Posted: 20 Jun. 2024 5 min.

Winning strategies for Insurers

Topic: Insurance

The majority of CEOs surveyed in Monitor Deloitte’s Q4 2023 global survey described 2023 in one word: challenging. There is a war raging in Ukraine, turbulence in the Middle East, natural disasters frequently reminding us of the climate crisis, and other macro environment factors contributing to a broad sense of concern. When we go back a few years and look at how CEOs responded in similar surveys, their top concerns were organisational culture and intense competition. Today, geopolitical instability is ranked as the top expected external business disruptor. Winning strategy needs to reflect this fast-paced, disruptive environment that companies operate in, while managing the hard tension between commitment and flexibility in markets that are changing rapidly.

Increased uncertainty is also a reality in insurance where many CEOs would also add political and regulatory change and rapid inflation to the list of challenges. With the price walking debate, the AI Act, and Open Insurance and Open Health solutions in the horizon, the potential external forces impacting insurers are numerous.

For decades, insurance companies have run a profitable business on planning for a predictable future. The recipe for success has relied on hindsight to inform future choices, risk aversion, and navigating by multi-year strategies. When we look at the answers from the survey – and not least the global context in which the answers are produced – it is clear that insurance companies need to change that recipe. Being able to develop and execute a more difficult and ambitious strategy as well as adaptability has quickly become basic conditions for gaining and retaining a competitive advantage. 

The four pillars of strategy
A good strategy is still deciding “where to play and how to win” and what core capabilities and steering models are needed. But when we speak to CEOs and their teams and factor in uncertainty on the one hand and technology at large at the other hand, “good strategy” needs some added features.

At Monitor Deloitte, we focus on four aspects of increasing importance: 1) Strategy needs to be data-driven; 2) Strategy needs to be agile; 3) Strategy needs to match bold plans with bold execution, 4) Strategy needs to be resilient.

Resilience first. Insurance companies must ask themselves how their strategy will fair in different scenarios – or “versions of the future” as we like to call them. Looking at all the variables which can influence the strategy of an insurer, the future is more unknown than ever. The authors of this blog have over the last couple of years worked with insurance companies on scenarios for, among other, the future of Danish healthcare economics (the divide between public healthcare, private providers and private health insurance); the future of the Nordic corporate insurance market; the Nordic industry configuration for private insurance (Auto/Home and Content); and probable scenarios for property insurance.

These scenarios allow the testing of a selected strategy AND more importantly give the insurance company “signposts” to look for when moving forward and course correct as the various scenarios become more or less probable.

Data-based and agile
That naturally takes us to two other strategy must-haves: Strategies being data-based and agile. Using data to build, test and monitor the strategy is increasingly feasible. Truly understanding the important value levers and dependencies within one strategy and using data to analyze and track those are key.

When the data shows that the world is developing differently than expected and planned, the insurer needs to course correct. The customers might not do what we thought they would (like SME’s not buying cyber insurance); the competitors might act differently (like ABG buying Codan instead of more obvious contestants); or the legislator might create a new situation (like the Danish regulator demanding balanced long-term disability, “SUL”, results in Life & Pension). This creates challenges. Traditionally, best practice for strategy implementation was to build a strategy implementation office who kept track of the strategy implementation and made the executive team effective in tracking and adjusting larger strategies. But insurers are not built for agility. On the contrary, they are built for stability and risk management.

We foresee, that insurers who excel at strategic agility are most likely to win in the future. For example, most experts foresee a very large market for privately funded healthcare within the Nordics in the future. Within both P&C and Life & Pension health insurance is becoming an area of focus. But uncertainties like public healthcare investments, consumers’ willingness to pay for prevention, medical and biotech development, segmentation of health across demographics etc. would make the CFO stop any standard business cased strategy. Hence, understanding how an insurer builds scaled feedback loops, organizational nimbleness and decision-making structures with more speed than red tape is crucial. The key is to be quick and decisive.

Match bold plans with bold execution
Are you playing to play, or are you playing to win? That is a question insurance companies will have to answer convincingly in the coming years. Depending on the organization, boldness may mean significant commitments to new technology, talent pools or skills that may stretch the current business and management systems, M&A to supercharge growth in existing or new markets, or rapid execution through prototyping and automation. We are not suggesting that insurers should go ahead and do ill-considered investments just to prove they are bold. The boldness lies in making smart investments that are in sync with the different scenarios for a probable future on the insurance market. And knowing when to course correct.

Two examples:

  • As economics of scale and scope in P&C insurance are well established, Tryg Forsikring buying RSA Nordic, and Alm. Brand Forsikring buying Codan were bold moves. But they were also calculated plays tapping into a value driver (scale) which almost irrespectively of how the future plays out cannot go all wrong. Both plays have moved Tryg Forsikring and Alm. Brand Forsikring closer to a very strong competitive position
  • As auto insurance is very likely to be disrupted, and the mobility ecosystem is likely to be big and configure in some shape or form, Gjensidige’s purchase and partnering with road toll, garages, parking system operators, road rescue etc. is an example of bold strategy. But it also puts Gjensidige in a prime spot once the winning plays start to become visible in the mobility ecosystem, just as it makes their core auto business more defendable for longer. “You have to be in it to win it”, as the saying goes. Might Gjensidige fail on some of their mobility ecosystem investments? Probably. Will Gjensidige have a distinct first-mover advantage in what everyone seems to believe is going to be a very big market? Probably

Clearly, we should not take the CFO and the actuaries out of the strategy development process. On the contrary, we need to do the qualitative logic checks, investment cases and the sensitive analyses. However, a wrapped-up ROE 15% business case with no risk factors might not be appropriate for winning. Some more risk combined with the strategic agility to course adjust and kill darlings if burden of proof is not lifted as we scale test cases, is more likely to be a winning recipe for a 2024 insurer. To that point, Tryg Group just sold Alka Mobil.

Embrace uncertainty
Many insurers around the world are talking about “strategic transformations” – which is in fact ‘only’ a lot of incremental digitization. Digitization is not a bold move nor a winning strategy! It is table stakes for customer engagement and cost level reset. Anyone can buy IT – it is what you do with it that makes you win.

As mentioned, private health insurance (PHI) and services are likely to be the next frontier of bold moves within Nordic Life & Non-Life insurance. PHI is growing, the public healthcare sector is challenged with demographic changes and advancements in healthcare (better form of diagnostics, treatment, medication, rehabilitation). However, there is only limited evidence of scaled consumer willingness to pay for broad health insurance products including prevention services.

As an insurer, you have a choice: Wait for the future health insurance market to configure and then make your play. Or look at the most important macro-drivers of the market, take some positions with calculated elements of business risk and course correct as the future health ecosystem configures and changing health economics (more prevention, less treatment) plays out in a PHI market very likely to be very big. We are confident that the PHI winners in 2030 are found by insurers choosing the latter.

Forfatter spotlight

Jan Auerbach

Jan Auerbach


Spørg mig om: Skadeforsikring, liv & pensionsforsikring, strategi, forretningsudvikling og business transformation Jan er leder af Deloittes strategi-praksis for finansielle institutioner: Monitor Deloitte FSI. Han har mere end 20 års erfaring fra den Nordiske og Internationale forsikringsindustri. Han har med base i London bl.a. haft europæisk ansvar for strategi, distribution, forretningsudvikling og såvel store kunder som mellemmarked for et at verdens største forsikringsselskaber.

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