A new report from KPMG has revealed that the world’s commercial insurance industry is performing well but faces a number of increasing pressures that threaten its long-term sustainability.
KPMG’s Future of Large Commercial Insurance report was compiled following extensive interviews and research with more than 400 industry leaders throughout the world. The report highlights five critical ‘signals of change’ that are already impacting the sector and could radically reshape the industry in the future. These are client and broker expectations; economic uncertainty; regulatory and legal deglobalisation; technology evolution; and ESG activism.
The global commercial insurance industry is predicted to continue its growth trajectory over the next decade, with estimates suggesting the worldwide sector could generate revenues of more than $661m by 2028, compared to $349m in 2020. But, despite the positive financial outlook, there are fears growing external challenges could bring the industry’s success to a halt, if decisive action is not taken now by CEOs and other sector leaders, said the report.
KPMG international global head of insurance Laura Hay said, “The business landscape is changing rapidly. Despite strong market performance, traditional commercial insurance business models are coming under pressure from swirling changes that now have the sector on the cusp of a radical transformation.
“To survive and thrive in this new environment, commercial insurers shouldn’t stand still. They need to evolve and build new differentiated capabilities that connect across the organisation. Technology will be critical, but digital transformation goes well beyond technology. Insurers need a clear, client-led business design of their end-to-end process that should be driven by deep client, broker and market insights. It should be underpinned by a digitally-enabled technology architecture and empowered workforce. In our view, it is only by taking this ‘connected’ approach that insurers can achieve true value from their digital transformations.”
KPMG’s findings highlight the need for the industry to rapidly evolve and address growing threats before they hamper progress in the sector. The report identifies three new business models for the businesses that emerge as ‘winners’ in the long-term. They are: Agile global player – optimising the existing; innovative specialist – adapting and exploiting at pace; and open-source risk manager – stock market of risk.
“To help ensure these winning business models will be successful, commercial insurers should focus on building new and differentiated capabilities that connect across their organisations. While leaders can’t do everything, they should identify which capabilities and models will help make the biggest difference to their business,” said KPMG UK global head of insurance advisory Mark Longworth. M