Future of insurance: Unleashing growth through new business building
To compete with digital players, traditional insurers should consider building their own new digital businesses. Markers across four critical areas can show if insurers are on track.
Evolving customer trends and rising competition from an array of digital players are pushing insurers to digitize quickly. Customers are increasingly turning to digital channels to fulfill a variety of needs, a trend that has only accelerated amid the COVID-19 pandemic.1 And the direct insurers in the market—insurtechs, digital insurance attackers, and even large tech platforms—have several advantages over more traditional insurers, such as their ability to scale quickly, launch products fast, and employ top tech talent.
To compete in this environment, incumbents should consider building their own digital businesses. Doing so can be challenging, however, as digital ventures operate differently from traditional insurance companies. For instance, incumbents must leave behind legacy IT models and pivot their focus from investing in sales and marketing teams to investing in digital channels to support acquisition, perhaps even alienating their sales force. Despite these challenges, various traditional global insurers have already built and scaled new digital businesses. A 2020 McKinsey analysis of the top 20 European insurers by measure of gross written premiums (GWPs) showed that the share of insurers with a digital business increased from 1 percent to 70 percent in just five years; the same analysis for the United States showed 20 percent of insurers have a digital business, up from zero.
Insurers that want to launch their own digital business should observe how digital attackers operate in four areas—customer acquisition, data and analytics, state-of-the-art technology, and talent—to draw comparisons and see how to support their new business. Insurance companies that can successfully emulate attackers and innovate can leapfrog competitors.