In our introductory blog, we mentioned that 55% of European insurers will be looking to tighten their belts in 2021. In the UK, while the impact from the recent Supreme Court business interruption ruling is a one-off, the gradual wind back of government-backed business and furlough support schemes may create a longer lasting headwind for insurers. Battered by the lockdown and bankruptcies, further erosion in SME premiums is likely especially in non-food retail, hospitality, travel and leisure sectors. The knock-on effects on profitability may prompt more insurers to embark on cost transformation initiatives.

However, according to our recent cost survey, 83% of UK cost transformation programmes failed to achieve their goals. Inability to align leadership around shared objectives is considered a major cause, and with the majority (69%) of the UK organisations targeting greater than 10% cost reduction over the course of next year, now is the time for the C-Suite to act.

Let’s face it, cost reduction is never straightforward. It requires leaders to make unpopular and often difficult decisions. Many insurers are struggling to take the first step due to competing agendas and appetite across the C-Suite, typically driven by a lack of consensus on the most pressing challenges facing the business. According to our 2020 Deloitte Cost Survey, cybersecurity vulnerabilities and increasing customer demand were cited as the most pressing challenges facing European insurer CxOs. Decisions that companies make today to kick-start recovery can help or hinder their positioning for the future.


Many organisations are already ‘change fatigued’ from recurrent transformation programmes, post-merger integration and restructuring initiatives over the past five to seven years. They have continually been tackling costs focusing on simple opportunities to little avail as they typically reappear or pop up elsewhere in the business. Now insurers recognise the need to be bold and take on more difficult costs that are inherently more complex to unpick and, potentially, sacred cows. We have also observed in several cases that a shortage of transformation and digital experience at board level, coupled with ad-hoc execution capabilities, can act as a barrier to change.

So how do insurers set the right ambition and appetite across the C-Suite to kick-start a successful cost journey?

First of all, it is crucial to set up the programme from the top. Without executive team alignment major initiatives are likely to under-deliver. Executive sponsorship from the top will manifest the strategic importance to the entire organisation. It is also important to articulate what ‘shared success’ looks like by defining an incentive framework underpinned by shared objectives with clear metrics that spur on senior management and their teams to drive value.

Clear choices must be made up-front. To our earlier point, it is not uncommon to have competing agendas around the executive table when a cost programme is about to take place. “Do we deliver left-to-right (tactical) or right-to-left (strategic)?” “Do we focus on expense or loss ratio performance?” “Head Office vs Business Units?” It is crucial for the C-Suite to think through these key questions and define a clear set of principles that will guide and shape the cost transformation going forward.

Like every strategic change, the leadership should create a ‘burning platform’ to articulate the importance and urgency for the cost initiative. Benchmarking can be used at this stage to reinforce the message and expose the performance gap, but as a signal may not show the true gravity of the challenge. It should be coupled with a compelling future vision so that the effort can be guided by a set of imperatives that the wider-organisation can buy-into.

Whilst tactical savings are necessary to get some runs-on-the-board, they should be time-boxed and focused to avoid death by a thousand cuts. The danger of a ‘left-to-right’ mission is that it runs out of steam fairly quickly and cost savings as a result of one-off actions typically will creep back into the business over time. The C-Suite need to create long-term strategies to sustainably address the expense base. ‘Right-to-left’ initiatives such as cloud, automation, re-platforming, organisation simplification and remote working enablement have been rated as top transformation levers by European insurers as a means to recover from the Covid-19 pandemic, and thrive. Prioritising and sequencing these levers will maximise their combined impact and provide a roadmap enabling leadership to navigate the journey ahead.


Last but not the least, insurers should leverage the opportunity to fix existing capability gaps and enable a continuous save-to-transform mindset. We have seen winners adopting sustained leadership behaviours and structures such as enterprise ‘agile’ delivery, flexible staffing, and strategic sourcing of even core capabilities. They have also laid the foundation for transformation through establishing greater cost transparency and insight, increased control, reduced bureaucracy and more effective decision making - increasing confidence across the C-Suite to seize the moment. 

We will re-visit the topic of leadership as part of our future blogs.