08 Jun CEO brief: The future of business building in insurance
The insurance industry is at a critical inflection point. Key trends are reshaping the industry, including the rise of competition from an array of insurance and noninsurance digital players, rapidly changing customer expectations, the increasing importance of growth in valuations, and—in many markets—financial and interest-rate pressures.
Given the potential for improvement and the prospect of attractive returns in insurance, private-equity and principal investors have been targeting attractive talent pools and deploying capital with the goal of rapidly driving and scaling the creation of new businesses. We’re already seeing an accelerating inflow of capital through private equity and other channels, with more than $7 billion of funding flowing into insurtechs alone in 2020.1
In this context, business-model reinvention for incumbent carriers is essential to fulfilling the imperative to grow, which ultimately delivers stakeholder value. Crucially, the industry has an opportunity to shift from a “repair-and-replace” approach to one of “predict and prevent” across all segments: life, commercial P&C, reinsurance, personal lines, and brokers. The evolution toward new business models—for example, financial wellness based around analytics-as-a-service (AaaS) and platform- and ecosystem-based partnerships with entities such as travel agencies—is already under way.
New-business building is emerging as a crucial strategic priority to drive reinvention and innovation for the industry. Part of the reason is speed: what used to take years must now be done in months or weeks to meet changing demands of the market. Insurance executives must shift how they lead their institutions—from a methodical pace of change to the decisive reinvention their businesses.
Many established companies have tried and failed to build new businesses from scratch. The ones that succeed combine the speed of a start-up with the scale and resources of the core business. Our experience across sectors shows that six elements define—and are essential to—organizations that repeatedly build successful new businesses.
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