Japan’s
Insurance
Sector
post-COVID
Where to From Here?
CONTRIBUTORS AND CONTACTS
Mukund Rajan
Mukund Rajan is a Partner with PwC Strategy& based in Tokyo. He works closely with multi-national insurers and
wealth managers to advise them on growth and distribution strategies, customer centricity, and operating model trans-
formations. Over the last 15+ years he has worked with clients across Japan, Australia, S.E. Asia and the US, and has
authored extensively on issues relevant to the Japanese and Australian insurers. He holds a BA in Economics (Honors)
from the University of Texas at Austin.
Toshiya Tsutsumi
Toshiya Tsutsumi is an advisor to executives in the nancial industry for PwC Strategy&. He has more than 15 years of
professional experience in strategy consulting and alternative investments. He has advised nancial service com panies
in the UK, Middle East, and Japan, including life insurance companies, asset management companies, and private as
well as Islamic banks. His expertise is in distribution strategy and company-wide cost transformation projects.
Daisuke Yabuki
Daisuke Yabuki is an advisor to executives in nancial industry for PwC Strategy&. Based in Tokyo, he is a Partner
with PwC Consulting LLC. He has over 15 years of extensive experience in growth strategy, marketing strategy, digital
transformation, M&A, global expansion, organization and operation transformation with focus on nancial industry and
business. In recent years, he has been involved in various large-scale projects for business strategy and operation/
organization transformation programs preparing for the structural change of industry.
Koichi Uzuka
Koichi Uzuka is a Partner leader of the Insurance industry with PwC Alata. He has been involved in the corporate acqui-
sitions (due diligence, post-merger integration support), risk-related operations, support of the governance system
and the ORSA /ERM systems conguration, various regulatory compliance/FRS support operations focusing on both
Japanese and foreign life insurance companies and non-life insurance companies. Currently he leads the Insurance
Advisory Group of the Second Financial Department, specializing in advisory services to insurance companies.
Akira Yamane
Akira Yamane is a Partner with PwC Consulting LLC in Banking & Capital Market Asset Management team of Financial
Service consulting practice. As the lead partner of the practice, he has been involved in account development and
delivery of strategic transformation engagements for the rm’s Japanese and multinational clients, with focus on
strategy development, operational excellence, post-merger integration (PMI), regulatory compliance, and technology-
enabled business transformation.
Hiroyuki Koga
Hiroyuki Koga has about 20 years of consulting experience to nancial Institutions. He specializes in supporting
nan cial institutions’ business process transformation in business management/management accounting as well as
managing large-scale system Implementation projects. Since joining PwC Japan, he held various positions in nancial
services division such as Insurance Industry leader and Accounting solution leader. He now leads various projects for
nancial institutions.
Jonathan Sharp
Jonathan Sharp is Partner with PwC Strategy& with a focus on technology strategy. Based in Tokyo, he has more than
20 years of global technology consulting experience working in Japan, Australia, South East Asia, and other parts of
the world. His main industry focus is in Financial Services including Banking, Insurance and Wealth Management, and
has lead major technology transformation eorts in other industries as well. Jonathan’s expertise is in designing and
executing technology strategies, architectures and solutions that build business capability.
Katsuya Ide
Manager of PwC Consulting, Strategy&. Engaged in the organizational restructuring, optimization of cost structure,
operation design, PMI for the nancial service industry.
Takumi Maeomote
Xiying Zhang
Strategy& | デジタルイノベ ーション戦 略 ガイド2
As of May 2020, Japanese insurers have mobilized rapidly in response to the COVID-19
pandemic. The sudden decrease in global interest rates and signicant restrictions on
people’s movement are necessitating changes to product portfolios, distribution models,
and business operations.
However, business continuity and crisis management are only half the story; while there is
a pressing need to react quickly to fast-moving events, insurers must also reassess their
long-term strategy. The need for establishing customer trust and supporting them through
a time of need has rarely been greater.
