With business activity continuing to pick up, most U.S. insurers are looking to capitalize on the innovations they implemented during the pandemic in terms of going virtual and digital. Yet, even though the industry as a whole may have adapted remarkably well to the extraordinary challenges raised during the past 18 months, there is still much work to be done and many critical decisions to be made over the rest of this year and into 2022.
To get a sense of how insurers are feeling about their top and bottom lines, investment priorities, transformation progress and talent plans for the rest of 2021, Deloitte surveyed 100 senior U.S. insurance financial executives for the
Financial expectations mostly positive, but some cautious on spending
Revenue expectations for 2021 among respondents were fairly positive, with 59% anticipating a higher top line, against only 16% predicting a decline. Modest gains of 1% to 5% are predicted by 28% of respondents, but 31% expect even more robust growth—including 12% seeing jumps of over 15% ahead. The same overall trend holds for the bottom line, with just 23% of respondents anticipating a drop in net income, versus 56% expecting higher profits in 2021.
However, 77% of those surveyed are concerned about possible fundamental changes that may have been prompted by the pandemic, both in the economy as well as in consumer behavior. That could in part explain why generally upbeat revenue and profit expectations have not yet translated into higher spending plans among a portion of respondents, as some insurers wait to see how all this shakes out before making any additional financial commitments.
Technology to the rescue
Given the need to digitize and virtualize their operations overnight, it’s no wonder that even though 52% of respondents trimmed discretionary spending, often in areas such as talent, only 6% canceled or postponed long-term technology projects, while 96% are accelerating digital transformation initiatives.
Meanwhile, the top two actions prioritized by respondents to support financial and operational stability over the next six to 12 months involved implementation of new technology—first, to enhance efficiency, 70%, and second, to improve customer experience, 68%.
That sentiment appears to be fueling more aggressive technology investment, with 68% of those surveyed planning to increase spending on data analytics, up from 49% in Deloitte’s 2021 outlook survey done last summer, and 66% allocating more to upgrade customer relationship management software. Fifty-nine percent will increase spending on artificial intelligence compared to 40% in the last survey, while about half of respondents also plan to boost budgets for robotic process automation, up from 30%.
The insurance workplace may never be the same
Transitioning to a post-pandemic workplace model may be the biggest challenge insurers face for the rest of 2021. Deloitte’s survey found only about one in four likely to revert to the “traditionalist” model of having nearly all employees work together in centralized offices.
Nearly half of those surveyed are planning to adopt a “progressive” hybrid model incorporating a fluid, often remote, workforce alongside those in offices. While the remaining quarter of respondents considers a more “visionary” path of maintaining a mostly virtual environment. Nationwide Insurance, for instance, anticipates that at least 50% of its workforce will either operate out of their homes for good or in a hybrid model.
Non-traditional models should allow insurers to tap an expanded talent pool, since at least some staff may no longer be required to live within commuting distance. Such shifts are already having an impact, as nearly 51% of respondents are now hiring employees irrespective of their location, while 58% are augmenting their teams with gig workers. This trend may also lower real estate expenses as well, as less office space may be required.
Getting employees on board with whatever model is adopted while accommodating personal priorities and preferences will be important in achieving a successful transition. It is encouraging that among those surveyed, 87% said they were able to maintain a strong engagement with employees during the pandemic.
Maintaining innovation
If nothing else, the pandemic demonstrated how adaptive the insurance industry can be when the chips are down. That lesson shouldn’t be forgotten as insurers consider how they might alter product design, underwriting and pricing methods, as well as distribution and service platforms to address emerging customer needs and societal problems. Innovative thinking and decisive action should be front and center, not just during a pandemic or another crisis, but as part of an insurer’s core culture and operating model.
The insurance industry should therefore capitalize on the innovations and operational flexibility adopted during the pandemic while accelerating their transformation to a more omnichannel, stakeholder-centric business.
