In the latest of a series of interviews with insurance leaders, we ask the director of the global financial institutions group at McKinsey & Company about his vision for the industry.
How do you see the market unfolding in two years’ time? The most likely scenario is that the industry undergoes continued evolutionary change with steady improvements in “transactional excellence”, by which we mean the quality of individual underwriting and claims decisions, better marketing, higher quality customer service levels and lower costs. Business will flow to the location that offers the best environment for making money; competition from other financial centres is intense and, if London can’t maintain an attractive environment in terms of regulation, tax, efficiency and cost, then the business will migrate elsewhere.
What is your vision of how the insurance sector will align to the changing business landscape? We are seeing a dramatic realignment of economic activity. Non-Japan Asia will account for an equal share of GDP as western Europe in 2025. How does your current economic footprint, your distribution of premium income, compare to global GDP? Will that footprint need to change? Industry structures are rapidly changing, dominated by global giants and fast moving niche players. Private equity funding is transforming ownership structures and speeding up change. Do you have a clear competitive edge that will place you among those who will thrive? All industries face challenges in responding to climate change. The insurance industry will need to adapt by being more international, more productive, and with more imaginative sourcing of talent.
What do you see as the main challenges in the market going forward? Underwriting profitably through the cycle is the holy grail and the best players remember that great insurance companies are, first and foremost, great underwriters. The main challenge is one of discipline, and a belief that it can be done.Who are the main visionaries in the market right now? I see two main types – those who understand deeply the business they are in and do the common, ordinary thing uncommonly well, and those who successfully expand the footprint of the industry. The mistake to avoid is thinking that one type is more important than the other – they both matter a lot.
What are the key issues that the insurance leaders need to understand today to drive their businesses? The need to understand the importance of great underwriting, to have a compelling growth story, a talented workforce in place to make it happen and the ability to organise this in an increasingly global market.
Charles Roxburgh is one of the industry leaders speaking at Insurance Times’ Commercial Lines Forum, to be held at the Hilton Tower Hill on 13 October.