We expect the market to be signicantly dierent over the longer term and here is what
insurers should focus on:
• Evolve product portfolios to reect lower interest rates and changes to underlying risks—
this extends to optimizing underlying investments (to achieve the desired yield) as well as
extending into adjacencies to capture new revenue streams
• Become digitally enabled across customer interactions, distribution (including agents/
banca partners), core operations, and back-end processing to support new ways of
working and evolved risk proles
• Integrate more tightly with suppliers to support their customer promise—in the short run,
this means working with them to creatively support their businesses.
• Rethink the operating model—beyond organization structures and processes, successful
insurers will critically rethink their workforce strategies, cost structures, physical
presence, and organizational culture to build resilience and adaptability.
The successful insurer of the Post-COVID era will be the ones that take a holistic approach
to rethinking their business (beyond just reacting to market dynamics).
Insurers can move in this direction by calibrating their mid- and long-term strategies around
six key areas: strategy & brand, distribution, nance & liquidity, workforce, operations &
supply chain, and being proactive about the regulatory agenda. In short, insurers must
watch the immediate situa tion, but with a rm focus on the emerging future to deliver on
customer promises and stakeholder expectations.
EXECUTIVE SUMMARY
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here? 3
*1: Insurance Journal, 2020. “Hong Kong Insurers Say Sales Have Fallen to ‘Almost Nothing’ Due to Coronavirus”, Accessed June 30, 2020.
https://www.insurancejournal.com/news/international/2020/02/06/557700.htm.
Global Data., 2020. “South Korea’s life insurance business to decline in 2020 due to Covid-19, says GlobalData”, Accessed June 30, 2020.
https://www.globaldata.com/south-koreas-life-insurance-business-to-decline-in-2020-due-to-covid-19-says-globaldata/
*2: Top 5 Japanese insurer announcement
Impact of COVID-19 on Japan
As of May 2020, Japanese insurers have mobilized rapidly in response to the COVID-19
pandemic. For insurers who have predominantly relied on face-to-face (F2F) distribution
and people-intensive operations, the battleground extends to all fronts: mass customer
acquisition, running the business, and delivering on claims.
Domestic sales have declined signicantly because insurance agents are unable to meet
with customers and reduced discretionary spending given the possibility of unemployment.
While the impact to date on general insurers is less pronounced, few expect this trend to
continue. If the experience of other regional markets is any indication*
1
, Japanese insurers
should expect a double-digit decline in new businesses in the initial months of the restrictions
and a low, single-digit reduction in annualized premium income thereafter. Several insurers
have started making regular compensatory payments to their agents*
2
, further impacting
protability and liquidity. Market volatility and declining interest rates have challenged
investment portfolios and overseas business interests further.
Yet, a relentless focus on business continuity will only get you so far—insurers need to have
one eye on the future to emerge strong and capture the signicant market opportunities
that emerge. In this context, we see three broad scenarios developing over the next ~12–18
months, both globally and in Japan outlined in the gure below (Exhibit 1).
Our house view is that scenarios U and L are most credible and insurers will need to adapt
accordingly. After crisis management, as national governments gradually pull societies out
of hibernation, opportunities will arise for insurers who act now to position themselves to
emerge stronger in the post-COVID times. To respond eectively, Japanese insurers need to
cater to four Japan-specic issues:
• A signicant shift toward remote working
• Regional variances in COVID related economic impacts
• A higher degree of manual operations vis-à-vis global peers
• Improve governance of their global portfolios
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here?4
L Scenario—Continued re-emergence of COVID-19
Drastic impact on economic performance and prolonged recession with
acute threats to the monetary and nancial system
U Scenario—Flattened curve of COVID-19
V Scenario—Early peak of COVID-19
Sustained recession with return to previous GDP level over several quarters
leading to postponed and, in part, sustained restricted consumption
Shock impact on the economy as a whole followed by swift and complete
recovery; insurers face postponement of investment and consumption
EXHIBIT 1
COVID-19 crisis: overview of possible economic scenarios
GDP Change (quarterly) through crisis, recovery and beyond
Source: PwC Strategy&
= crisis and recovery period
0%
2%
–2%
4%
–4%
0%
2%
–2%
4%
–4%
0%
2%
–
2%
4%
–
4%
= crisis and recovery period
0%
2%
–2%
4%
–4%
0%
2%
–
2%
4%
–
4%
0%
2%
–2%
4%
–4%
= crisis and recovery period
0%
2%
–
2%
4%
–4%
0%
2%
–2%
4%
–4%
0%
2%
–2%
4%
–4%
• A substantive, sustained shift toward remote working by employers and employees.
