Insurance - deloitte.com · Strategic Cost Transformation *OREDO 0DUNHW 2 HULQJ /HDGHU 7hriving in uncertainty in the age o I digital disruption: Deloitte’s 4rst biennial global

Save-to-transform as a catalyst for embracing digital disruptionDeloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in the Insurance sector

Global Cost Report 2019–2020 Insurance

Contents

Executive summary 4

About the study 8

10

Firmographics 14

Insurance survey results: Detailed insights 18

Digital and technology solutions applied to cost management in Insurance 34

Save-to-transform as a catalyst for embracing digital disruption 40

2

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in the Insurance sector

Digital technology and digital disruption have burst onto the scene as key levers for cost management and business transformation around the world and throughout the Insurance sector. In Deloitte’s 2017 Biennial Global Cost Survey,1

in the United States but was barely visible elsewhere. Now, however, technology investments and innovative digital technologies are top-of-mind for insurance companies in all regions.

In today’s challenging environment, cost management remains a strong imperative for nearly all businesses; however, the prevailing mindset among insurance companies seems to be expanding from save to grow to save to transform. Most companies in the Insurance sector continue to have very positive expectations for revenue growth, and many are using cost reduction as a tool to help fund their required growth investments. However, in today’s increasingly digital world, more and more companies also recognize the need to transform their operations and capabilities with infrastructure investments in key digital innovations such as robotic process automation, cognitive technologies, business intelligence, and cloud-based ERP systems.

These digital technologies and innovations can deliver dramatic improvements in competitiveness, performance, operating

can also strengthen a company’s positioning for adverse future events, including economic downturns and digital disruption.

With digital innovation emerging as a critical enabler for both cost reduction and business transformation, we are delighted to present the results from our latest global cost survey. The study includes responses from more than 1,200 executives and senior leaders around the world with direct involvement in cost management, including 46 respondents from the Insurance sector.

This report provides an up-to-date view of the cost management practices and trends shaping the future of the Insurance sector and global business. It also takes a detailed look at how the latest digital technologies and cost management strategies are acting as

digital disruption.

your thoughts and feedback.

Foreword

Sam Balaji Global Consulting Leader

Omar Aguilar Strategic Cost Transformation

hriving in uncertainty in the age o digital disruption: Deloitte’s rst biennial global cost survey report December 2

3


Executive summary

Cost management in the Insurance sector is less prevalent and less aggressive than average. In Insurance, 63% of the surveyed companies plan to undertake cost reduction initiatives over the next 24 months, lower than the global average across industries (71%). Similarly, the percentage of Insurance respondents with aggressive cost reduction targets of 10% or higher is

(56% in Insurance versus 68% globally across industries).

The save-to-transform mindset is prevalent in Insurance, but less than the global averages. The survey results show that the save-to-transform mindset is prevalent in Insurance, but to a lesser extent than globally across industries. This cost management philosophy is characterized by a simultaneous strategic focus on sales growth,

technology implementation, and digital enablement. Relative to the global averages across industries, Insurance

priority levels in all save-to-transform dimensions except digital enablement (+5 percentage points).

Expected implementation rates for key digital technologies vary widely relative to the global averages. In Insurance, implementation rates for digital technologies over the next 24 months (in-process or planned) are expected to be higher than the global averages across industries for business intelligence (+19%) and cloud (+2%), on par for cognitive technologies, and lower for automation (-13%).

Insurance survey results: Detailed insights

Cost programs in Insurance have a high failure rate on par with the global average.

According to the survey results, 80% of insurance companies failed to fully achieve their cost reduction targets—on par with the global average across industries (81%).

80%Insurance

81%Global

Cybersecurity is the top external risk.

In Insurance, the three top external risks are cybersecurity (63%), credit risks (61%), and digital disruption (61%). Globally across industries, cybersecurity (62%) and digital disruption (61%) are also among the three top risks.

63%Insurance

62%Global

Lack of controls is the top internal risk.

The top internal risks in the Insurance sector are lack of regulatory, legal, and/or management controls (22%); recruitment, development, and retention of talent (15%); and business continuity (15%). Globally across industries, reliability/functionality information systems is the top internal risk (26%).

22%Regulatory, legal and/or management controls

4



Strategic priorities align with save-to-transform.

Top-rated strategic priorities over the next 24 months:

74%digital enablement

70%product

65%sales growth

59%technology implementation

Growth and competition are the top cost reduction drivers.

Three top drivers for cost reduction in Insurance over the next 24 months are:

65%international growth opportunities

61%required investment in growth areas

63%

competition

The revenue outlook in Insurance is more positive than the global average.

Insurance respondents have a positive growth outlook:

87%positive growth over past 24 months (on par with the global average, 86%)

91%expect positive revenue growth over next 24 months

than the global average, 86%)

Capability development in Insurance has generally been lower than average.

Most actively developed capabilities in Insurance over the past 24 months are:

52%

infrastructure

35%cognitive solutions

46%automation

ERP infrastructure development was 11% higher than the global average.

Insurance companies have been balancing strategic and tactical cost actions.

Over the past 24 months insurance companies focused almost equally on:

36%tactical cost actions

35%strategic cost actions

This is similar to the global pattern across industries.

The balance of strategic and tactical cost actions is expected to continue.

Looking ahead to the next 24 months, insurance companies expect to continue balancing strategic and tactical cost reduction actions, with a slight shift toward strategic actions:

65%strategic cost actions

64%tactical cost actions

ERP systems are the top barrier to successful cost reduction.

In Insurance, the three top barriers to successful cost reduction:

61%

ERP system

59%implementation challenges

57%erosion of savings

Those same three barriers top the list globally across industries, led by implementation challenges.

5



Cloud leads the pack.

The most widely implemented in Insurance over the past 24 months are:

48%cloud

28%business intelligence

Cloud was also the most actively implemented technology globally across industries (49%).

Business intelligence is expected to be the most actively implemented technology in Insurance.

