April 20, 2021
The Future Isn’t What It Used to Be
Customers, risks, operations and the workforce all have been transformed over the last year. This makes strategic planning a challenge.
The pandemic has changed everything. Well, not everything… but it has changed many aspects of the lives of individuals and families and has had far-reaching effects on businesses in every industry. The patterns that represent the ebb and flow of daily life have been altered significantly. Where we work, travel, eat and buy are quite different than what they were in early 2020. This upheaval of society has important, long-term implications for the P&C insurance industry. Customers, risks, operations and the workforce all have undergone rapid transformations over the last year. This makes strategic planning a challenge for insurers.
As the new decade dawned in 2020, many insurers began thinking about what the world would be like in 2030 and, by extension, what it would mean for their business. Enter scenario planning.
Scenario planning is a time-tested tool in the strategic planning toolkit. SMA has been quite busy facilitating scenario planning sessions for insurers over the past couple of years. The beauty of scenario planning is that, even though the timeframe is often 10 years out, the result of the process is the identification of strategic actions that should be taken in the near term to position for the possible developments in the future. Before the pandemic, many were able to envision the state of their customers and their business model 10 years out. Even though there were many uncertainties, there was still a relatively clear line of sight to the future.
Although mid- to longer-term planning should never be based on straight line projections, they still form the basis from which various alternate future scenarios can be developed. Now, it is fashionable to say that 2025 is the new 2030. The predominant theme is that the pandemic, economic lockdowns and work-from-home mandates have accelerated digital transformation. There is no doubt this is true, but the reality is more nuanced than just an acceleration of trends in a straight-line manner. It is not just that the future we envisioned will arrive more quickly than we originally thought – it’s that the future will be different than we all thought it would be. In other words, the future isn’t what it used to be.
See also: The Future of AI in Insurance
None of us can predict the future. But that makes scenario planning even more valuable. Evaluating different alternative futures in the context of the insurance enterprise stretches our thinking, opens up possibilities and identifies foundational capabilities that are required for success in any of the possible futures. Every dimension can be explored in a holistic way, looking at factors external to the insurer such as the industries and customers they serve, the potential changes to the landscape of risk, the nature of the workforce and the role of automation and advanced technologies. The whole value chain is in play – from how products are conceived and designed to how they are sold, priced and serviced – along with every part of the business that supports those activities.
What will the world of 2025 or 2030 mean for your business? For that matter, how do you need to adjust your strategies and plans now and for 2022?