The medical requirements for social distancing necessitates a high proportion of sta
work from home (Exhibit 2), and companies (and sta) are investing to do so; for example,
the purchase of remote working equipment has risen sharply this year (Exhibit 3). Some
changes may likely remain post COVID, with profound implications for how insurers
manage their workforce, real-estate, and product portfolios (i.e., as underlying risk
evolves).
EXHIBIT 2
% of companies adopting remote
working
Source: PwC Strategy&
EXHIBIT 3
Sales of Tele-Working Equipment
(16 Feb–15 Mar 2020, YoY, %)
SSDWeb cam
111%
107%
Headset Display Note PC
246%
226%
80%
Source: PwC Strategy&
EXHIBIT 4
Insurers Willingness to Invest in Digital Technologies—
Pre-COVID
35%
16%
61%
41%
45%
47%
30%
44%
20%
37%
9%
15%
JapanWorld Japan World
2017
Future Plan
Pre-COVID
Small-scale/no investment
Medium-scale
Large-scale
Source: PwC Strategy&
• A higher degree of manual operations vis a vis global peers has left Japanese insur-
ers facing additional challenges in responding to the current operating environment.
There are constraints associated with physically getting sta to locations to execute man-
ual, paper-based processes. In parallel, the signicant volume of non-digital records has
posed business continuity and risk management challenges that are dicult to resolve in
the short term. Local insurers who have typically underinvested in digitization compared to
global peers are already revisiting these plans (Exhibit 4), but will need to accelerate them
as business stabilizes.
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here? 5
19%
81%
52%
48%
2018 Mar-20
Yes
No
n=2106 n=2835
• Disparities in the impact of COVID-19. By sheer size, the largest impact (based on
population) will be in Kanto, Kinki, and Tokai. In the rest of Japan, 65%+ of the working
population is employed in small- and medium-sized enterprises (SMEs), who face lower
employment security (Exhibit 5).
The immediate impact will be on new businesses as customers reduce the amount and
types of cover they hold. While there is an urgent need to support SMEs and freelancers
with working capital solutions in the near term, over the mid to long term, we envisage a
slight decline in SME-oriented products and propositions. Beyond evolving distribution
models, insurers will need to think about the types of products that can cater to the
diverse workforce—now and in post-COVID times.
• Management of global portfolios by Holding Companies. Over the last decade,
Japanese insurers have nurtured global portfolios to tap into attractive markets and
investment opportunities—the economic upside and yield arbitrage opportunities more
than oset the cost of integrating and governing global businesses. However, with the
precipitous decline in interest rates and a declining global economic outlook, this arbitrage
opportunity has also diminished. Additionally, the nature of these portfolios may require
incremental capital contributions (e.g., to cover increased income protection claims).
While not a direct issue for Japan operations, we expect this to be an area of signicant
interest for top management in holding companies.
