Managing Director & Partner
Social issues are taking on greater prominence, and insurers are uniquely positioned to help address them. Insurers control trillions of dollars in assets worldwide, and they have a key role in society, with direct ties to individual consumers and businesses. Moreover, there is a growing business opportunity in taking on social challenges.
Thus far, most insurers haven’t pursued this opportunity—but they should. Over the next three to five years, as regulations evolve and expectations among stakeholders increase, social issues will become more relevant. Forward-looking insurers can give themselves a first-mover advantage if they take immediate action.
BCG recently surveyed people in management roles (from C-level executives to managers) at insurers worldwide to understand the current state of their work on social issues. The results show that most are just starting their journey, implementing a handful of isolated initiatives (such as programs to improve diversity, equity, and inclusion in their workforce) that are primarily aimed at capturing reputational benefits. Although worthy efforts, the bigger business opportunity lies in addressing a broader variety of social needs, including those of vulnerable customers.
Recent events—including the pandemic, a decline in real wages, rising inflation, and more frequent climate-related disruptions—have all exacerbated social inequalities in many countries, pushing more people close to, or below, the poverty line. Insurers can help vulnerable groups by embracing financial inclusion (offering affordable products that meet the needs of a broader set of customers) and by enabling financial well-being (helping people become more financially resilient). In doing so, insurers can not only improve the lives of their customers but also generate tangible business benefits, including increased revenue, improved shareholder returns, higher employee morale, and a stronger and more trusted brand reputation.
Key findings from the analysis include:
Some aspects of environmental, social, and governance initiatives entail tradeoffs for insurers, but in our experience, addressing social issues does not. It is a rare win-win situation in which doing good creates real business value.
For example, a large insurer recently developed a standalone inclusive insurance business unit that focuses on people right above the poverty line who are not familiar with insurance sold through traditional agencies and, thus, represent an untapped market. The initiative aims to identify and develop new ideas to address the needs of this underserved—but still profitable—segment across multiple lines of business.
To capture the social impact opportunity, insurers should apply the following best practices.
Prioritize and set a strategy. Identify and prioritize a small number of social initiatives that are in line with the company’s overall strategy and purpose.
Set clear accountability. When everyone is responsible for social impact, no one truly is. Insurers can generate better results by assigning a leader and team direct responsibility for deploying programs and achieving results.
Empower businesses to act. Task frontline operational units with the work of developing products and services that address social issues, and build business plans that factor in the likely longer timeline required to reach profitability.
Tailor projects to the needs of local markets and customers. When designing social initiatives, keep in mind the socioeconomic context and regulatory landscape and make the necessary adjustments.
Measure and report. Adopt a comprehensive set of metrics—for inputs and outputs—and measure overall impact, in both social and business terms, and report progress.
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