In contrast to the global results, the technology expected to be most actively implemented in Insurance over the next 24 months:

70%business intelligence

Least expected to be actively implemented, most likely because current implementation levels are already very high:

48%cloud

Digital leaders in Insurance have a big impact on technology implementation, similar to the global average.

On average, insurance companies with a designated digital leader have a higher level of technology implementation than those without one:

+121% Insurance

+118%Global

Digital and technology solutions applied to cost management in Insurance

Top reasons for applying digital technologies. In the Insurance sector, reducing costs and increasing productivity is the top reason for applying:

80%cognitive & AI technologies

75%robotic process automation

64%cloud

Most technology implementations meet or exceed expectations.

62%When implementing each of the technologies covered by the survey, at least 62% of Insurance respondents had their expectations met or exceeded.

Lessons learned.

The top lessons learned in Insurance are:

No. 1assess, validate, and adjust targets

(65%).

No. 2deploy change management to raise awareness, acceptance,

initiatives (63%).

No. 3designate a full-time position

and cost-improvement initiatives (61%).

Cost management maturity in Insurance is lower than average.

According to the survey results, cost management maturity

global averages across industries. The percentage of insurance companies that rate themselves high or intermediate maturity:

50%Insurance

66%Global

While the percentage of insurance companies that rate themselves low maturity are:

33%Insurance

20%Global

6


Digital rises to the top of the Insurance agenda. Cybersecurity is now recognized as the top external risk in the Insurance sector (63%), followed closely by digital disruption (61%). Meanwhile, technology implementation has emerged as the top-rated strategic priority in Insurance over the next 24 months (74%)—a 6% increase over the past 24 months.

Save-to-grow.In the recent past, most insurance

to-grow mode. Cost and growth were the main business levers, with talent (including capabilities) as another key component. In this mode, cost reduction is a high priority, with cost savings used to fund growth initiatives and strategic investments that

Save-to-grow expands into save-to-transform.Many insurance companies are now shifting into save-to-transform mode, with the save-to-grow mindset expanding to include a strong focus on digital enablement and implementation of technologies. This shift can transform a company and help it capitalize on digital opportunities, while at the same time positioning the business for potential adversity that may be on the horizon—such as an economic downturn or credit crisis—using digital innovations to unlock

Save-to-transform as a catalyst for embracing digital disruption


Deloitte Consulting LLP (Deloitte or Deloitte Consulting) engaged Dynata to conduct a global cost-management survey to better understand business leaders’ perspectives on current and future cost-reduction initiatives within large companies, multinationals, and other companies that are representative of the industries and regions surveyed

Study objectives

nderstand actors approaches actions and targets related to cost initiatives

ssess the e ectiveness o the cost actions including lessons learned rom previous e orts

Understand the drivers and scope of past and future cost initiatives

Provide context on how digital disruption and advanced digital technologies are a ecting cost management

ssess industry results and provide insights on di erent behaviors related to cost reduction

MethodologyData was collected through detailed online surveys conducted between November and December 2018.

January February March April May June July August September October November December

About the survey

FirmographicsThe global survey of more than 1,200 executives and senior leaders with direct involvement in cost management decisions and actions included 46 respondents from the Insurance sector.

88



9

cost-management survey are directionally consistent across industries and geographic regions. However, there

the Insurance sector results and the global survey results, which include data from all industries.

How is the Insurance


Likely Neutral Unlikely

Global Insurance

Likelihood

63% of Insurance respondents plan to undertake cost reduction initiatives, compared to 71% globally

Exceededgoals

Met goals Did notmeet goals

Lessthan 10%

10% to lessthan 20%

Morethan 20%

Cost targets Success analysis

80% of respondents failed to fully meet their targets, similar to 81% globally

56% of respondents reported targets above 10%, less than 68% globally

% o

f Tot

al R

espo

nden

ts

71%

63%

41%

4%

20%

30%

8% 7%

% o

f Tot

al R

espo

nden

ts 30%

37%

30% 31%

26%

% o

f Tot

al R

espo

nden

ts5%

14% 15%

81% 80%

Cost management in the Insurance sector is less prevalent and less aggressive than averageIn Insurance, 63% of the surveyed companies plan to undertake cost reduction initiatives over the next 24 months, lower than the global average across industries (71%). Similarly, the percentage of Insurance respondents with aggressive cost reduction targets of 10% or higher

globally across industries). Cost program failure rates in the Insurance sector are similar to those of the global respondent pool, with 80% of insurance companies failing to fully meet their cost reduction targets

Figure 1. Cost program likelihood, targets, and success analysis

11


0

10

20

30

40

50

60

70

80

Sales growth

Cost reduction

Balance sheet management

Productpro tability

Organization and talent

Technology implementation

Digitalenablement

% o

f tot

al r

espo

nden

ts

72%65%

68%

50%

61%57%

73% 70% 68%

59%

73%

59%

69%74%

Global Insurance

The save-to-transform mindset is prevalent in Insurance, but less than the global averagesThe survey results show that the save-to-transform mindset is prevalent in Insurance, but to a lesser extent than globally across industries. This cost management philosophy is characterized by a simultaneous strategic focus on sales growth, cost reduction,

enablement. Relative to the global averages across industries,

in all save-to-transform dimensions except digital enablement

Figure 2. Strategic priorities (next 24 months)

12


Global Insurance

% o

f tot

al r

espo

nden

ts

43% 42% 37%

In process of implementationNot implemented but planned

Business intelligence(not including cognitive or AI)

Cloud solutionsAutomation: Robotic process automation

Cognitive technologies: AI and machine learning

38%

24% 24% 20%

14%17%

26%28%

39% 39%33% 37% 37% 41% 37%

11%

62% 63% 59%

47%54%

63%70%

48%

+19%

-13%

+2%

Expected implementation rates for key digital technologies vary widely relative to the global averagesIn Insurance, implementation rates for digital technologies over the next 24 months (in-process or planned) are expected to be higher than the global averages across industries for business intelligence (+19%) and cloud (+2%), on par for cognitive technologies, and

Figure 3. Implementation of technologies (next 24 months)

13


FirmographicsGlobal information was collected to provide meaningful insights across regions and industries.

ithin the nancial services industry, the Insurance sector had 46 respondents, representing 18% of all nancial services responses (see gure 4).