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here?6
EXHIBIT 5
Employment by employer size & region
38%
South
Kanto
7%
8% 60%
Chugoku
31%
Kinki
1,871
59%
Tokai
24%11%
156
334
Kyushu
25%
63%9%
Hokkaido
55%
65%22%12%Tohoku
65%25%
23%
23
%
65%
66%
387
12%
11%
10%
10%
Shikoku
65%
15% 18%
728
437
246Hokuriku
North
Kanto
29%
65%
8%
62
33%
Okinawa
232
67%
<500 employeesGovernment >500 employees
In many
regions, more
than 60% of
people are
employed by
small and
medium sized
companies
556
933
Source: PwC Strategy&
As an initial response, many insurers are evolving their business practices. Several have
signicantly curtailed agent and sta sales visits, closed physical locations, reduced working
hours, and established A/B teams (Exhibit 6). Others have increased website use, with
many substantively shifting to digital channels (Exhibit 7). However, these are only near-
term measures; tackling longer-term impacts will require deep examination across four main
dimensions:
• Product portfolio and value chain participation
• Workforce and real-estate management
• Operational resilience and agility
• Role as stable, long term Institutional Investors
EXHIBIT 6
Company A
*3
# of consultation by type
(2020)
18
March April
151
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
50
100
150
200
250
300
350
400
Visit
Store
Online
Online
(
%
)
*3: Large Japanese Insurance Distributer
*4: Major Japanese Direct Insurer
*5: Top 10 European Insurer in Japan
EXHIBIT 7
Sales trend for online insurance
(# of contract, 2020 vs 2019)
Online insurers
Online
insurance store
March
February
Company B*
4
Company C*
5
Company A*
3
182%
122%
116%
127%
150%
N/A
Source: PwC Strategy&
Source: PwC Strategy&
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here? 7
Longer Term Impact on Japanese Insurers
From disrupted value chains to workforce anxiety, all business aspects are being impacted.
Japan’s scal stimulus package is one of the world’s largest*
6
, and its interplay with health
data pertaining to the local progression of COVID-19 should underpin scenario planning.
While acute in the short term, the combinatorial impacts of these aspects will have more
substantive impacts across the product portfolio over the longer term (Exhibit 8).
*6: Japan’s scal stimulus in response to the COVID-19 pandemic is pegged at ~20% of GDP, which is on par with Germany and the UK and
ahead of Australia and Singapore.
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here?8
EXHIBIT 8
Impact on Insurers Products & Business
Premium Loss Ratio Long Term COVID Impacts
Property & Casualty
Fire & Marine
Compulsory
Auto Liability
Voluntary
Automobile
Personal
Accident
Other Personal
(Pet, Travel, etc.)
Property & Misc.
Casualty
Life
Whole / Term
Endowments &
Annuities
Hospitalization &
Surgery
(3
rd
Sector)
Group Insurance
Neutral UnknownDeterioratingImproving
More businesses closing but
shipping likely to increase—
unclear if two will balance out
Reduced vehicle demand and
customers choosing to drive
at non-peak periods
Reduced vehicle demand,
changed driving conditions,
and customers saving money
Slight reduction driven by
reduction in short and long
term travel
Underpinned by spending on
discretionary items subject to
customers’ belt tightening
Ownership and occupancy
unchanged—but some shift
to cheaper policies
Usage patterns of surviving
businesses remain largely
unchanged
Changed driving frequency
and behavior improve loss
ratio assumptions
Changed driving frequency
and behavior improves loss
ratio assumptions
Usage patterns may be
“safer” but volume loss
could increase unit cost
Changes in usage pattern
unclear
Usage patterns largely
unchanged
Largely unchanged as businesses re-emerge
—but will trend with overall population/
economy of Japan profile
Economic slowdown, continued travel
restrictions and declining car ownership rates
will reduce premiums
Mixed impact on loss ratio—likely lower in the
short term but higher in the long term as driving
increases to maintain social distancing
Demand likely to remain stable and likely to
follow broader market/societal trends
Less requirement for travel
Increase in other personal items insufficient to
offset loss
will trend with broader Japan population and
economic profile (e.g., people seek lower cost
housing)
Few discretionary purchases
by customers and likely for
lower ticket amounts
Base mortality and morbidity
largely unchanged—assumes
COVID will be controlled in
next ~12–18 months
Sustained shift in acceptance of remote work-
ing resulting in changes to underlying risk profile
assumes COVID will be controlled over the next
~12–18 months
Flight to preserve cash or
substituting into other
traditional policies
Increased cost of generating
returns and hedging in a
low-rate, volatile environment
Shift toward larger ticket sizes—lower rates
for foreseeable future will necessitate (pricier)
high grade real assets to generate returns
Increased demand for health
cover and services—if you
can reach the customer
Changes in usage patterns
and mix uncertain
Increased demand for health related policies
(and services) as customers continue to
become more health conscious
Longer term contracts with
expectations of employers to
provide cover
Base mortality and morbidity
unchanged
Sustained shift in acceptance of remote work-
ing resulting in change to underlying risk profile
?
