Sustainability & ESG: A Strategic Resilience Information for Insurers

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In the first part of this blog series, Accenture’s strategic resilience framework was presented. In this blog I will expand this introduction to take you step by step through our framework from the perspective of sustainability and ESG (Environment, Social and Governance).

Sustainability and ESG trends are huge influencing factors in insurance – they are also some of the most complex, unknown and disruptive. Dealing with this problem can be overwhelming because the future is so unclear: How will climate change accelerate the frequency and severity of Catastrophic Events (CAT)? How will climate change, along with the call for more social justice, affect the economy, and therefore finances and consumer preferences? Will stakeholder capitalism profoundly change the current economic system and political landscape?

Current trends with an impact on sustainability in insurance

Some trends offer insurers opportunities while others present challenges – both of which are important to prepare for. Below, I’ve outlined five sustainability and ESG-related trends that are currently impacting the insurance industry (and the world). This is a rough, small snapshot of the potential impact of these trends.

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Use the unknown to move from trends to scenarios

There is a real risk in ignoring these sustainability trends in insurance – and a real opportunity to act on them. Looking at the opportunities in the North American P&C market, we determined that ESG-related trends are expected to open $ 206 billion over the next five years. If these trends accelerate, that opportunity could increase to $ 385 billion.

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* The value at stake includes both the entry of new rewards opportunities and the shift from old rewards to new product offerings

If not responding to these sustainability and ESG trends is not an option, what should a company do when the future of these trends remains unknown? The answer is scenario planning through a strategic resilience framework.

Since these trends are based on the social, environmental, and governance parts of the PESTEL framework, we can create a graph to understand what happens when these categories accelerate or slow down. (Note: Governance connects politics and law and is integrated into the socially and environmentally oriented scenarios).

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This is really at the heart of strategic resilience. By their very nature, trends are a high-level vantage point, as the details of their development can change at any time. Strategic resilience is designed to withstand this uncertainty. By looking at what will happen when these trends accelerate, companies can make long-term decisions to build resilience from the start of their strategic planning.

Turn scenarios into an actionable roadmap with Accenture’s strategic resistance model

The point of scenarios is to provide your company with knowledge. When you envision a world where a trend is moving faster or slower, come up with a number of potential scenarios that you can work with when deciding on a strategic roadmap. How do you then determine which scenario (s) to pursue?

The world of the future is just one piece of the puzzle. You still have to grapple with the current reality of the trend, and you also have the reality of your current business situation that will influence your decision. Essentially, you need to see how the different scenarios will affect your specific business and where the greatest opportunities lie. For this reason we have built a strategic resilience model.

Using our strategic resistance model, we can determine the baseline – the financial impact of each trend on its current history – and then the financial impact if a trend accelerates or decelerates in ESG-driven scenarios. For example, based on the graphic below, our model predicts that environmental and social trends will result in a $ 117 billion new business opportunity over the next 5 years. However, the combinatorial effect of rapidly accelerating these trends together could net in up to $ 343 billion. Insurers must have their plans in order to take advantage of these opportunities.

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With this information, combined with industry expertise, you can make informed decisions about the future of your business. A systematic look into the future can help you stay one step ahead of the changing winds and unlock opportunities that your competitors may not see.

We may not be able to predict the future, but we can predict the range of future possibilities. This is just one example of looking at one category – sustainability / ESG – and using our PESTEL framework and strategic resistance model to create a roadmap that is both durable and flexible. In the next blog in this series, we’ll analyze our strategic resilience framework from another angle – an industry angle.

You can reach out to Nina Jais or Ravi Malhotra for help with insurance ESG strategy and use our strategic resistance model to create a long-term strategy roadmap that will keep you competitive and agile.

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Disclaimer: This content is provided for general informational purposes and is not intended to be used in lieu of advice from our professional advisors.
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