Insurance CEOs worry about regulation, tech
Insurance chiefs are more worried by threats from too much regulation and technological change than any other business sector.
And they also fear the effects of changing customer behaviour and competition from new entrants to the market than other areas of financial services.
But — despite worries allied to soft premium rates and slow economies in developed markets — insurance CEOs said they are “fairly confident” that they can increase revenue over the next year and they are also among the most ready to handle disruption.
The news came in a survey of 1,379 CEOs around the world by professional services firm PwC, which included 95 insurance companies in 39 countries.
Arthur Wightman, PwC Bermuda leader and insurance leader, said high-tech insurance companies could open up valuable opportunities for insurers and help them to transition from step-by-step to breakthrough innovation.
Mr Wightman added: “Partnerships with lean and agile insurtech entrants can help insurers improve their processes, strengthen efficiency and reduce costs.
“They can also help insurers improve their analysis of the huge amounts of data at their disposal, which can lead to better customer understanding, higher win rates and more informed underwriting.”
And he said: “Playing an active part in the development of insurtech is one of the key elements of the fit for growth platform we believe will enable insurers to compete on cost, innovation and customer intimacy.”
The survey found that more than a third of insurance CEOs were “very confident” they could boost revenue over the next year and more than 80 per cent were “somewhat confident.”
PwC said that the industry was also very aware of the challenges posed by “robo-advice”, pay-as-you-go insurance and sensor-based coverage.
The report added: “Concerns over regulation, competition from new market entrants, the pace of technological change and especially shifting customer behaviour have continued to rise from their already high levels in previous years.”
Concern over possible barriers to market entry and development also increased over previous surveys — 60 per cent believed that it was becoming harder to compete in an open, global marketplace because of a shift towards protectionist national policies.
A further 74 per cent, more than in any other sector surveyed, said lack of trust in business was a threat to growth.
In addition, 45 per cent of insurance CEOs said they were “extremely concerned” about changing customer behaviour — up 21 per cent on the previous year.
But they added that customer intelligence, along with the quality of client insights and the interactions underlying them, was their most valuable asset and best bet for increased profits and business growth.
And Mr Wightman said that there was evidence that insurers were responding to threats and appeared ready to face them.
He added: “This is evident in the fact that 67 per cent of industry leaders see creativity and innovation as very important to their organisations, more than any other financial services sector.”
The survey also found that insurance CEOs were ahead of other financial services sectors in some areas, with 61 per cent looking at the benefits of people and machines working together and nearly half considering the future impact of artificial intelligence on skills needs.
Insurance companies said that, apart from their home markets, the US was the top target for growth, followed by China.
And, while London and New York remain the most important commercial centres, Hong Kong had seen “a noticeable rise up the rankings” to third place.