?
?
?
Source: PwC Strategy&
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here? 9
Once in a generation shifts in customer behavior will profoundly impact market
dynamics. A drive to frugality will see customers purchasing fewer and lower ticket whole /
term policies, but potentially more on supplemental health cover. Substantive and long lasting
shifts in real estate usage, travel and socialization patterns, and personal asset ownership
will impact longer term risk proles. First, we expect a shift in product portfolios—especially
for life insurers—away from capital intensive products as savings oriented products will
have to work much harder to generate returns. Products like unit linked ones might appear
attractive but their capital eciency should be stress tested given solvency requirements.
Second, core operations need to be a lot more digitized—not only to provide exibility
in business operations, but to respond to and remain relevant to long term changes in
customer behavior. Given the expected decline in volumes in some parts of the portfolio,
reducing the expense ratio (through digitization) will be critical to maintaining protability.
Third, digitization will extend to distribution models—not to replace agents and partners, but
to support them with more time to spend with customers. Several tools are available from
ntech-type providers, and there is an opportunity for insurers to accelerate eorts by buying
capability. Fourth, insurers should integrate better with suppliers (e.g., repairers, hospitals,
other service providers), distribution partners (e.g., agents, banks, etc.), and for the Group
business, with large corporates (e.g., to put in place programs to manage safety and mental
health whilst working from home).
A second major change will be around workforce and real-estate management.
The high degree of manual and paper-intensive processes among Japanese insurers has
necessitated large workforces, oces and branches. COVID-19 has forced insurers and
sales forces to work remotely and challenge existing norms; as we emerge from this crisis,
successful insurers will rethink how and where they organize their people and activity.
Managing this requires a greater focus on organizing the workforce (including for continued
remote work) and investing in a base level of digital/remote working skills for all sta.
From a real-estate perspective, this is an opportunity to re-examine the scale of corporate
headquarters/operational centers and rethink the format of sales branches. Done correctly,
there is a real opportunity to redeploy savings from the former to the latter.
A third area, which Japanese insurers will have to develop is building resilience and
agility within their businesses. This will require more than just training sta; specically,
there needs to be a deeper focus on the interconnectivity between people, processes, and
governance. First, governance structures and controls should be updated for a changed
environment. Second, customer and non-customer facing processes need to be redesigned
to focus on digitization and distributed execution, that is, “one process, distributed
execution.” This means greater standardization and “designing- in” controls (vs. traditional
model of relying on human oversight). Lastly, all managers must be trained on how to
lead distributed teams on a regular basis. The benets of achieving this include increased
workforce exibility, better customer customers; improved employee value proposition; and
increased operational capacity.
A fourth longer-term impact is the role of insurers as large institutional investors.
Portfolios/allocations of large institutional investors will shift due to lower global interest
rates and structural changes in asset valuations (e.g., commercial real estate). In addition to
ALM requirements, insurers will need to seek yields for savings-oriented products that have
already been sold and redesign future savings—oriented products. There are fewer highly
rated investments, and longer tenured (e.g., infrastructure) investments come with liquidity
constraints. Insurers should revisit their investment strategies and the products that can be
supported through those strategies.