Figure 4. Respondent breakdown by industry and region

Industry breakdown:Total respondents (%)

27%

13%

7%2%

12%

18%

21%

Consumer and Industrial Products

Financial Services

Technology, Media and Telecommunications

Life Science and Health Care

Energy and Resources

Public Sector

Other

FSI sector breakdown:Number and percentage of responses by sector and region

Insurance (46)

Banking (118)

Real Estate (18)

Other (9)

Private Equity, Hedge Funds, Mutual Funds & Investment Management (65)

Total

39

37

100

68

7

5

256

Canada

South Africa

APAC

Europe

LATAM

USA 8

1

17

17

2

1 3 1

2 2 1

20 25 3 3

47 22 13 1

21 12 2 1

25 3 3

14



Management-level breakdown(% of respondents by level and region)

Executive Management (enabling functions)*Executive Management (business units)**President, CEO CFO, COO

InsuranceGlobal

24%

21%

14%

42%

37%

17%

26%

20%

Only leaders and executives with direct involvement in cost-management decisions were included in the survey 20% of Insurance respondents were Presidents or CEOs, 37% were CFOs or COOs, and the remaining 43% were executive management (see gure 5).

Figure 5. Respondent breakdown by management level

* Executives Management (enabling functions): P or above in nance, logistics, IT, HR, marketing, etc.** Executives Management (business functions): P or above business units, regions, or countries

15

The ma ority of Insurance respondents (66%) reported revenues of 1 billion or more, and 46% had revenues of 5 billion or more (see gure 6).

Figure 6. Respondent annual revenue (US dollars)

$200M toless than $500M

Global Insurance

$500M toless than $1B

$1B toless than $5B

$5B toless than $20B

$20B toless than $60B

Over $60B

15% 16%

20%

15%

24%

20%

24% 24%

13% 13%

8% 9%

Note: The survey was conducted in local currencies. For analysis purposes they have been converted to US dollars.

16



Lessthan 1,000

0

4

8

12

16

20

1,000to 2, 499

2,500to 4,900

5,000 to 9,999

10,000to 24,000

25,000to 49,999

50,000to 99,999

Morethan 100,000

8%9%

15% 15% 15%

11%

13%

19%

13%

22%

13%

10%11%

7%

9%

11%

Global Insurance

In Insurance, 66% of respondents had at least 5,000 employees, 31% had at least 25,000 employees, and 11% had more than 100,000 employees (see gure 7).

Figure 7: Respondent employee headcount

17



18

Likely Neutral Unlikely

71%

% o

f tot

al r

espo

nden

ts

0.0

12.5

25.0

37.5

50.0

62.5

75.0

87.5

100.0

63%

8% 7%

20%

30%

63% of Insurance respondents plan to undertake cost reduction initiatives.

1

1

2 2

3

3

1

than the global average across industries (71%).

2 In Insurance, 7% of respondents say they are unlikely to undertake cost reduction initiatives over the next 24 months, on par with the global average across industries (8%).

3 30% of Insurance respondents are neutral towards cost reduction initiatives, much higher than the global average across industries (20%).

Cost reduction is less prevalent in the Insurance sector than globally across industries

Figure 8: Likelihood of cost reduction (next 24 months)

19


Note: Respondents that selected no speci c targets were established were not plotted in the graph.

1 across industries (68%).

2 The percentage of Insurance respondents with targets above 20% is lower than the global average across industries (26% in Insurance versus 31% globally).

3 In Insurance, 41% of respondents have cost reduction targets of less than 10%, a much higher proportion than the global average across industries (30%).

Most Insurance respondents (56%) reported targets above 10%.

Less than 10% 10% to less than 20% More than 20%

Global Insurance

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

41%

30% 31%

26%

37%

30%

1

1 1

21

2

3

3

Cost targets in Insurance tend to be less aggressive than the global averagesThe majority of surveyed Insurance respondents (56%) have cost reduction targets above 10%; however, that percentage is much lower than the global average across industries (68%). The percentage of insurance companies with targets above 20% is

Figure 9. Cost reduction targets

20


1 Cost programs in the Insurance sector have a high failure rate (80%) similar to the global average across industries (81%).

2 15% of Insurance respondents met their cost reduction goals, on par with the global average (14%).

3 4% of Insurance respondents exceeded their goals, similar to the global average across industries (5%).

Met goals Exceeded goalsDid not meet goals

Global Insurance

% o

f tot

al r

espo

nden

ts

0

15

30

45

60

75

90

80%81%

5% 4%

15%14%

1 1

2 2 3 3

Cost programs in Insurance have a high failure rate on par with the global averageAccording to the survey results, 80% of insurance companies failed to fully achieve their cost reduction targets—on par with the global

Figure 10. Cost program success and failure

21


Political climate Macroeconomic concerns Currency uctuations Commodity price uctuationsCredit risks Cyber security concerns New market entrants Digital disruption

0

10

20

30

40

50

60

70

80

Global Insurance

% o

f tot

al r

espo

nden

ts

23 2 1

3

1 159% 59% 58% 59%

57%62%

57%

46% 46%43%

61% 63%59% 61%

57%61%

1 The top-rated external risks among Insurance respondents are cybersecurity (63%), credit risks (61%), and digital disruption (61%).

