KPMG: The changes required as we enter a new reality

September 20 2020

By Frank Dubois, head of insurance, KPMG in Singapore and Paul Brenchley, head of insurance advisory, KPMG in Singapore

Terrible human and widespread economic impacts continue months after the Covid-19 virus first made its appearance. This has been felt in different ways across multiple sectors of our economy, from placing immense pressure on healthcare systems and the unprecedented restriction of movement locally and overseas, to increased online activity.

As progress is made on the public health front and governments cautiously lift restrictions, with some tapering off their financial support, many insurers have been preparing themselves for the new reality by assessing operational challenges and market opportunities.

Key trends have begun to emerge to address these challenges. These include digitalised sales processes replacing traditional face-to-face models, the acceleration of process automation moving towards paperless routines, the development of customer self-servicing tools, greater use of data and analytics for lead generation and digital marketing, and planning for new ways to use office space.

From a longer-term strategic perspective, many insurers are looking to determine a range of possible future scenarios and then assessing corresponding strategic actions which they need to plan for to address these possible futures.

The insurance sector needs to transform to emerge stronger. What are the main changes required as changing customer expectations and engagement push the sector towards a necessary transformation?

Where are we in the recovery cycle?
KPMG has identified four key phases of recovery arising from the pandemic:

Reaction: Uncoordinated responses, capital market sell-off, government controls leading to disruption of operations, professional and personal lives.

Resilience: Panic behaviour beginning to subside, government controls starting to loosen, but still slow customer deman

Recovery: Capital projects begin to scale, gradual consumer and capital market recovery

New reality: The new normal begins to set in as behaviours and technologies tested during the crisis (such as digitalisation and flexible working) become standard even after Covid-19.

After several early months of extreme uncertainty, a vast majority of organisations are now within the ‘resilience’ and ‘recovery’ phases and are transitioning into the ‘new reality.’

How can insurers transform to re-emerge even stronger?
KPMG has identified six key themes which insurers should reflect upon:

Customer-centricity: One of the most significant areas of change that insurers will need to focus on is the ability to react to changing customer needs and expectations. This can ensure their continued relevance and ability to compete with other industries for customer attention. Many customers have become increasingly comfortable with digital interactions as their default engagement model, and that is how they now want to interact with any company.

Customers want to engage when they want, where they want and how they want. The insurance industry has been speaking for many years about being customer-centric, yet many companies have failed to offer this experience.

Insurers are making fast progress to better understand the needs and behaviours of their customers and must continue to do so. Customers are more focused on protection against future health costs and financial planning for an uncertain future than they were before this pandemic.

There also seems to be a movement towards a society that has a greater focus on illness prevention and wellbeing, both physical and mental, and some insurers are responding by developing wider services to show their value to their customers beyond a simple insurance policy.

Will mental stress be the next curve that we must flatten and what role will insurers play to assist and protect their customers?

New business model: These changing customer expectations are driving insurer investments in new business models. Insurers are developing digital first financial advisory interactions, increased product personalisation based on new customer needs and targeted digital marketing. They are also meeting basic operational hygiene factors including developing digital payments for collection and disbursements, customer and intermediary self-servicing, and end-to-end process automation with e-forms and extended workflow capability for customers, alongside paperless internal processes to support the employee experience.

Organisation structure: Transformation is clearly easier said than done and many insurers have tried various approaches to accelerate digital transformation, but implementation has been slow and patchy. Traditional insurers often started their journey with innovation labs or small internal digital teams. As these teams have grown, or as innovation labs have been incorporated into their businesses, conflicts and ownership issues have emerged with this centralised structure.

Many are rapidly moving to a more hub-and-spoke structure where a central hub is seen as an enabling function and the spokes or functions develop their own digital capabilities to be able to support the development of digital tools before they are fully deployed. Finally, we may see insurers move to a fully decentralised structure where there is no more need for the hub, and functions own their own digital destinies. Outside of the insurance sector, many of the more advance digital players, such as banks, have moved to this model.

There is no one size fits all, and it’s important for insurers to tailor their organisation structure to the current level of digital maturity (and to be customer centric in distribution rather than being product centric). They need to have appropriate people and culture change programmes. This includes a clear tone-from-the-top as well as programs to continually upskill existing staff and encourage innovation within teams.

Lead generation: Covid-19 has impacted new business sales significantly by restricting traditional physical lead generation methods. Insurers have therefore looked to focus on selling to existing customers and using data analytics to support their sales activities. Effective sales analytics programs must be able to answer these five questions – what, who, how much, how and when to sell – in order to focus sales on the most efficient path.

Increased digital product disclosures on websites, as well as search engine optimisation and online needs analysis have been on the rise to match customer research and engagement preferences. Data capture and the subsequent allocation of leads to agents with the greatest conversion chance is now commonplace.

Facilities and workplace changes: The success of remote working and digital interactions have led to a fundamental rethinking of the need for physical office spaces. Insurers are reassessing and optimising their online and offline footprint as customers, intermediaries and staff balance between the need for physical and digital meetings. Insurers are now looking to reassess their office space (as collaboration locations) and the space used by agents.

M&A: Fresh merger and acquisition considerations have emerged in the new reality. KPMG research shows that over 80% of chief executives are considering inorganic strategies to address the changes in operating models. Any such activity should clearly consider the strategic rationale. This includes acquiring new capabilities to accelerate transformation as well insurers entering into new non-traditional partnerships (for example with e-commerce players or mobile wallets) to reach a new customer base.

What next for insurers?
The six areas of focus have now to be turned into impactful action plans tailored to each organisation.

Insurance companies will need to find the answers to delivering more certainty in an uncertain environment, building resilience and giving customers what they want whilst being resilient and agile enough to evolve in changing circumstances. They need to drive business recovery and identify opportunities by reconsidering their value proposition, adapt to the new world and challenge their strategies to face the permanence of market changes in order to thrive in the new reality.


The views and opinions expressed herein are those of the authors and do not necessarily represent the views and opinions of KPMG in Singapore.

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