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here?10
EXHIBIT 9
Future Positioning of Insurers - Typical Archetypes
Scale
Provides access to capital and resources to
sustain and then recalibrate the business
Portfolio Breadth
In-built resilience within the portfolio
Low High
Low High
Suited for Survival
Product
Differentiators
Potential Stars
Challenged Future
1
34
Opportunity to leverage core
products to re-position
business by digitizing, and
building scale
Strong business model …
must start acting now to
capture opportunity before
others
Sub-scale and challenged
products
…preserve value
for possible merger/exit
Ability to leverage scale into
digitizing the business or
expanding product portfolio
2
Source: PwC Strategy&
Actions for Insurers
The fast spread of COVID-19 pushed most businesses to uncharted territory. It is tempting
to become internally focused, but insurers’ response to customers and society in the present
times will dictate their future public perception. The rst steps should be directed toward
customers; reiterating your value propositions, providing a clear way for customers to get
help, and developing solutions to operational challenges with customers in mind (even if
the solution is not perfect). For example, in China, an insurer has fast-tracked claims (and
accepted the risk of a higher loss ratio) and waived deductibles. Only then, should insurers
start thinking about their longer-term business response.
There is no doubt the insurance landscape will be signicantly altered over the long term
from customer, employee, and product perspectives. It is also possible that some of these
changes will be acute enough to force market consolidation providing opportunities for
stronger players. The actions available to insurers will be inuenced or constrained by their
archetype which are presented in the Exhibit 9 alongside. These are based on the current
scale and portfolio breadth of insurers (i.e. structural factors that enable or constrain their
businesses).
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here? 11
EXHIBIT 10
Actions Insurers Can Take to Emerge Stronger
Crisis
Management
& Response
Workforce
Operations
& Supply
Chain
Finance &
Liquidity
Distribution
Tax, Trade &
Regulatory
Strategy &
Brand
Mobilize
Stabilize
(Start now to execute over the medium term)
Strategize
(Think now to guide long term choices)
Archetype Specific Options
(Start thinking now)
Ongoing scenario planning and stress testing
of financial, operational and reputational risk
Customer charter—demonstrate how
you will support for future crises
Be clear on your purpose
Liquidity solutions for Small and Medium
Enterprises (SME) (and other) for other
Strengthen customer loyalty by capitalizing
on minimized risk (e.g., motor, value added
services)
Reprioritize and rationalize project portfolio
Review product portfolio mix and
compare with client needs
Recovery + growth strategy
Fit for purpose operating model
!
1
1
2
3
Strategic M&A—of other
insurers and capabilities
Global portfolio optimization
Build distribution partner-
ships
Extending credit/ working capital to business
partners
Re-insurance strategies
Recalibrating capital/ valuation models
Make better use of existing sales related
assets—lead trackers, savings calculators,
etc… i.e. drive adoption
Design and deploy digital sales support tools
in the hands of agents and drive adoption
Better link direct and F2F sales channels
Closed block/ legacy portfolio strategy
Lapse management
Accurate valuation on illiquid
investments & overseas portfolios
Rethink agent/ banca sales experience
—and retrain/hire to deliver on that
experience
Redesign branch/ agent office formats
and rethink location strategies
!
1
4
2
2 4
Partial Sale of back-books
Divestments
Capital/Liquidity
Management
!
3
1 2
1 2
Redesign sales process to
make it digital centric
Invest in direct distribution
and customer engagement
!
1 2
Captive re-insurance to
better access global capital
markets
Workforce stabilization and planning
Base level of digital & remote leadership
training for staff and agents/partners (inc.
adoption of existing tools)
Personal development & personal projects
Workforce strategy & digital upskilling
Improved agent value proposition
Real estate location strategy
!
1 2
Targeted recruiting
campaigns to capture
candidates from others
Ensuring continuity of supply chain through
targeted investments and working capital
solutions
Digital tools to agents—chat, VC, shared
screens, etc.
Digitization and automation of core processes
Design-in cyber security and data
privacy—before digitizing processes
IT Infrastructure & end of life strategy
!
