A focus on innovation and purpose to fuel growth
COVID-19 has disrupted insurance industries across the globe, but there’s an emerging optimism driven by a focus on innovation and a strong connection to organizational purpose which is building confidence in the industry’s growth. These are among the top themes emerging among insurance executives surveyed for the KPMG 2021 CEO Outlook. This annual publication, which includes interviews with CEOs from some of the world’s most significant businesses, provides a unique snapshot of the views of more than 1,300 CEOs in 11 countries and key industries. The following draws on the perspectives of 129 insurance CEOs, 77 percent of which have their organization headquartered in the US, UK or Asia Pacific, and offers a lens on how today’s connected insurance CEOs are plugged-in, people-first and purpose-led.
The road to renewal
Global insurance CEOs have a renewed confidence in the growth prospects of their organizations, the insurance sector and the global economy. Leaders in the insurance space expect aggressive growth and are looking to expand their businesses and organizations in new ways. As insurance CEOs look forward, a key focus will be embedding purpose into the fabric of their organizations and, in return, providing long-term value to customers, employees and stakeholders.
Growth prospects picking up
Despite continued uncertainty as a result of the pandemic, most insurance CEOs (93 percent) are confident about the growth prospects of their organizations — a positive shift from this time last year (88 percent). This growth is expected to continue, with 84 percent feeling optimistic about the growth of the insurance industry in the next three years. And this optimism is expected to translate into global growth.
Shifting risks agenda
Business leaders are recognizing a drastic shift in emerging threats to their organizations, fueled by unprecedented pandemic-related risks and new regulations or modifications to existing laws. Among these emerging concerns are regulatory, tax, reputational/brand and cyber security risks — with regulatory and tax as the biggest threats to the industry’s long-term growth. Tax is an emerging risk for insurers, particularly, the Organization for Economic Co-operation and Development’s (OECD) Global Anti-Base Erosion (GloBE) proposal, as well as US tax reform and upcoming new European tax directives, which are causing significant uncertainty. New tax frameworks have a significant impact on how tax functions will manage tax risks on a group level in the future. Insurance groups have to adopt their processes, systems and governance in order to cope with new requirements. They also need to be consistent with environmental, social and governance (ESG) strategies as companies seek to improve tax transparency, governance, and operate with a tax strategy consistent with corporate purpose. The time frame to accomplish all this is extremely tight.
Embedding purpose for growth
Stakeholder expectations have evolved, and leaders are under increased scrutiny to act. Insurance CEOs recognize the importance of having a clear purpose for their organizations to move ahead on their growth path. Sixty-one percent of CEOs are driven by the purpose of creating long-term value for their stakeholders — growing by eight percentage points from 2020 (53 percent). There has been a shift in focus and 76 percent of insurance CEOs feel a stronger connection to their organization’s purpose since COVID-19 began. Driving value that stems from this purpose and embedding it in their business and operating models is expected to play a vital role, with 73 percent saying they’re using corporate purpose to drive action in addressing the needs of key stakeholders.
Strategies for growth
As insurance CEOs look to react quickly to how markets have changed — particularly digital driven changes in consumer preferences — they believe that their inorganic strategies will be key to achieving their growth ambitions. Adapting to the changing trends is the primary focus. In 2021, mergers and acquisitions have emerged as the primary growth strategy over the next three years among 36 percent of insurance CEOs. In addition, organizations are finding ways to overcome disruption to pursue growth, and 60 percent of insurance CEOs have an appetite for mergers and acquisitions — while in 2020 it was 39 percent. To meet customers’ digital engagement demands and support new hybrid ways of working, InsurTech acquisitions are becoming increasingly desirable.
To achieve their long-term objectives, CEOs have their sights set on technology upgrades and innovation as key focus areas to pursue growth. Sixty-eight percent plan to increase investments in disruption detection and innovation processes because of accelerated digitization in the industry. Many leaders believe that this shift will lead to the development of new innovative technologies with a goal of increasing resources and reducing costs.
Creating digital resilience
CEOs recognize that a digital-first approach lies at the heart of how organizations can avoid disruption, stay innovative and create new sources of value. Seventy five percent of insurance CEOs suggest they need to be quicker to shift investments and divest businesses that face digital obsolescence, and 65 percent feel that new partnerships will be critical to continue with pace of digital transformation.
Cyber security preparedness
Cyber security threats limit growth and create boundaries to digital development and inclusion. Sustainable cyber security practices help digital ecosystems thrive, bounce back from attacks, and instill confidence that a business is well governed. Eighty-eight percent of insurance CEOs have already prepared or are preparing their organizations to secure them from future cyber attacks. The need for cyber security has become crucial due to increased digitization, and cyber threats are recognized as a major security issue that can restrict business growth.
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