How To Win In Insurance: Climbing The Power Curve

By McKinsey & Company

Insurers can take concrete, evidence-backed actions to move them in the right direction and, cumulatively, improve their odds of long-term success. Purposeful, bold moves aimed at shifting resources, boosting underwriting margins and productivity, and delivering on a series of programmatic M&A deals can dramatically improve an insurer’s odds of reaching the top quintile of economic profit over a ten-year period. Many companies fail to pursue them rigorously.

McKinsey & Company conducted an analysis of the economic profit of 209 insurers across geographies from 2013 to 2017, identifying a power curve, the proof that economic profit is unevenly distributed among insurance companies. The power curve illustrates the uneven distribution of insurance industry economic profit.

“The top 20 percent of insurers created an annual average of $764 million in economic profit during that period. In contrast, the middle 60 percent produced an average of only $26 million in economic profit. And while those middle insurance companies didn’t create or destroy much value, the bottom 20 percent destroyed a staggering $976 million per company per year. This pattern was similar to the universe of all companies studied by our colleagues.”

Read the full report here.

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