The recent market and economic crisis have been challenging to most insurers. Reduced sales volumes, lower investment returns, declining stock value and consumer behavioral changes are all evident in the property-casualty and life insurance markets.
As a result, insurers have had to realign their priorities for 2009, including restructuring their organizations, shifting business strategies and making hard technology decisions.
I’ll be taking a look at such decisions during a session here at the conference on Monday, at 10:15 a.m., titled “Invest Or Be Left Behind: Staying Competitive & Innovating In Insurance.”
Gartner research has found that there are four types of organizational responses to the current economic conditions. Insurers, based upon their strategy, product line, and financial structure, are taking different approaches to staying competitive.
The approaches are:
- Maintain the status quo.
- Focus on cutting.
- Focus on agility.
- Turn adversity into opportunity to overcome competitors.
The findings also show that most companies are taking the route of focusing solely on cost cutting and operational efficiency.
While this approach will serve short-term goals, such as reducing internal operations cost to drive greater profitability, it does not help to position the company long-term to be able to compete when the market conditions improve.
It is imperative that insurers invest in 2009 in areas which will allow them to respond to the market when it picks up again. Organizational agility can be created through improved infrastructure, legacy modernization, business process management and data/information management.
Insurers must be proactive in planning for the future--including anticipating consumer wants and needs in regards to channel use, product needs, and service interactions. In addition, prepare for the new competition and regulatory requirements which are likely to be outcomes of the crisis.
Simply focusing on tactical, short-term market needs will put companies in jeopardy for the long run.
Being more futuristic to understand shifting market conditions, conducting scenario planning to determine possible outcomes, and making necessary steps to be agile and quick to respond to future industry conditions are all critical success factors in both life and P&C insurance industries.
Organizations primarily focused on running the business profitably may fall victim to the more strategic rganizations which are launching initiatives this year to target new markets, customer segments, product lines or channels.
While insurers can survive this year and next by being more cautious, they need better planning and building of the information technology foundation that will allow them to respond as needed.
Access to core business processes, data and information, and the ability to quickly add new products and channels and alter business processes, are all key to staying ahead of the competition and maintaining market position.
Furthermore, sustaining competitive advantage is also key during this difficult time.
Leaders in 2010 will have laid the foundation in 2009, making them able to run and walk as needed. They will have put in place the IT foundation, as well as taken organizational steps such as having a more focused business strategy aimed at profitability, and will have implemented new tactics to improve relationships with partners and customers.
This will all be accomplished through:
- Visionary business thinking.
- A keen understanding of customers and the market.
- Better business and IT alignment.
- Improved workforce management.
- Effective IT use, including adoption of business intelligence and analytics, service-oriented architectures, business process management, and new distribution and customer service solutions.