's time for insurers to focus on making their underwriting more efficient. It may be one of the best ways to build a sustainable, competitive advantage.

The topic has been on the back burner for some time. As returns on investments grew and expected losses failed to materialize after the financial crisis, companies were able to generate attractive profits without counting nickels and dimes. Underwriters were encouraged to focus on bringing in business. But, times have changed.

You may be hearing a lot of talk about how you can use advanced technology to improve underwriting results. Some applications are very promising, but you'll want to start with some basic blocking and tackling. By heading back to basics, you can address the more fundamental challenges of tying underwriting decisions to loss experience on a more timely basis, selecting risks more effectively, and improving the customer experience — all at lower cost.

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Insurance underwriting

Talent

Insurers have been trying to reinvent the way they attract, motivate and retain employees to stay relevant to the modern workforce. While some have had success, many have fallen short. Considering the aging industry workforce, replacing talent is a critical issue. This isn’t just about losing developers to Silicon Valley. Across a full range of job categories, the industry is often seen as both limited and limiting by geography, incentives, career paths and more. Now, there’s an opportunity to change the odds.

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Insurance talent strategies

Ecosystems

For carriers, size has long been an advantage. To achieve scale and manage complex, diverse pools of risk amid ever-intensifying regulation, insurers have had to commit tremendous resources and focus. The industry often requires a long term view, considering long-tail risks, policies that can last a lifetime, and the need to build and maintain historic knowledge and project results far into the future.

But now, insurance ecosystems are upending many of these long-held assumptions. By choosing their approach to ecosystems strategically, smaller carriers or regional players may be able to close the opportunity gap. Meanwhile, even a large balance sheet may not prevent the risk of commoditization for those that fail to get off the sidelines.

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Distribution

Three forces are shaping insurance distribution:

  • the resilience of intermediaries,
  • rising expectations among commercial and individual buyers
  • and the elusiveness of building scale in direct channels.

Yes, these were factors a few years ago too. In fact, carriers built roadmaps to adapt their strategies accordingly. But the COVID-19 pandemic upended those plans, along with many others, by compressing timelines. In a matter of weeks, consumers and businesses began to shun in-person meetings and rely much more heavily on digital tools for research and communication. Their perceptions of risk changed quickly, as did the kind of help they looked for when evaluating insurance products. And while some carriers were able to pivot, many continue to struggle and those multi-year roadmaps now look like wishful thinking.

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Contact us

Matt Adams

Insurance Practice Leader, PwC US

Ellen Walsh

Insurance Advisory Leader, PwC US

Marie Carr

Global Growth Strategy, US Financial Services Practice, PwC US

Jim Quick

Life, Retirement and Group Advisory Leader, PwC US

Scott McMillen

Property and Casualty Advisory Leader, PwC US

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