What Should Be on the P&C Agenda for 2013

Property and casualty insurers can be excused for feeling a bit exhausted after 2012. Industry conditions remained challenging all year, with low interest rates making it hard to obtain suitable risk-adjusted returns from the investment portfolio. Customers became even more demanding, seeking from P&C insurers the same kind of personalized experience they receive not only from online retailers but from banks and other service providers. Competition remained fierce from both direct sellers and from traditional agency-based insurers. And, to top it all off, Hurricane Sandy tested P&C insurers’ business continuity plans as well as their ability to deliver on their claims promises.

Michael Costonis, Accenture

Operating and capital expenditure budgets for 2013 have been established and internal revenue and earnings targets have been set. Yet, with the year just under way, P&C insurers might be well advised to take some time to think about the “big picture” items which aren’t readily captured in the normal budgeting and forecasting process. Whether through formal committees or ad hoc work groups, P&C insurers should have these four topics featured prominently on agenda for 2013:

1. Standing Out in the Crowd. It’s hard enough to establish a distinctive brand identity through sound customer research and clever marketing and advertising. It’s even more difficult to establish differentiation in the customer’s mind through products or services that really are distinctive. The key questions here is: Does your company have the customer data and analytics needed to develop products that are meaningfully different, in that they provide features and benefits that the customer both wants and is willing to pay for? To ask this question, the company must also know what the customer values in terms of pricing, claims service, coverage and other product attributes.

In research we conducted in 2011, 26 percent of P&C customers said they had no loyalty at all to their insurance providers and 32 percent said they would be likely to stop doing business with at least one of their insurance providers in the next 12 months. Three-quarters or 75 percent said there is no significant difference in the products and services offered by insurance companies. Differentiation is critical to keep the P&C insurer’s business from becoming sold on price alone and ultimately commoditized.

2. Managing your most important asset — the Workforce. We don’t believe that P&C insurers think enough about their workforces. Specifically, they don’t pay enough attention to the problems of an aging workforce – with a great deal of expertise concentrated among those over 45 – and the concerns of their Millenial replacements, who aren’t exactly thrilled to show up the first day at work and sit down in front of an early 90s style computer interface. Insurers need to be thinking hard about knowledge transfer, about the consumerization of IT as it affects younger workers, and about how to compete in attracting smart, service-oriented people.

3. Focusing on the Customer. This priority remains as if not more important than ever. Our research indicates that customers, while remaining price-sensitive, are willing to pay a premium for insurance products that are more relevant to their needs. They also want to communicate at the time and place of their choosing, using their preferred channel. By taking a leaf out of Apple’s book and focusing on the overall customer experience, carriers will succeed in creating a more durable competitive advantage, one that allows them to charge a premium while building customer loyalty.

4. Making the Most of Regulation. Most businesses – and certainly most P&C insurers – see regulation as a necessary evil and compliance as a drain on resources and profitability. The most enlightened P&C insurers see regulatory change as an opportunity to put more distance between themselves and their competitors. They do this by a) making regulatory change programs both efficient and effective, getting in front of regulations and exceeding the expectations of the regulators themselves; b) using such programs as an incentive to upgrade data collection and management, automating manual procedures if possible; and c) establishing a reputation not only for strict compliance but for going the extra distance on behalf of clients – with the support of systems and processes put in place as part of regulatory change programs.

For many property and casualty insurers, 2013 will be the year to put the pedal to the floor or be left behind. Technological innovations ranging from analytics to social media are no longer abstract ideas for discussion and planning; rather, they are business realities demanding rapid and effective action. Leading P&C insurers will emerge from 2013 with a much clearer definition of their operating model, particularly whether they will pursue clients through direct and online channels or through a network of agents. In either case, they must grapple with the major agenda items of 2013: Differentiation, talent, customer-centricity and regulation. Their approaches to these concerns will help define success in 2013 and beyond.

About the author: Michael A. Costonis is a managing director in Accenture Property and Casualty Insurance Services.