Maintaining optimism while grappling with transformational changes
Article Synopsis :
According to PwC’s 21st CEO Survey, insurance CEOs continue to rate insurance as one of the most disrupted industries. However, their outlook is increasingly positive as half of insurance CEOs see global economic growth improving over the next 12 months, up from only 19% in 2017. And more than 90% report confidence in their own organisations’ revenue prospects over the next three years (43% are very confident and 49% are somewhat confident).
Other survey findings include:
What’s keeping insurance CEOs up at night? CEOs are either ‘extremely’ or ‘somewhat concerned’ about the following issues:
- 95% – Over-regulation
- 93% – Cyber threats
- 85% – Speed of technological change
- 85% – Populism
- 83% – Geopolitical uncertainty
Nearly half (49%) of insurance CEOs are planning a new strategic alliance or joint venture to drive profitability and growth over the next 12 months, reflecting the increasing importance of partnership ecosystems. InsurTech businesses are likely to be receptive to offers of partnership and even acquisition. While InsurTechs have the innovative technology to respond to changing customer demands, establishing viable platforms for asset management, retirement, and group policies is expensive, as is entering market niches such as digital small medium enterprise (SME) insurance. Expect more tie-ups with incumbents as a result.
Human and machine collaboration is the winning formula in the digital age. More than half of insurance CEOs are clear about how robotics and artificial intelligence can improve productivity and customer experience.
Regulation and Compliance
Over-regulation is still insurance CEOs’ biggest worry (62% are ‘extremely concerned’ and 33% ‘somewhat concerned’). No other sector comes close. And with IFRS 17, the new set of accounting rules for insurance contracts, looming, concerns will likely intensify.
Pressure on returns and the need to free up funds for investment mean there can no longer be a blank cheque for compliance costs. RegTech can not only strip out costs in labour-intensive areas such as ‘know your customer’, but also strengthen risk management and improve compliance.
Changing Customers Demand Fresh Talent
More insurance CEOs (78%) see changes in consumer behaviour as a threat to growth than those in almost any other industry (only entertainment and media is higher at 80%).
Developing the necessary capabilities requires close collaboration of humans and machines – with machines augmenting rather than supplanting human capabilities, and vice versa. Investment, innovation models, and choice of partners such as InsurTech firms, can flow from this.
Fresh digital talent is required. Only 19% of insurance CEOs say attracting such talent is easy; more than 80% are concerned about shortages of digital skills within the industry (81%) and within their workforce (86%). While this is a challenge for all sectors – around three-quarters of participants in the CEO Survey are concerned – insurance CEOs report having the biggest anxieties in this area of all sector CEOs.
Interestingly, it’s not all about technical skills as 86% of insurance CEOs say they believe their organizations need to strengthen employees’ soft skills alongside digital skills to forge better connections with customers.
Better Results Delivered Faster
66% of insurance CEOs report increasing pressure on their organisation to deliver business results under shorter timelines. As the rate of change accelerates, insurers need to accelerate their internal rates of change, with shorter cycle times, and more rapid releases.
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Digital Insurer's CommentsWhat makes disruption so devastating is the fact that, absent a crisis, it is almost impossible to avoid. Managers are paid to leverage their advantages, not destroy them; to increase margins not obliterate them. Culture is an organization’s greatest asset – until it becomes a liability.
This survey is very insightful for its view into the minds of Insurance CEOs as they attempt to manage disruption on the fly. Though digital technology is the main driver of industry change, culture and people are the main determinants of success.
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