2 For the global respondent pool, the top-rated external risks are cybersecurity (62%) and digital disruption (61%).

3

Cybersecurity is the top external riskIn Insurance, the three top external risks are cybersecurity (63%), credit risks (61%), and digital disruption (61%). Globally across

Figure 11. Top external risks

Lack of strategic plans or execution to provide clear direction to the business

Liquidity and nancial position to support business plans

Recruitment, development and retention of required talent to support business initiatives

Reliability and functionality of information systems to support business processes and decisions

Lack of controls, processes and systems to ensure business continuity

Lack of regulatory, legal and/or management controls

0

10

20

30

Global Insurance

% o

f tot

al r

espo

nden

ts

2 2

1

23% 23%25% 26%

24%22%

13% 13%1

15%

3

3

13%1

15%

22%

1 In Insurance, the top internal risks are lack of regulatory, legal, and/or management controls (22%); talent (15%); and business continuity (15%).2 Globally across industries, the two top-rated internal risks are information systems (26%) and talent (25%).3

Lack of controls is the top internal riskThe top internal risks in the Insurance sector are lack of regulatory, legal, and/or management controls (22%); recruitment, development, and retention of talent (15%);

and business continuity (15%). Globally across industries, reliability/functionality of information systems is the top

Figure 12. Top internal risks

22


1

three top priorities globally across industries.

2

3 In the Insurance sector, the strategic priority of technology implementation is expected to decrease by 13 percentage points from the past 24 months to the next 24 months.

.

Strategic priorities align with save-to-transformThe save-to-transform cost management approach uses cost reduction to fund investments in growth and transformational digital technologies, while in turn using many of those same digital technologies to boost the

Insurance, the top-rated strategic priorities over the next 24

(70%), sales growth (65%), and technology implementation

Figure 13. Strategic priorities

% of total respondents

Sales growth Cost reduction Balance sheet management Product pro tability

Organization and talent Technology implementation Digital enablement

Glo

bal

Next 24 monthsPast 24 months


69%

61%

73%

69%

73%

69%

73%

68%

61%

73%

68%

73%

69%

72%

Insu

ranc

e

52%

59%

76%

52%

72%

70%

61%

50%

57%

70%

59%

59%

74%

65%


1

1

1

1

2 2

2

2

2

3

1

3

23


The revenue outlook in Insurance is more positive than the global averageInsurance respondents have a positive growth outlook. According to the survey, 87% of insurance companies enjoyed positive revenue growth over the past 24 months, on par with the global average across industries (86%). Also, 91% expect positive

Figure 14. Past performance and future expectations

1 Over the past 24 months, 87% of Insurance respondents had positive revenue growth, on par with the global average across industries (86%).

2 Over the next 24 months, 91% of insurance companies have a positive growth outlook, higher than the global average across industries (86%).

3 In Insurance, the percentage of companies expecting their revenue to decrease over the next 24 months (4%) is lower than the global average across industries (6%).

Increased Remained the same Decreased

Global Insurance

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

87%86%

7% 7%7% 7%3

1 1

Increase Anticipate at top line Decrease

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

91%86%

6% 4%8%

4%

3

22


24


Growth and competition are the top cost reduction driversOver the next 24 months, the three top drivers for cost reduction in Insurance are international growth opportunities (65%),

Figure 15. Cost reduction drivers

1

(65%), changed regulatory structure (54%), and international growth opportunities (54%). Those same four drivers topped the list globally across industries.

2

investment in growth areas (61%). Those same three drivers top the list globally across industries.

3 Looking ahead, Insurance respondents expect international growth opportunities to rise sharply as a cost driver (+11 percentage points).

Signi cant reduction in consumer demandDecrease in liquidity and tighter creditUnfavorable cost position relative to peer group

Required investment in growth areasChange regulatory structure

Intensi ed competition among peer group

Increased international growth opportunities


Glo

bal



52%

56%

59%

66%

65%

63%

52%

Insu

ranc

e

53%

57%

61%

67%

66%

65%

55%

39%

46%

41%

61%

63%

65%

39%


1

1

1

1

2

2

2

48%

39%

54%

65%

65%

54%

46%

1

1

1

1

3

2

2

2 3

25


1 The Insurance sector’s most commonly developed capabilities over the past 24 months were improved ERP infrastructure (52%), automation (46%), and cognitive solutions (35%).

2 Automation was the most commonly developed capability globally across industries (48%), followed by cognitive/AI (42%).3

average (12%).

Capability development in Insurance has generally been lower than averageOver the past 24 months, capability development in Insurance was generally lower than the global averages across industries, except for ERP infrastructure (+11 percentage points). The top developed capabilities in Insurance were improved ERP

Figure 16. Capabilities developed over the past 24 months

Created a new executive position and/or full-time positions to drive cost management

Set-up or improved ERP infrastructure

Developed or implemented automation technologies

Developed or implemented cognitive and arti cial intelligence technologies

Implemented new policies and procedures and strengthened the compliance mechanisms

Improved processes for forecasting, budgeting, and reporting to enable e ective cost management

Implemented zero-based budgeting or process

0

10

20

30

40

50

60

Global Insurance

% o

f tot

al r

espo

nden

ts

2

2

1

1

3

34%

41%

48%

42% 41%

34%

12%

3

7%

26%

30%

35%

52%

1

26%

46%

26


Insurance companies have been balancing strategic and tactical cost actionsAccording to the survey results, insurance companies over the past 24 months focused almost equally on strategic cost actions (35%) and tactical cost actions (36%). This is similar to

Tactical actions tend to produce incremental improvements and relatively small cost savings, whereas strategic actions have a much broader and deeper impact. Examples of strategic actions include: centralizing business activities (action

Figure 17. Implemented cost reduction actions over the past 24 months

Note: Respondents who had implemented those actions were selected for this question.

1 The most commonly implemented cost reduction actions in Insurance over the past 24 months were increased centralization (39%), streamlined organization structure (39%), and improved policy compliance (39%).

2 Globally across industries, the most commonly implemented cost actions were streamlined business processes (37%), improved policy compliance (37%), and streamlined organization structure (36%).

3 Over the past 24 months, Insurance respondents focused almost equally on strategic cost actions (35%) and tactical cost actions (36%).

Averages

Global Insurance

32% 35%34% 36%

% o

f tot

al r

espo

nden

ts

3

2 2 235%

31% 31%

36% 37% 37%

32% 32%30%

39%36%

31%1

39%

1 36% 139%

31%

36%34%

Action 1 Increased centralization – Integrated business units and functions into the corporate center

StrategicAction 2 Changed business con guration – Divested underperforming assets, ad usted number of products/services, geographies, customers, etc.