1 3
!
1 2
Tactical sales campaigns
Digital adoption campaigns
of existing tools and systems
Financial reporting and disclosures
Replan & recalibrate regulatory programs
currently underway—IFRS, LDTI
Global governance models (for those
with multi-national portfolios)
Immediate crisis management and business continuity planning
efforts largely completed—now at monitoring stage
Source: PwC Strategy&
Estimates suggest that the global economy will take at least ~12–18 months to return to
something resembling “normal” conditions—but what exactly it looks like is still unclear. It
is also clear that we have to get used to emergencies like COVID-19 in a world of growing
uncertainty, instability, and interconnectedness. We are familiar with some systemic threats
like climate change and cyber-attacks and are already adapting to them—a similar approach
is required for the post-COVID environment. Insurers need not wait; irrespective of their
archetype, there are actions insurers can start now to position themselves (Exhibit 10).
Strategy& | Japan�s Insurance Sector post-COVID: Where to From Here?12
So, the actions that you, as insurers, take now will build resilience and adaptability in
your organization, starting with the following:
• Test, Test, Test: To loosely paraphrase the advice of WHO Director General Dr. Tedros
Adhanom, companies must adopt a “Test! Test! Test!” policy by taking a scenario-based
approach to business planning. Insurers have historically run sophisticated nancial
scenario tests (e.g., solvency), but they now need to expand this to customer- and
employee-facing processes and develop market approaches, product portfolios, and
physical infrastructure.
• Assessing Resilience in Product Portfolios: The rapid decrease in global interest rates
has wreaked havoc on investment portfolios; for life insurers, this has markedly increased
the cost of capital (especially in legacy portfolios). It is unlikely that rates will increase
for some time. Stress testing your current and legacy products including using health
analytics will enable you to better negotiate with re-insurers (near term) and optimize your
post-COVID portfolio (long term).
• Digitize the Customer Interaction: Profound changes in customer behavior brought
about by COVID19 means insurers should rethink customer interactions - the need to
digitize sales, customer management, and claims management has never been higher.
Contrary to dogma, digital eorts need not replace agents and sta - it can actually
give them back more time to spend on higher value activities (e.g., spending time with
customers) and support better risk management. The time to start acting on this is now.
• Revisiting Governance and Controls: Current (local and global) governance models and
controls must be redesigned for an operating environment in which risks rapidly translate
across national boundaries and one where much work may be conducted remotely
(even in post-COVID times). As you design these controls, ask the following question:
“Why can we not do this remotely”? (e.g., using physical vs. electronic signatures for
supplier contracts) and design in this digital governance for customer facing and internal
processes.
• Rethinking the Workforce: Near-term eorts have necessarily focused on sta safety,
tactical resource management, and team splitting. To position for the future, insurers
must start thinking about their workforce strategy including the mix of required skills,
where employees need to be (physically) located, incorporating a comprehensive digital
upskilling program, instilling remote team leadership skills for all managers, and rethinking
career pathways.
• Redesigning the Operating Model: Without a doubt, successful insurers will be more
digitized, more adaptable, more resilient, and potentially more dispersed post COVID.
Beyond organizational structures, you need to dene how parts of your company work
together and the requisite collaboration, information ows, and infrastructure delity.
So to from here? Japanese insurers have already successfully mobilized in the face of
COVID-19. The next step is to stabilize operations, and then re-strategize for the future. This
should necessarily focus on business models and organizational change. Insurers who can
align their COVID-19 response with their long-term strategy will be able to emerge stronger.
We encourage you to explore your scenarios and stress-test them and, in doing so, focus on
the implications to your strategy over the coming weeks and months.
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Please see www.pwc.com/structure for further details. Mentions of Strategy& refer to the global team of practical strategists that is integrated
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written permission of PwC. Disclaimer: This content is for general purposes only, and should not be used as a substitute for consultation with
professional advisors.
Issue: July, 2020
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