In this guest blog, Isabelle Santenac, Global Insurance Leader, and Jennifer Baziuk, Partner, EY Canada Insurance Business Consulting Practice, of ICMIF Supporting Member EY discuss how current challenges to our sector also present opportunities to reshape mutual/cooperative insurers, so they become more efficient, resilient and adaptable, to offer a better future for members and policyholders. EY is the Platinum sponsor of the forthcoming ICMIF Biennial Conference in November 2024, learn more about the event here.
The mutual and cooperative insurance sector is being severely disrupted by new regulations and technologies, economic and political volatility, environmental, social, and governance (ESG) pressures, rising customer expectations and a continued talent shortage.
We believe such challenges also present opportunities to reshape mutual/cooperative [hereafter referred to as “mutual”) insurers, to become more efficient, resilient and adaptable, to offer a better future for members and policyholders.
The most recent ICMIF Global Strategy Summit in Toronto (Canada) provided an ideal forum to discuss these issues in greater depth, bringing together the leading minds from across the industry.
Drawing on these conversations, and the latest EY Global Insurance Outlook, here are four priorities for mutuals to consider, in order to navigate the uncertainties and thrive.
1. Become more agile
Geopolitical volatility, military conflicts, high inflation, rising interest rates, and new regulations all add to the uncertainty facing insurance companies. These aren’t just temporary phenomena; the world is becoming less predictable, and we need to be in a permanent state of readiness to adapt quickly to changing conditions, reassess risk management strategies, and ensure pricing reflects claims costs.
Strategy is no longer about long-term planning, but about being prepared to change course at a moment’s notice – for instance, who could have predicted the COVID-19 pandemic? Agility means having the capability to swiftly adapt to changing circumstances, whether it’s evolving customer demands, competitors’ actions, new regulations – especially for ESG – or crises and systemic shocks.
Flexible product design, with modular features, can help customers access products that continue to meet their emerging needs. Cloud migration enables insurers to cost-effectively scale up or down quickly to roll out new products or retreat from older or redundant ones. Companies can navigate uncertainty through robust scenario planning and stress testing, helping them anticipate change and remain resilient and responsive.
2. Create a customer-centric, digitally-driven organisation
Today’s consumers seek more than just financial protection; they want personalised, tailored life and savings products and experiences, comprehensive coverage for emerging risks (such as job loss or health concerns post-COVID-19), and seamless digital interactions. One example is the increasing focus on life insurance to protect families.
To address these rising expectations, insurers are rethinking how products are designed, distributed, and serviced, as they shift from product- to customer-centricity. Broker-insured relationships are growing in importance, to help develop stronger connections with customers. Embedded insurance is gaining traction, disrupting traditional distribution channels by integrating insurance directly into the purchase of goods and services. Transparency and accessibility are a must-have, to give customers convenient online services (often self-service) via digital platforms, where they can buy and manage products, and process claims faster via easy-to-use apps.
3. Bridge the protection gap
There was much talk at the ICMIF Summit last year about a growing protection gap, due to climate-related natural catastrophes, cyber threats, and health crises, which, along with inflation, push up claims costs and policy prices and limit supply, leaving more people uninsured or underinsured. Insurers are increasingly cautious about assuming risks in highly volatile regions, raising questions about the industry’s wider role in protecting society.
Overcoming the gap requires a collaborative approach involving governments, as well as greater cooperation between mutuals within the ICMIF membership to share resources and come up with innovative new products to cover life, health and cybersecurity needs. The sector should also explore how it can better educate and advise clients on risk prevention, invest in resilient infrastructure, and help reduce exposure to emerging risks.
4. Embrace emerging technologies enthusiastically – but safely
Generative AI (GenAI), machine learning (ML) and other new technologies are game changers. Advanced data analytics helps to better understand customer behaviours, enhance risk assessment, and personalise products and pricing. Algorithms improve the efficiency and accuracy of underwriting, claims management and customer service. The aforementioned digital platforms and cloud services can increase agility and reduce costs.
However, technologies also bring with them challenges over data privacy and security, and possible ethical dilemmas over how they’re used – with growing concerns about AI bias that may breach regulations and damage reputations. Which calls for sound data management and frameworks for responsible AI use – as well as education for staff on its benefits and dangers. New technology also comes at a cost, and it is vital to fully understand the investment and upfront costs.
The power of strategic planning
As the mutual insurance industry continually evolves, its leaders should welcome transformation and foster innovation to remain relevant to the modern customer. Strategic planning has never been more important, to stay attuned to market, competitor, technological and regulatory signals, and plan for and adapt to multiple scenarios. A collective commitment to learning and collaboration can make good use of limited resources and shorten the learning curve for new technologies and ways of working.
The road ahead is likely to be narrow and bumpy, but with strategic foresight and adaptability, the sector can continue to serve as a pillar of stability and protection in an ever-changing world.