Action 3 Outsourced/O -shored business processes to low cost service providers

Action 4 Streamlined organization structure – Increased spans of control, and modi ed reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of speci c automation or cognitive technologies

Action 9 Aligned incentives of executives or employees to cost reduction objectives

27


The balance of strategic and tactical cost actions is expected to continueLooking ahead to the next 24 months, insurance companies expect to continue balancing strategic and tactical cost reduction actions, with a slight shift toward strategic actions (65% strategic versus 64% tactical). The top cost action in Insurance is

Figure 18: Expected cost reduction actions over the next 24 months

Note: Only respondents who had implemented those actions were selected for this question

1 processes (74% in-process or planned), implement automation/cognitive technologies (71% in-process or planned), and streamline business processes (67% in-process or planned).

2

3 Over the next 24 months, Insurance respondents expect to focus almost equally on strategic cost actions (65%) and tactical cost actions (64%).

Averages

62% 65%61% 64%

StrategicIn process of implementationNot implemented but planned

% o

f tot

al r

espo

nden

ts

42%

19%

44%

21%

43%

16%

42%

18%

46%

16%

40%

19%

43%

18%

41%

22%

35%

22%

43%

20%

57%

17%

35%

20%

52%

15%

50%

13%

54%

11%

54%

17%2

Global Insurance

3

1

11

Action 1 Increased centralization – Integrated business units and functions into the corporate center

StrategicAction 2Changed business con guration – Divested underperforming assets, adjusted number of products/services, geographies, customers, etc.

Action 3 Outsourced/O -shored business processes to low cost service providers

Action 4 Streamlined organization structure – Increased spans of control, and modi ed reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of speci c automation or cognitive technologies

28


ERP systems are the top barrier to successful cost reduction

challenges (59%), and erosion of savings (57%). Those same three barriers top the list globally across industries, led by

Figure 19. Barriers to successful cost reduction

1

(59%), and erosion of savings (57%).

2

(62%), and erosion of savings (61%).

3 Implementation challenges are rated higher as a barrier globally than in Insurance (+6 percentage points).

Lack of understanding/acceptance of the solution by the audience

Erosion of savings due to infeasible target setting

Weak/unclear business case for cost improvement

Poorly designed reporting and tracking

Lack of an e ective ERP system to enable date availability, decision-making, process improvement, performance management

Management challenges in implementing initiatives

0

10

20

30

40

50

60

70

80

Global Insurance

% o

f tot

al r

espo

nden

ts

57% 57% 58%61% 62%

65%

48% 48%54%

57%61% 59%

11 1

3

2232

29


Lessons learned

s1

2 The three top lessons globally are: invest in technology improvements (72%); design a solid tracking/reporting process

3

Designate a full-time position to drive e ciency and cost improvement initiatives

Develop, validate and sponsor a clear business case for cost improvement

Deploy change management activities to raise awareness, acceptance, and bene ts of initiatives

Design a solid tracking and reporting process

Assess, validate, and adjust targets reasonably according to the reality throughout the implementation phase

Invest in technology improvements to enable data availability, reliability, and decision-making process

0

10

20

30

40

50

60

70

80

Global Insurance

% o

f tot

al r

espo

nden

ts

61%65% 66%

70% 69%72%

61% 59%63% 61%

65%61%

1 1 122 2

30


Cost management maturity in Insurance is lower than average

averages across industries. In particular, the percentage of insurance companies that rate themselves high or intermediate maturity (50%) is well below the global average (66%), while the percentage of insurance companies that rate themselves low

Figure 21. Cost management maturity levels

1 In Insurance, 30% of companies rate themselves high maturity at cost management; 20% rate themselves intermediate maturity; and 33% rate themselves low maturity.

2 Globally across industries, 35% of companies rate themselves high maturity; 31% rate themselves intermediate maturity; and only 20% rate themselves low maturity.

3 17% of Insurance respondents rate themselves at the lowest maturity level, similar to the global average across industries (15%).

% o

f tot

al r

espo

nden

ts

Lowest High

High

Intermediate

Low

Lowest

Cost policies and procedures are continually reviewed and examined to ensure best practices around e ciency and cost management

Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply

There may be written cost policies and procedures documented but not readily available and essentially not followed

Few or no formal cost policies or procedures are employed or documented, or they are signi cantly fragmented

35%31%20%15%

20%33%17% 30%

Global

Insurance

3

3 1 1

2 2

31


32


33


Digital technologies are having a major impact on all aspects of business in the Insurance sector—including cost management. Breakthrough innovations made possible by digital technology are enabling companies to

increasingly digital world. They also have the potential to enable new levels of cost savings.

Digital and technology solutions applied to cost management in Insurance


34

Global Insurance0

10

20

30

40

50

60

70

% o

f tot

al r

espo

nden

ts

Automation: Robotics Process Automation

Cognitive technologies: Arti cial intelligence and machine learning

Business Intelligence (Not including Cognitive or AI)

Cloud Solutions

25%25%

35%

49%

17%

22%

28%

48%

1

12

2

33

1 In Insurance, cloud was the most widely implemented technology covered by the survey (48%); automation was the least widely implemented (17%).

2 Cloud was also the most widely implemented globally across industries (49%), followed by business intelligence (35%).3 Implementation levels in Insurance were lower than the global averages for all technologies, especially for business

intelligence (-7 percentage points).

Cloud leads the packAmong the technologies covered by the survey, the most widely implemented in Insurance over the past 24 months was cloud (48%), followed by business intelligence (28%). Cloud was also the most widely implemented technology globally across

Figure 22. Technology implementation levels (past 24 months)

35


Cloud

% o

f tot

al r

espo

nden

ts

0

10

20 30 40 50 60 70 80 90 100

Insu

ranc

eG

loba

l

63%

43%

48%

64%

64%

41%

41%

59%

RPA Cognitive & AI

Reduce Costs and Increase Productivity

Increase revenue Enhance product/service capabilities Tighten data security and Improve business control

1

1

0

10

20 30 40 50 60 70 80 90 100

80%

57%

53%

69%

75%

25%

25%

63%

0

10

20 30 40 50 60 70 80 90 100

76%

56%

59%

68%

80%

40%

40%

60%

2

2

3

3

1 The top reason for applying cloud in Insurance is to reduce costs and increase productivity (64%). Globally across industries, the top reason for applying cloud is to tighten data security and improve business control (64%).

