Insurers must start giving more priority to customers if they want to transform their operations in the new business landscape, according to a KPMG report.

The industry is aware of the need to adapt and has undertaken some bold initiatives, but the focus has been disproportionately on meeting regulatory requirements, it says.

About 30% of more than 70 global insurance executives surveyed for the report expect their business models to change to grow revenue.

More than one-third say government policy or enforcement agendas will disrupt their businesses over the next three years.

Less than a quarter believe changing customer behaviour will have an impact.

“We would argue customer behaviour should actually be the inspiration behind insurers’ efforts to reinvent themselves,” KPMG Global Insurance Innovation and Change Lead Partner Mary Trussell said.

“The fact less than a quarter expect to be disrupted by changing demographics and preferences suggests insurers may not have their eyes on the ultimate prize.”

Only 5% rate the outcomes of business transformations as “close to ideal”, while 57% feel the results are “not ideal” or worse.

“Because the first human instinct is self-preservation, organisations naturally seek to preserve the people, processes and tools that led to past successes,” KPMG US Global Head of Insurance Strategy Tom Nodine said. “It can be politically risky to question their relevance for the future and difficult to make necessary changes based on new information.”

More than 25% of respondents say they have led a major transformation initiative in the past two years, and 8% have completed several projects recently.

About 53% rate themselves capable of achieving short-term transformation wins.

“Insurance organisations are, on the whole, rather good at tweaking, monitoring and improving their business and operating models,” KPMG UK Management Consulting Partner William Pritchett said. “Insurers can often be very keen to optimise the sub-optimal and reiterate the process.”

KPMG commissioned Forbes Insights to carry out the survey early this year. It interviewed 380 financial executives on business and operating model transformation. About 20% of respondents are from the insurance and reinsurance sector.