Change agents
EY’s Simon Burtwell on how a new and more dynamic value exchange will fuel growth in large commercial and reinsurance business.
Just as they did at the outset of the pandemic, commercial insurers and reinsurers today find themselves facing serious risk of disruption and an imperative to transform their operations. They must simultaneously adjust operations to the Covid-19-enforced reality of remote working and digital interactions and devise ways to restore growth. Accelerating transformation programs appears to be the best way forward.
The pandemic has reinforced the reasons behind the significant transformation investments of recent years. Customer demand for intuitive and streamlined experiences, along with more transparency and highervalue outcomes, has only risen. Insurers still need to develop new products to cover the intangible assets critical to many modern businesses.
Beyond benefiting individual players, advanced digital capabilities can lead to a dramatic transformation of how the industry works. For generations, the commercial insurance and reinsurance value chain has been highly linear, with rigidly defined roles for different stakeholders, resulting in inefficient processes and misaligned incentives. Today, a more flexible, dynamic and data-driven value exchange is well within reach — and it can generate considerably more value for the full range of industry stakeholders, provided they have the appetite and capacity for change.
Indeed, such a dynamic value exchange will reshape traditional transactions and relationships. Firms will specialize. New services and value propositions will emerge. Integrated technology and real-time data will enable direct interactions and fluid collaborations. Seven core components or disciplines form the heart of the value exchange of the future.
1. Product innovation and business origination will be designed for differentiation
Customer- and industry-focused teams, led by skilled underwriters, will collaborate on solutions in incubator environments. Marketing and business development will be fueled by data and actionable insights for tailored offerings and unique go-to-market programs.
2. Loss prevention will offer tailored and timely advice for more customers
The harnessing of customer, third-party and Internet of Things (IoT) data and application of advanced will prevent claims. Enhanced actuarial and underwriting science will proactively mitigate customer exposures and insurer accumulations.
3. Risk transfer will become data-driven and analyticsenabled
Most risks will be placed through digital exchanges, with underwriting teams applying specialist expertise and analytical skills to high-value tasks. Instantaneous placement for less complex risks will drive the shift toward real-time coverage and away from annual renewals.
4. Ancillary services will move closer to the heart of the value proposition
New services will be designed and packaged in close alignment to customer needs, including risk advisory, data sharing, actionable insights and other related offerings. Ecosystems of validated providers will give customers access to legal, risk management and other useful services when they need them.
5. Loss resolution will involve end-to-end automation, with very rare exceptions
Advanced connectivity, direct data feeds from assets, and parametric triggers and AI will make automated settlement increasingly common — from notification through assessment to payment. In-house and byexception handling will be for complex claims only.
6. Business support and enablement will become smarter, leaner and higher value
Straight-through processing and enabling tech will eliminate many manual processes. Smarter and more secure IT infrastructures will support remote working and collaboration at scale.
7. Capital and risk management will see increased alignment and enhanced capabilities
To maximize returns across books of business, capital will be deployed flexibly. Alternative and other forms of capital will fuel product innovation and pricing competitiveness. Though dramatic growth may seem a distant dream in the wake of a crisis, a more strategically aligned and digitally enabled value exchange can contribute significantly to top-line growth and profitability gains. Of course, the firms best able to drive change will enjoy the upside.