FORECAST 2023: Business Disruptors
What has the greatest potential to disrupt business-as-usual in the insurance and financial services industry? MarketFacts posed this question to C-suite executives, and most embrace disruption — be it in the form of evolving technologies, customer expectations, regulations, or nontraditional competitors — as a routine part of today’s business climate. No one identified a game changer or “paradigm buster.”
“I actually view disruption as a positive and not a negative,” says Jasmine Jirele, Chief Executive Officer, Allianz Life of North America. “There is so much going on in our industry, ranging from continued consolidation, the influx of new technology, an increased focus on holistic financial planning, and the importance of guaranteed lifetime income. Add in recession, [high] interest rates, and new ways of working, and, on paper, it seems potentially disastrous. It is the exact opposite, though.” She believes these disruptors have strengthened the insurance industry’s value proposition.
Regulation always is a disrupter, of course. “Increased regulation has great potential to disrupt business practices,” says Wade Harrison, EVP & Chief Retail Officer, Protective Life, “particularly regulation that may impact insurers’ ability to apply sound actuarial principles or reasonably expected claims results as a basis for product pricing or underwriting practices.”
Data is top-of-mind. “[Data] is behind so much of what we do, and customers trust us to protect it,” says Amy Friedrich, President, US Insurance Solutions, Principal Financial Group. “A breach can cripple our ability to conduct business and is one of the fastest ways to shatter customer trust. At the same time, it’s the basis for innovation, customer-centricity, and how we’re modernizing and transforming our industry.”
Consequently, cyber attacks become a major potential disruptor. “It’s estimated that damage from cyber attacks will reach $10.5 trillion annually by 2025,” says Harrison, “up from $3 trillion in 2015, according to the 2022 Cybersecurity Almanac. And according to a recent McKinsey & Co. survey, 80 percent of threat groups and 40 percent of malware have never been seen previously.”
“While we hear a lot about cybersecurity risk,” adds Mike James, EVP, Head of Life & Wealth, NFP, “most still don’t really understand how devastating a cyber event can be to a business. There can never be too much investment in helping our employees and clients to be more cyber aware.”
A full-blown recession has the potential to be a big disruptor. “Certainly, a recession, culture shifts, ways of working/hybrid work have the potential to disrupt business as usual,” says Joe Monk, SVP, Financial Services, State Farm. “However, a recession could have an exceptionally significant impact on the industry, leading many to find ways to further lower costs, leverage technology, and simplify the process to make our products more affordable and accessible.”
Talent management has become a disruptor, as traditional work practices are turned on their head, the gig economy affects benefits sales, the Great Resignation dampens productivity, and inflation fuels wage increases. In addition, talent is more mobile and demanding than ever. One executive says hybrid work has become a positive disruptor, offering the best of at-the-office and work-at-home employment models. Another adds the rising gig economy may disrupt the traditional group benefits market with respect to product offerings and distribution channels.
Another positive disruption will come from the life sciences and technology to help people live longer, healthier, better lives, according to Brooks Tingle, President & CEO, John Hancock Insurance. He adds, “Beyond that, private equity and the continued consolidation of distributors also are poised to be disruptors. We’ll have to see how the interest rate environment impacts the flow of private equity money moving forward to see how deep the disruption will be.”
“The greatest potential disruptors to business-as-usual should be the evolving needs and expectations of our potential clients,” says Mark Holweger, President & CEO, Legal & General America. “As an industry, we need to continue toward becoming obsessively curious about those we want to serve and find ways to partner and meet their needs.”
What about outside competitors moving into the industry? According to insurance executives, that disruption is not particularly worrisome. For starters, “There are significant barriers to entry for potential industry disruptors,” says Gordon Watson, Chief Executive Officer, AXA Asia & Africa, “including the regulators strictly controlling licenses, the heavy capital requirements, and the need for specialist skills to properly assess and manage risk.”
Another executive concurs. “I don’t believe there is one particular [disruptor] and, in fact, I strongly believe we have a true competitive advantage as an industry, in that there is no clear substitute or alternative to what we offer consumers,” says Neil Sprackling, President, US Life & Health, SwissRe America Holding. “Yes, there are natural disruptors who see the same opportunity. However, they can [and do] work in unison with established players for consumers’ benefit. So, this is more about partnerships than outside competitors.”