2 The top reason for applying RPA in Insurance and globally across industries is to reduce costs and increase productivity.3 The top reason for applying cognitive & AI in Insurance and globally across industries is to reduce costs and increase

productivity.

The top reason for applying digital technologies in Insurance is to reduce costs and increase productivityIn the Insurance sector, reducing costs and increasing productivity is the top reason for applying cloud (64%), robotic process

Figure 23. Reasons for applying technologies

36


Unable to assess results at this point

Results according to expectations

Results below expectations

Results above expectations

Global

Cloud

29%

56%

13%

2%

Global

35%

41%

23%

1%

Global

36%

47%

16%

1%

Insurance

27%

41%

23%

9%

Insurance

25%

38% 37%

Insurance

30%

50%

20%

RPA Cognitive & AI

12 3

1 When implementing cloud, 41% of Insurance respondents had their expectations met and 27% had their expectations exceeded.2 When implementing RPA, 25% of Insurance respondents had their expectations met and 37% had their expectations exceeded.3 When implementing cognitive & AI, 50% of Insurance respondents had their expectations met and 30% had their

expectations exceeded.

Most technology implementations meet or exceed expectationsWhen implementing each of the technologies covered by the survey, at least 62% of Insurance respondents had their

Figure 24. Results of implementing technologies

37


0

10

20

30

40

50

60

70

80

InsuranceGlobal

% o

f tot

al r

espo

nden

ts

In process of implementationNot implemented but planned

38% 39% 39%33%

24%20%

62%

47%

59%

24%

14%

63%


Cognitive technologies: Arti cial intelligence and machine learning

Business Intelligence (Not including Cognitive or AI)

Cloud Solutions

2 2

3

37% 37% 41% 37%

11%17%

28%54%

48%

70%

26%

63%

3

1

1

1 Business intelligence (70%) is expected to be the most actively implemented technology in Insurance over the next 24 months, followed by cognitive/AI (63%).

2 Cognitive/AI (63%) and automation (62%) are expected to be the most actively implemented technologies globally across industries.

3 The expected implementation level for business intelligence is higher in Insurance than globally across industries (+11 percentage points).

Business intelligence is expected to be the most actively implemented technology in InsuranceIn contrast to the global results across industries, the technology expected to be most actively implemented in Insurance over the next 24 months is business intelligence (70%). The technology expected to be least actively

implemented is cloud (48%), most likely because current implementation levels for cloud are already very high

Figure 25. Technology implementation levels (next 24 months)

38


0

10

20

30

40

Global Insurance


Average Cognitive technologies: AI and machine learning

Business intelligence (not including Cognitive or AI)

Cloud solutions0

10

20

30

40

50

60

No designated leader

9%

17%

37%

31%29%

18%

29%26%

39%

31%

53% 51%

14%10%

0%

17%14%

30% 29%

14%

118%

121%

190%

NA

222%

29%

129%

121%

77%

76%

Designated leader

1 Overall, Insurance respondents with a designated digital leader report much higher levels of technology implementation (+121%).

2 Globally across industries, the impact of a designated digital leader on technology implementation levels is also very high (+118%), but slightly lower than in Insurance.

3 intelligence (rising from 0% to 26% in Insurance versus a rise from 10% to 29% globally across industries).

Digital leaders in Insurance have a big impact on technology implementation, similar to the global averageOn average, insurance companies with a designated digital leader have a higher level of technology implementation (+121%) than those without one. That number is slightly above the highly positive impact of digital leaders globally across industries

Figure 26. Impact of a designated digital leader

39


Cost management practices and approaches have grown increasingly sophisticated over time, with digital solutions—although still maturing—now representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past

whole new level of savings—as well as enable new and more innovative business models.

The rise of digital technologies and innovations is also contributing to a shift in how insurance companies around the world approach cost management, with the save-to-grow mindset from 2017 steadily expanding into a save-to-transform mindset where investments in digital enablement and transformational technologies play a key role.

Cost management practices and approaches have grownincreasingly sophisticated over time, with digital solutions—although still maturing—now representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past

whole new level of savings—as well as enable new and more innovative business models.

TThhee rriissee ooff ddiiggiittaall tteecchhnnoollooggiieess aanndd iinnnnoovvaattiioonnss iiss aallssoo contributing to a shift in how insurance companies around the world approach cost management, with the save-to-grow mindset from 2017 steadily expanding into a save-to-transform mindset where investments in digital enablement and transformational technologgies pplayy a keyy role..

Save-to-transform as a catalyst for embracing digital disruption

40


Cybersecurity and digital disruption as external risks Technology implementation as a strategic priority

0.0

12.5

25.0

37.5

50.0

62.5

75.0

87.5

100.0

0.0

12.5

25.0

37.5

50.0

62.5

75.0

87.5

100.0

57%

46% 46%43%

61% 63%59% 61%

73% 73% 74%

Past 24months

Global

Next 24months

Past 24months

Insurance

Next 24months

70%

+6%

% o

f res

pond

ents

% o

f res

pond

ents

1 1

Cybersecurity

Cybersecurity (63%) is the top external risk in Insurance.

Technology implementation has risen to become the top strategic priority in Insurance.

2

A

A Cybersecurity is the top-rated external risk in Insurance (63%), followed closely by digital disruption (61%).

1 Over the next 24 months, technology implementation is expected to be the top strategic priority for the Insurance sector (74%), similar to the global average (73%).

2 Technology implementation as a strategic priority is expected to increase by 6% from the past 24 months to the next 24 months.

