Emerge stronger: Recession recovery for insurers
July 30, 2020
RESEARCH REPORT
In brief
In brief
- Accenture analyzed recessionary impacts on the insurance industry and the strategies insurers used to outperform competitors in previous recessions.
- With these patterns in mind, we present insights to help insurers test the resiliency of their strategies and outmaneuver uncertainty.
- Coupling structural cost reduction with investments in key competitive areas can help insurers emerge stronger and outperform competitors.
- Specific improvements and investments differ based on the insurer’s position and book of business, but a few "no-regret" measures can apply broadly.
The global economy is likely to suffer a marked decline in 2020 due to the COVID-19 pandemic. The severity of this recession is still to be determined. Yet, we already know that impulsive cost reductions fail to guarantee survival for insurers and might become pitfalls on the pathway to recovery.
In our latest report, Strategic Plays for Recession Recovery, we explore the delicate mix of actions that previous outperformers have taken to remain stable during, and come out stronger after, recessionary times.
A look at recession winners
Looking at recessions past, we find time-tested strategies to help weather the recessionary storm and come out stronger. Research shows the actions that 4,700 public companies from various sectors took during the previous three global slumps.
The actions taken by the observed companies during the three previous global recessions had these results:
80%
Eighty percent of surviving companies failed to reach their pre-recession growth rates for sales and profits three years post-recession.
9%
Only nine percent of survivors were in a better financial position and outperforming competitors following the recession.
Deeper analysis on the insurers within this group reveal strategies that helped in recession recovery. Insurers that combined selective cost-cutting with strategic investments in areas of competitive advantage were more likely to emerge stronger than before and outperform competitors.
Time-tested patterns of success consist of structural cost improvements coupled with strategic investments to drive revenue.
Turn challenges into profitable growth
The approach outlined in our report is vital for insurers to successfully navigate the current environment and emerge stronger. Insurers that outperformed following the Dotcom bubble burst and Great Recession generally combined two key plays:
Structural cost reduction
Fundamentally changing how work gets done, often by automating to replace manual activity or restructure tasks, then aligning teams accordingly
Strategic reinvestment of savings
Investing in areas of competitive advantage to help minimize business impact from an economic downturn and focus future growth
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Acting with a time-tested, data-driven strategy can empower insurers with the insights they need to devise, refine and implement a winning strategy. While each insurer will need a unique approach, certain "no regret" measures may apply under all scenarios and help build long-term resilience.
A crisis can come in any form and seemingly out of nowhere. We have both the insurance industry expertise and innovative solutions to help your insurance business weather the recession, outmaneuver uncertainty and outpace competitors.
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