Do you have what it takes to be a valued insurer?

Jonathan Faurie, FAnews Journalist

What would it take to make the perfect athlete? What would it take to make a perfect cure for illnesses? But have we ever taken a step back and asked what it would take to create the perfect insurance company?

Before we answer this question, we have to realise that this will be a very subjective question as every client believes that different unique elements make up the perfect insurer. And no two clients will look for the exact same things. However, this does not stop companies from trying to improve themselves in order to satisfy the largest number of clients through their actions.

Capturing the unicorn

It is safe to say that achieving this could prove to be very difficult, almost to the stage that the perfect insurer can be regarded in the same light as the minotaur, centaurs and unicorns we hear about in myths and legends.

However, global auditing giant KPMG believe that they have come up with a formula which will resolve this and make achieving perfection a reality rather than an ideal. This formula is outlined in the form of its report: The Valued Insurer.

A recent survey found that 57% of insurers do not feel their organisation has a business structure which is agile enough to adapt to changing customer and market needs. The Valued Insurer reveals how the world's top insurers have embraced a customer-centric approach enabling them to reap the rewards of sustainable, profitable growth.

Establishing common ground

Top insurers around the world share common ground when it comes to clients, they keep them at the heart of their business. In order to instil this customer-centric approach to service across their business, top insurers share attributes that can carry them through strong economic headwinds.

In its report, KPMG mapped the characteristics of top-performing insurers to uncover the traits that make insurers outperform in uncertain times.

"In a post-crisis environment, characterised by low interest rates and equity market volatility, insurers are focusing on sustainable growth more than ever before," said Gary Reader, Global Head of Insurance, KPMG in the UK. "This renewed focus is under the constraints of the new normal - a volatile, low yield environment where insurers have to exhibit specific attributes to differentiate themselves and rise above the competition."

One of the aspects of a successful company is the investment in mega trends, trends which are currently shaping the industry and the manner in which companies interact with their clients.

"These insurers have found ways of connecting with their policyholders through building relationships based on trust, or at least at a level of trust that exceeds that of their peers. We expect that the successful insurers of today will continue to invest in information technology to gather and analyse data to enable them to better understand their clients. This will ensure that their service offerings remain relevant in the future,” says Reader.

The four attributes of The Valued Insurer

The Valued Insurer looks at the attributes needed to succeed as an insurer in today's tough, and often complex, economic conditions. KPMG found the firms who are the most profitable, put their customers at the heart of their business. A relentless customer-orientation is the core element of the attributes which KPMG has identified, that contribute to sustainable superior performance include:

- Focus: Top firms have charted a precise course with a long-term view - an articulated and clear strategy that reflects their vision and specialisation.

- Efficiency: The most successful insurers have embraced a culture of continuous operational efficiency, establishing scalable, low cost models and invested in systems and processes to resolve inefficiencies.

- Agility: From the boardroom to the back office, successful insurers demonstrate flexibility to adapt swiftly to a shifting environment across their entire organisation.

- Trust: Top insurers have found ways to attain or regain confidence and trust, through genuine, far-sighted efforts that build constructive relationships with mutually beneficial goals for all stakeholders including customers, regulators and investors.

Creating value in uncertain times

"Valued insurers charted highly individual paths, incorporating their own distinct combination of these characteristics," said Mary Trussell, Global Insurance Focused Markets Lead, KPMG in the UK.

"KPMG's investigation demonstrated that these attributes, combined with the goal of delivering value to the customer enabled each firm to outperform in difficult times and create organisational capacity to succeed, even in challenging times. In particular, the insurers with these attributes have the capacity to withstand a prolonged period of low interest rates and equity market volatility."

The South African experience

Although South Africa is one of the most developed markets on the continent, it comes under immense criticism for the snail like pace it has in adopting global trends. This is especially true for the financial services industry. Even the industry regulator, the Financial Services Board (FSB) admits that South Africa is behind the curve especially when it comes to legislation.

This however is seemingly changing. The FSB is in the process of rolling out TCF, RDR and SAM; and the added weight of the Financial Advisory and Intermediary Services Act will hopefully ensure a smoother local roll out of these legislative pieces than was seen in the UK and Australia.

In fact, South Africa is in a much better position than most people think. "The findings set out in the Valued Insurer publication are directly relevant for the South African market,” said Gerdus Dixon, Head of Insurance for KPMG in South Africa. "History shows that those local insurers that have grown profitably on a sustainable basis, almost always have a clearly defined view of their target customers.”

This will only be sharpened by the implementation of TCF and SAM, which aims to refine business practices in order to make them more focused on the client.

It is also an advantage to be a smaller insurer. Speaking to the FAnews at the launch of the report, Trussel said that smaller companies have greater adaptability and the fact that local companies can learn from the mistakes made in international markets will benefit them significantly.

Editor's Thoughts:
The process to become a Valued Insurer is not as simple as pushing buttons. The adoption of mega trends is an obvious piece to the puzzle which needs to me completed in order to achieve this. However, it becomes difficult when you have to adopt mega trends while trying to maintain profitability and sourcing new business. Non-direct insurers have the advantage over their direct counterparts in that KPMG has proven that information sharing is key and that brokers and advisers play an important role in sharing this with clients. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.