Digital rises to the top of the agendaCybersecurity is now recognized as the top external risk in the Insurance sector (63%), followed closely by digital disruption (61%). Meanwhile, technology implementation has emerged as the top-rated strategic priority in Insurance over the next 24

Figure 27. The rising importance of digital issues in Insurance

41


TurnaroundSave-to-turnaround. Focus on immediate actions to reduce costs, maximize liquidity, achieve stability, and capture savings to avoid further deterioration of the business.

FundSave-to-fund. Focus on actions that help improve cost and competitive position; avoid cuts that might inhibit future growth rebalance costs to fund investment in business strategy enablers.

GrowSave-to-grow. Enable or develop a scalable cost/business platform to fuel growth and investment in core capabilities while supporting a

TransformSave-to-transform. Invest in digital technologies and technology infrastructure

business models to prosper in a digitally disrupted market.

Turnaround Fund Grow Transform

Cost levers

Liquidity Cost Growth Growth

Cost Growth Cost Cost

Talent Talent Talent Talent

Growth Liquidity Liquidity Liquidity

Prio

rity

+

-

Save-to-grow

grounded in save-to-grow mode. Cost and growth were the main business levers, with talent (including capabilities) as another key component. In this mode, cost reduction is a

high priority, with cost savings used to fund growth initiatives

Figure 28. The continuum of cost management approaches

42


1. Save-to-turnaround 2. Save-to-fund 3. Save-to-grow 4. Save-to-transform

Scope Narrow Broad

Competitive situation

• Losing market share • Structural operating aws • Liquidity concerns • Flat pro t growth

• Adjusting to demand levels • Growth concerns • Healthy balance sheet • Excess cash ow/reserves • High growth potential

Playbook

Defense-oriented playbook

• Short-term tactics to improve balance sheet • Cash ows • Stabilize business through any cost and/or liquidity

improvements • Compensate sales decline

Growth-oriented playbook

• Achieving pro table and sustainable growth through structural cost e ciencies and improvements

• IT investments • Innovation • Actions to strengthen performance and competitive position

Cost levers priority

Save-to-turnaround Save-to-fund Save-to-transform levers

Growth Talent Cost Liquidity Growth Talent Liquidity Cost Growth

Technology

Talent CostLiquidity

New

Low Low HighHigh Low High

Save-to-grow expands into save-to-transformMany insurance companies are now moving into save-to-transform mode, with the save-to-grow mindset expanding to include a strong focus on digital enablement and technologies that can transform a business and help it

capitalize on the vast opportunities in an increasingly digital world. Shifting into save-to-transform mode means that in addition to cost, growth, talent, and liquidity, technology is

Figure 29. Save-to-grow expands into save-to-transform

Save-to-transform not only helps a company capitalize on digital opportunities, it can also position the business to withstand potential adversity that may be on the horizon—such as an economic downturn or credit crisis—by using the power of digital

43


Save-to-transform can not only help a company capitalize on digital opportunities, it can also position the company to withstand potential adversity that may be on the horizon by using the power of digital solutions as the key to unlock new levels of cost savings.

Looking ahead

44


45


US Contacts

US Strategic Cost Transformation(MarginPLUS™) Leaders

Caleb LongenbergerPrincipal Strategy & AnalyticsMarginPLUS Co-LeadDeloitte Consulting LLP +1 513 560 3407 [email protected]

Faisal ShaikhPrincipal Mergers & AcquisitionsMarginPLUS Co-LeadDeloitte Consulting LLP+1 484 885 4699 [email protected]

US Insurance Leaders

Gary ShawPrincipal US Insurance LeaderDeloitte & Touche LLP +1 908 334 8842 [email protected]

Karl HerschPrincipal US Insurance Consulting Leader Deloitte Consulting LLP +1 908 377 6365 [email protected]

MarginPLUS™ Insurance Team

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in the insurance sector

Paul NelsonPrincipal Strategy & AnalyticsDeloitte Consulting LLP +1 7732946679 [email protected]

Hanif SidiPrincipal Strategy & AnalyticsDeloitte Consulting LLP +1 312 342 5525 [email protected]

PK PalaniappanSenior ManagerStrategy & AnalyticsDeloitte Consulting LLP +1 812 679 9845 [email protected]

Global Strategic Cost Transformation

Omar AguilarPrincipalStrategic Cost Transformation | Global Market Offering LeaderDeloitte Consulting LLP+1 215 870 0464 [email protected]

Global Strategic Cost Transformation

Omar AguilarPrincipalStrategic Cost Transformation | Global Market Offering LeaderDeloitte Consulting LLP+1 215 870 0464 [email protected]

Global Insurance

Neal BaumannPartnerInsurance | Global Consulting LeaderDeloitte Consulting LLP +1 917 371 3695 [email protected]

AMERICAS

BrazilHeloisa MontesPartnerStrategy, Analytics and M&A LeaderDeloitte Consultores+55 11 5186 [email protected]

Caroline YokomizoPartnerStrategic Cost Transformation | Brazil Leader Deloitte Consultores+55 11 99258 [email protected]

Sergio BiaginiPartnerCore Business Operations | FSI Country LeaderDeloitte Consultores+55 11 99936 0269 [email protected]

Rodrigo MendesPartnerRisk Advisory| FSI Country LeaderDeloitte Consultores+55 11 99645 [email protected]

CanadaSimon KingSenior ManagerStrategic Cost Transformation | Operations & Organization LeadDeloitte Canada+1 437 993 4087 [email protected]

ChilePablo TipicPartnerStrategic Cost Transformation| Operations Transformation Chile LeaderDeloitte Advisory SPA+569 6844 [email protected]

Daniel OrtegaDirectorStrategic Cost Transformation| Offering leaderDeloitte Advisory SPA+569 9649 [email protected]

Bianca SantillanaDirectorFinancial Services| Operations TransformationDeloitte Advisory SPA+56 9 5768 0388 [email protected]

MexicoEduardo PachecoPartnerStrategic Cost Transformation | Mexico Strategy, Analytics and M&A LeaderDeloitte Consulting Mexico+52 55 5080 [email protected]

