The findings of PwC’s 21st Global CEO survey, which included responses from 100 insurance leaders, show a generally positive outlook, but that actual growth in the sector has typically failed to live up to expectations. The report explains how insurance businesses can reinvigorate revenue growth, while still driving down costs.
Key findings
• Insurance CEOs’ three biggest concerns are over-regulation (95%), cyber threats (93%) and speed of technological change (85%)
• Insurance CEOs are more concerned about the pace of technological change (85%) than leaders in any other industry.
• Over 80% of insurance CEOs are concerned about a shortage of digital skills, the highest percentage of any industry
• 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
The grounds for insurance CEOs’ optimism include the increasing digitisation of the global economy and resulting shift in customer preferences, opening up a range of new opportunities for insurers. For example, as more business moves to digital channels, demand for cyber insurance is rising – 40% of CEOs from across all industries are now extremely concerned about cyber threats, compared to 24% in 2017. In turn, there are openings for insurers to become the ‘orchestrator’ of services such as mobility or internet of things-enabled smart homes.
Jim Bichard, UK insurance leader at PwC, said: “Insurance continues to be one of the most disrupted sectors in the global economy but there are plenty of reasons to be optimistic. Technological change is impacting all industries and, as companies across the world change the way they do business, they will be looking to the insurance industry for help in guarding against new risks and fuelling their own growth. This is a huge opportunity for insurers to provide innovative new products and help protect society from the new risks associated with flexible workforces, connected homes and cyber threats. The UK insurance market has always shown itself to be resilient and agile in the past.”
Still a need for longer-term transformational change
There is another side of the coin when it comes to optimism and opportunities - 66% of insurance CEOs still report increasing pressure on their organisation to deliver business results under shorter timelines. 78% of insurance CEOs also see changes in consumer behaviour as a threat to growth. Insurers shouldn’t be underestimating the need for longer-term transformational change into digitally-enabled, customer-focused organisations.
Innovation will require humans and machines to work together, and attracting the right talent will be key. At this point, however, only 19% of insurance CEOs say it’s easy to find the right people for the job. 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 are most concerned.
Jim Bichard concludes: “Insurance has typically been a sector slow to innovate, but there is no time to lose - getting up to speed demands a clear strategy. CEOs know that if they are not transforming and harnessing the positive power of technology, they risk being left behind. In order to succeed in such a competitive market, insurance leaders need to ensure their companies are fit for growth by really homing in on the lines of business that will bring revenue growth in the future.
“This industry was built on understanding risk, and technologies such as predictive analytics and AI offer a platform for insurers to strengthen their products whilst helping solve important societal problems. Insurance CEOs need to encourage a ‘bionic’ organisation, with humans and machines working together to improve outcomes. By communicating the role insurance plays in society, the industry should hope to appeal to a wider group of potential employees.”
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