Insurers on the brink

Disrupt or be disrupted

This report is meant to serve as a call to arms. Insurers need to be far more proactive and creative in responding to disruptive threats emanating not just from within the insurance market, but spurred by new realities in the economy and society at large. Most insurers may be aware of these forces of change, and some have started taking steps to deal with them. However, we believe the industry in general has lacked the sense of urgency necessary to effectively mitigate and capitalize on these bigger-picture issues, especially given the accelerating pace of change in technology, demographics, and consumer preferences.

Contributing to this reluctance to take swifter action, as we see it, is that many insurers may still be relying upon a series of orthodoxies that historically have served as entry barriers, insulating their traditional ways of doing business and allowing them to make do with relatively modest changes in their products, operations, and distribution systems. However, a number of disruptive developments—driven largely by changing consumer experiences and expectations in an increasingly digital world—are undermining the effectiveness of longstanding business models leaving insurers vulnerable to those introducing new ways of leveraging information and spreading risk, while creating unconventional sources of competition.

In such an environment, insurers will not only need to move more quickly to negate the emerging strategic risks threatening to erode their market position or even displace them entirely. They also should be considering how to turn these threats into opportunities for innovation and growth.

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