Other parts of this series:
- Perfect storm threatens to sink insurers’ earnings by nearly 40%
- Smart digital strategies enable insurers to double their earnings
- Insurtech firms show big insurers how to thrive in the digital economy
- Defensive digital strategies help insurers strengthen earnings
- Insurers should prepare themselves for constant digital transformation
Innovative digital strategies will not only help insurers protect their earnings from corrosive market forces. They could also fuel substantial earnings growth.
Insurance companies that counter the swarm of emerging threats to their businesses with innovative digital strategies could more than double their earnings by 2020.
Many traditional insurers, as I mentioned in my previous blog post, are struggling to come to terms with stagnant demand, rising competition, increasing customer expectations and widespread digital disruption. These forces are a serious threat to insurers’ future earnings.
A framework of innovative digital strategies, however, could not only protect earnings from significant erosion. It could trigger earnings growth by as much as 80 to 130 percent. To achieve such an impressive boost in earnings, insurers need to start acting more like hungry insurtech start-ups. They have to combine offensive and defensive digital strategies and target three key areas – market disruption, business operations and the customer experience.
Offensive strategies tackle factors outside the organization to aggressively grow the business. Defensive strategies concentrate on protecting the value of the organization by improving its efficiency and effectiveness. We estimate that insurers, by combining these two types of digital strategies to disrupt key markets, could boost their earnings by 80 percent within the next four years. This is an enormous opportunity. What’s more, by further digitizing their operations they could raise their earnings by an additional 30 percent by 2020. Deploying digital technology to improve the customer experience could push up earnings, in four years, by another 20 percent.
The illustration below shows some of the key offensive and defensive digital strategies and the potential improvements they can deliver to an insurer’s earnings before interest, depreciation and amortization (EBITDA).
Such strategies each have the power to deliver significant earnings growth. When combined, in a framework that addresses both the offensive and defensive needs of the business, their potential is huge.
In my next blog post, I’ll take a closer look at some of the offensive digital strategies that insurers can deploy to beef up their earnings. In the meantime, take a look at these links. I’m sure you’ll find them worthwhile.