Monica GuisaSenior ManagerStrategic Cost Transformation | Operations TransformationDeloitte Consulting Mexico+52 55 4441 6054 [email protected]

ASIA PACIFIC

AustraliaTony O’DonnellPartnerFinancial Services | Operations TransformationDeloitte ToucheTohmatsu+613 9671 [email protected]

China – Hong KongDavid Wai Kit WuPartnerFinancial Services | Operations TransformationDeloitte Advisory (Hong Kong)Limited+86 21 [email protected]

IndiaGaurav GuptaPartnerBusiness Model Transformation | Operations TransformationDeloitte Touche Tohmatsu IndiaLLP+91 12 4679 [email protected]

JapanYusuke KamiyamaPartnerMergers & Acquisitions (M&A) | Strategy, Analytics and M&A Deloitte Tohmatsu ConsultingLLC+81 8 [email protected]

Tetsuo TakasagoPartnerStrategic Cost Transformation | Operations Transformation LeaderDeloitte Tohmatsu ConsultingLLC+81 7 [email protected]

New ZealandPaul ShallardPartnerOperations Transformation | Core Business Operations LeaderDeloitte Limited+64 21 645 [email protected]

SingaporeWendy LaiPartnerBanking and Capital Markets (FS) | SEA Core Business Operations LeaderDeloitte Consulting PteLtd+65 6232 [email protected]


Global Contacts

Global Contacts


Jean-Michel PintoDirectorStrategic Cost Transformation| Strategy and Business Design Deloitte [email protected]

Guillaume PicqDirectorStrategy & Business Design | Monitor DeloitteDeloitte [email protected]

Germany

Uemit AydinPartnerStrategy & Operations | Operations TransformationDeloitte Consulting GmbH+49 151 5807 [email protected]

Kurt MitznerPartnerInsurance| Sector LeadDeloitte Consulting GmbH+49 151 5807 [email protected]

Ireland

Alan FlanaganPartnerFinance Transformation | Enterprise Technology and Performance LeaderDeloitte Ireland+35 314 172 [email protected]

Italy

Umberto MazzuccoEquity PartnerBusiness Model Transformation | Mergers and AcquisitionsDeloitte Consulting SRL+39 02 8332 [email protected]

Netherlands

Willem Christiaan van Manen PartnerBusiness Model Transformation LeaderDeloitte Consulting B.V.+31 6 1004 2582 [email protected]

Jan-Wouter BloosPartnerInvestment Management and Pensions| Operations Transformation Deloitte Consulting B.V.+31 6 3032 8192 [email protected]

Arjen BeersDirectorFinancial Services | Operations Transformation Deloitte Consulting B.V.+31 6 8201 9343 [email protected]

Nordics

Tore Christian Jensen (Denmark)PartnerOperations Transformation| Nordic LeadDeloitte Denmark+45 22 20 28 [email protected]

Anders Harritz Lund (Denmark)Senior ManagerStrategic Cost Transformation | Offering LeaderDeloitte Denmark+45 30 93 69 [email protected]

Tuomo Saari (Finland)PartnerStrategy, Analytics, M&A| Finland offering LeaderDeloitte Finland+35 84 0505 9159 [email protected]

Bjorn Grenman (Norway)PartnerStrategic CostTransformation| Norway offering LeaderDeloitte AS+47 911 61 [email protected]

Fredrik Gillebo (Norway)Senior ManagerStrategic Cost Transformation | Operations TransformationDeloitte AS+47 917 84 055 [email protected]

Jonas Malmlund (Sweden)PartnerDeloitte Sweden+46 75 246 33 [email protected]

Spain

Gorka BrionesPartnerStrategic Cost Transformation | Strategy and Business Design Deloitte Consulting, S.L.+34 9 1443 [email protected]

Jordi MontalboPartnerInsurance | Consulting LeaderDeloitte Consulting, S.L.+34 6 2937 4814 [email protected]

Teodoro GomezPartnerFinancial Services | FSI corporate and regulation LeaderDeloitte Consulting, [email protected]

SwitzerlandAntonio RussoPartnerAnalytics and Cognitive | Consulting Offering LeaderDeloitte Consulting AG+41 7 9102 4673 [email protected]

United Kingdom

Lorraine BarnesPartnerCore Business Operations | UK LeaderDeloitte MCS Limited+44 77 6589 [email protected]

EUROPE

Austria

Alexander KainerPartnerStrategy, Analytics and M&A | Austria offering LeaderDeloitte Services Wirtschaftsprüfungs GmbH+43 664 805 372 [email protected]

Belgium

Catherine HannossetPartnerStrategy & Business Design | Strategic Cost Transformation offering lead + 32 494 56 68 [email protected]

Ben Desmet DirectorStrategic Cost Transformation| Strategy & Business Design Deloitte Belgium+32 496 72 77 [email protected]

Croatia

Zlatko BazianecPartnerStrategy and Business Design | Consulting Country LeadDeloitte Croatia+385 1 2351 [email protected]

France

Olivier PerrinPartnerBusiness Transformation | Monitor Deloitte Deloitte France+33 6 87 14 17 [email protected]

Alexandre KuzmanovicDirectorStrategic Cost Transformation| Business Transformation Deloitte [email protected]

AuthorsOmar Aguilar PrincipalStrategic Cost Transformation | Global

Deloitte Consulting LLP USA: +1 215 870 0464 International: +1 267 226 [email protected]

David Izquierdo SánchezSenior Consultant Monitor Deloitte Deloitte Consulting [email protected]

Sakshi Kastiya Consultant Strategy & Operations Deloitte Consulting India Private Limited [email protected]

47


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This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, nancial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may a ect your business. Before making any decision or taking any action that may a ect your business, you should consult a quali ed professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Copyright 2020 Deloitte Development LLC. All rights reserved.

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Insurance - deloitte.com · Strategic Cost Transformation *OREDO 0DUNHW 2 HULQJ /HDGHU 7hriving in uncertainty in the age o I digital disruption: Deloitte’s 4rst biennial global