Business changes rapidly, and not all business models can weather the storm — but three models will dominate the future large commercial insurance (LCI) market, KPMG said in a new report.
The three models — named the agile global player, innovative specialist and open-source risk manager — are here to stay, KPMG suggested.
The agile global player, which describes established, often large international insurers who cover multiple countries, business lines and segments, is a model that’s focused on ‘agility,’ KPMG wrote.
Refreshing current platforms will not be enough to keep up with client expectations and digitization in other sectors, but agile global players will be the ones that “prioritize and focus their investments and execute at pace — connecting their back and front offices across functions and geographies,” the report read.
Agile global players will focus on harnessing a wide range of new technologies and adapt to changing economic and social landscapes effectively. This method will help LCIs respond swiftly to changing events and circumstances.
“We believe technology will sit at the heart of such an enterprise, performing as an engine of the existing business, while also facilitating the exploration of new opportunities for revenue growth and profit maximization,” the report said.
Data will likely be central to their business strategy, said KPMG. These companies will create new offerings for clients in an efficient, low-cost method which will keep them competitive in the LCI market.
The innovative specialist, on the other hand, will be nimble and capable of rapidly embracing new and emerging risks.
“They develop new products and supporting operating models that harness the power of technology and data to help scale rapidly and respond aggressively to new opportunities in the market,” KPMG wrote.
“A number of industry players are leveraging the power of algorithmic underwriting to scale their underwriting capacity. Supported with the right platform, we expect to see more organizations demonstrating the ability to rapidly scale their offering.”
Insurers using this model will create new products and solutions while getting closer to their clients and delivering rapid solutions when opportunities arise.
“They will not just adopt new technologies; they will pair them with digital savvy underwriting teams. Blending traditional skillsets with analytical capabilities, we expect they will harness the power of data to inform decisions and product design,” said the report.
Those who are successful in this model will have bold and empowered teams and leaders, KPMG suggested, with the ability to make rapid decisions.
The final business model that will be well-placed to survive adversity is the open-source risk manager, said KPMG.
These are the businesses that recognize the complexity of the global insurance market.
“Against this backdrop of increasing complexity, scale and diversity of risk, these insurers are offering their clients simplicity, efficiency and integration by bringing together the best risk management and indemnification solutions from different sources,” the report said.
A range of models and combinations are emerging, but the common ground is that this model will cater efficiently to the majority of commercial insurance needs. These businesses will effectively bring together risk, capital and operational execution, KPMG said.